(S) White Collar Crime Compiled Notes

LAW638 White Collar Crime
WEEK 1
INTRODUCTION TO FEDERAL WHITE
COLLAR CRIME
Federal White Collar Crime p 1 – 52
A. DEFINITION
Elements of significant white-collar crime cases: White collar violations…involve

the use of a violator‟s position of significant power, influence, or trust in the
legitimate…order for the purpose of illegal gain, or to commit an illegal act for
personal or organisational gain
B. WHITE COLLAR TRIAL PROCESS
 Complaint – There is an incredible fraud going on against the State of Illinois! They got
all these money because of political connection!
 Evidence gathering – FBI agents out in the field interviewing people and getting
documentary evidence. Tell your clients to tell the truth – an omission can even
be a lie. If you have a target, there is no reason for him to talk to the FBI . You can
always talk to them later – but with the lawyer present.
 Parallel investigation to what the government is doing – you are building your
file just as they are building their file
 You have to tell your client what they are being charged for, give them an
overview of the processes, plea bargaining, fees
 Grand jury convenes – the witnesses who refused to talk to the FBI get called to
the grand jury. They are told by the prosecutors that they are not the targets. If
you are to testify to the grand jury, tell the 100% truth – or else they would use
perjury charges
o Sword and a shield! Proceedings are kept secret
o Disadvantage to D: Defendant‟s office not entitled to pre-indictment
information
 Joint Defence and Common Interest Agreement – attorney-client privilege
would be preserved
 Detention hearing – confined to the district, not allowed to have any weapons.
 Even though there is this presumption of innocence, there isn‟t really such a
presumption! Because of this indictment and the court‟s power to release/detain
you – he is not released as a full member of the society! The only way the court
would let someone out of custody would be to place a bracelet on him! Violating
one of these conditions is a separate federal offence.
 Discovery in Federal Court is not exactly that way – required disclosure is
limited. You do have to disclose physical evidence, admission or confession, a list
of witnesses…but you are not required to turnover the statements of the
witnesses who are going to testify in trial, until they have testified! Surprise in
trial! Fortunately, most prosecutors recognise that as a problem.
 The judge – in a way to control this – is to grant a recess. But you can imagine
what will happen to the length of trial – time delay, etc.
 Discovery request which required the prosecution to disclose any at all, co-
conspirator statements. US v San Diego – not only must the prosecution disclose
the co-conspirator statements, but must establish probable cause – and the co-
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conspirator statements were made in furtherance of the conspiracy. It became so

routine that it became part of the local rules. That would put an agent on the
stand and testify it – and the defence would get to cross-examine the defence on
it
 Pre-trial motions – rulings made by the court to dismiss the indictment because
of lack of elements (i.e. mens rea, lack of fraud, etc)
 Motions to suppress – suppressed evidence that were taken out of seizures
 You can get governmental witnesses to testify and know more about the case, by
having hearings on the motions.
 Power to have subpoena as a defence lawyer – significant! You can use that case
to subpoena documents that may be favourable to you!
 Motion to eliminate – Pre-trial ruling on the evidence before the judge
 Jury instruction – the lawyers prepare those instructions early.
 If you can set up a pre-trial hearing where you can get a defence witness under
oath, you should do that. You should try to anticipate the prosecution / defence
theories
 The judge would want to know how long is the trial – find out how the judge
handles jury instruction. In state courts, the counsels participate in jury selection.
In federal courts, really rare.
 Final trial preparation stage – the first thing you should do is to prepare your
closing arguments. That trial ought to be about getting evidence to address the
themes of the trial, and the closing arguments. We already ought to know the
truth! You have to call witnesses – you need to meet those witnesses in person.
But note that no matter how much you prepare the witnesses, everything goes
out of the head.
 Prepare Opening Statements
 There is no such thing as one-person case. You need someone to help you to take
notes, remember things.
 Opening Statements + go through governmental witnesses (Show time). If you
have done your homework, and the prosecution did not do their proper work –
you can get the case dismissed (though it is really rare)
 Into the defendant‟s case – same routine just that the role is reversed. There is an
opportunity for rebuttal – but there is also an opportunity for sur-rebuttal. But it
is very rare that those situations happen – but it could.
 Closing arguments – can take up an entire day. Thereafter, the jury is instructed
and goes back to do their deliberation
 Post-trial motion
 Most of the time in trial is spent on sentencing!
 Notice of Appeal
 State law and federal law overlap more often than not! The investigator may
more often than not choose to go to the federal court if he has a strong case
C. RECURRING THEMES
(1) Criminalisation (i.e. where should the line be drawn between criminal and
tortious (or simply immoral) conduct?)
(2) Federalisation (i.e. if one is satisfied that the conduct at issue should be pursued
criminally, what principles should control the allocation of cases between federal
and state enforcement authorities?)
(3) Judicial role (i.e. where the content of the criminal prohibition at issue is
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uncertain, how should courts respond?)

(4) Prosecutorial discretion (i.e. what is the value of prosecutorial discretion and
how should it be exercised or, where necessary, constrained?)
(1) Criminalisation
 Notwithstanding modern blurring of civil and criminal law, criminal law

retains certain distinguishing core features:
o Sanctions: Criminal law‟s uniqueness derives from its invocation of
society‟s harshest sanctions, including the loss of liberty that results from
incarceration, death, and the moral stigma associated with a criminal
conviction
o Justification: Virtually all of criminal law‟s distinguishing features derive
from the need to identify the circumstances that justify the use of criminal
sanctions – entailing both carefully defining the human behaviour
warranting the sanction, as well as attaching procedural safeguards to the
criminal proceeding to ensure a fair and accurate adjudication of
culpability
o Moral stigma: The moral stigma of the criminal sanction will attach in the
long term only if the public is persuaded both of the moral culpability of
the proscribed conduct and of the reliability of the adjudication of the
defendant‟s guilt.
 One of the features that makes criminal law unique – the moral
stigma associated with a criminal conviction – is not self-
executing. It can be lost over time by overreaching
o Moral culpability: The more culpable the state of mind, the harsher the
corresponding punishment ought to be. Culpability in this context turns
on D‟s purpose, the extent of D‟s knowledge of the circumstances
surrounding her conduct, the conduct itself, its results, and the reasons
for D‟s behaviour
o More exacting burden of proof on the government and otherwise
provides D with significant additional procedural guarantees: The govt
must establish D‟s guilt beyond a reasonable doubt and not, as in civil
enforcement actions, by a mere preponderance of the evidence. Moreover,
there are a host of evidentiary and procedural rules applicable only to
criminal proceedings that are intended to enhance the reliability of the
evidence before the factfinder and to preclude consideration of unduly
prejudicial information
(2) Overcriminalisation; Federalisation; Judicial Role; Prosecutorial Function
 Failure to have in place even a modestly coherent code makes a mockery of the
United States‟ much-vaunted commitments to justice, the rule of law, and human
rights
 An effective and just system of penal laws should be: drafted by elected
representatives to be as clear and explicit as possible so that citizens have fair
notice of that which will subject them to criminal sanction; public; accessible;
comprehensive; internally consistent; reasonably stable; rationally organised to
avoid redundancy and ensure appropriate grading of offence seriousness;
prospective only in application; and capable of uniform, nonarbitrary, and non-
discriminatory enforcement
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 Saving grace: US Sentencing Guidelines.

o Classify conduct and offences – apply those characteristics to the nature of
the case. We will end up with a lack of sentencing disparity. But it
violated the separation of power as Congress was telling the courts what
to do – until fairly recently!
o Provided sentencing formulas to be applied to the facts of offenders‟ cases
and required judges to sentence offenders within the narrow sentencing
range (e.g. 15-21 months) dictated by those formulas absent extraordinary
circumstances
o Statutory maximums still operated to cap defendants‟ sentencing
exposure, but in most cases the maximums were sufficiently generous
that they did not impose a significant limitation on Guidelines sentencing
o In 2005, however, the Supreme Court held the mandatory Sentencing
Guideline unconstitutional in Booker v US. It reasoned that augmentation
of a defendant‟s sentence by mandatory judicial determination of the
“real” facts of the case at sentencing violated D‟s jury trial rights. The
Court ruled, however, that augmentation of sentences based on judicial
findings in a discretionary system did not offend the Sixth Amendment
o Once again, judges have enormous sentencing power because their
discretion, though informed by the Guidelines, is limited only by the
applicable statutory maximum(s).
 Chaotic mess of laws
o A satisfactory administration of criminal justice must rest ultimately on a
satisfactory criminal law. Without a system of offences, it is impossible to
make a collection of random laws work together to serve the purpose of
punishment identified by Congress: just deserts, crime control, and
(where incarceration is not an option) rehabilitation
o The lack of any system to the code‟s organisation is not only rife with the
possibility of injustice but is also inarguably ineffective in combating
crime
 The “Federalisation” and “Overcriminalisation” Phenomena Translate into
Federal Overreaching into Areas of Traditional State Competence and the
Trivialisation of the Criminal Sanction
o Federalisation – With legislation covering virtually any crime they might
plausibly wish to prosecute, federal prosecutors pick their targets and
marshal their resources, not in response to the limitations of the
substantive law but according to their own priorities and agendas
o Federal Overcriminalisation – comprises a number of problems:
 Untenable offences
 Superfluous statutes
 Doctrines that overextend culpability
 Crimes without jurisdictional authority
 Grossly disproportionate punishments and
 Excessive or pretextual enforcement of petty violations
o “Overcriminalisation” of “essentially innocuous conduct has contributed
materially to the trivialization of the concept of criminality – a
trivialisation that erode the respect for, and hence the deterrent impact of,
the criminal law generally”
 The Code is Redundantly Repetitive, Thereby Increasing the power of
Prosecutors in Charging, Plea-Bargaining and Determining the Actual Scope of
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Federal Criminal Law

o Prosecutors have the ability to pick and choose among a smorgasbord of
statutes that might apply to given criminal conduct – offering prosecutors
important advantages over others – in terms of such matters as venue,
proof, evidentiary admissibility or sentencing impact
o Often a prosecutor may choose a general statute over a statute that is
more specifically tailored to a particular context – by choosing mail fraud
or the general conspiracy statute, for example, rather than another statute
that has more complicated proof requirements
o The effect of choice is to give prosecutors substantially greater bargaining
power vis-à-vis the defence
o Courts cannot second-guess such choices unless (as is virtually impossible
to prove) they arise out of unconstitutional motives
 Much of the “Code” Consists of Vague, Overbroad or Internally Inconsistent
Laws
o Inherent tension between creating statutes sufficiently open-ended to
address new ways of committing the offence and prevent Ds from
evading liability by relying on technical “loopholes” in very specific
prohibitions, and making criminal prohibitions sufficiently specific to
provide citizens fair notice of that which is outlawed, avoid delegation of
law-making power to judges, and constrain the charging discretion of
prosecutors
o Mens Rea: Congressional drafting has been most deficient in specifying
the mental element
 The Penal laws of the US May Be Nominally public, But They Are Not
“Accessible”, Do Not Provide “Fair Notice” and Invite Arbitrary or
Discriminatory Enforcement
o Lack of clarity in statutes – “fair notice” and “accessibility” problem.
Without reference to the – often conflicting – federal case law and
sometimes, volume of federal regulations, one cannot know the law
o A lack of precision in statutory drafting fails due process vagueness
standards not only when the statutory provision at issue cannot be said to
provide “fair notice”
 The Above Characteristics Have Fundamentally Changed the Traditional
Understanding of the Appropriate Roles of Judges and Prosecutors
o Judges
 Given the complete lack of definition in some important federal
statutes, courts are in fact engaging in lawmaking in determining
that such statutes in fact apply to varied fact situations when the
statutes themselves do not in any intelligible terms speak to those
situations. An excellent example is the rules that govern
organisational criminal liability. There is no generally applicable
statute in the federal criminal code that defines when corporations
can be held liable for crimes
 Offends separation of power
o Prosecutors
 Prosecutors “make law” by exercising their discretion to make
enforcement decisions that functionally determine the real shape
of the federal code and to formulate theories of prosecution that
expand the accepted understandings of the reach of certain
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criminal statutes. In these respects, prosecutors are allied with

judges in determining the true content of federal penal laws
 Number of crimes worthy of investigation outstrips the resources
available to pursue them. Prosecutors‟ flexibility in responding to
these constraints is augmented by the availability of alternative
civil and regulatory sanctions
 If prosecutors are given undue power to pressure Ds into pleading
because of code irrationalities, the result may be disparate
treatment of similarly situated Ds based on the idiosyncratic
choice of prosecutors
 A fundamental concern is that prosecutors, in plea bargaining, can
offer Ds such a stark choice between a lenient plea offer (say a
five-year count) and a threat of harsh charges if the plea is rejected
(the potential for a 20-year sentence after trial) that risk-averse but
innocent Ds will be coerced into a guilty plea.
o Defence Lawyer
 You have to be zealous and that means preparation in all respects.
 Most of the white collar criminals have money to hire attorneys.
 There is however some good to federalisation. Evils that the federal had
legislated may some times be evils that the State courts would never prosecute!
 Congress tries to close the loopholes – but the end result is the succession of more
and more federal crimes that permit prosecutors to decide whether it is a crime
E. PRACTICE: SELECTING “PROCEDURAL” TOPICS RELEVANT TO

WHITE-COLLAR CRIME
 Complexity, Scope and Magnitude:

o Federal crimes were much more likely than cases involving federal
common crime to spread across county, state and national boundaries, to
involve large dollar losses, to target multiple victims, to involve five or
more coconspirators, to demonstrate a pattern of offending, and to extend
over a substantial period of time
o The subject-matter of these wide-ranging investigations also often
demand more business acumen than the typical street crime
 Investigation
o Using investigative methods formerly reserved for street crime
o White-collar cases generally will involve extensive pre-indictment use of
grand jury subpoenas for the production of banking, credit, telephone,
and travel records, computer-maintained information, business, tax,
securities, and accounting documentation, and a variety of other materials
 Defence Counsel Role
o It cannot be overemphasized that the battle in many white-collar cases is
perceived to be lost or won at the indictment stage.
o The defence attorney works to keep potential evidence out of government
reach by controlling access to information – “the more information you
control as a defence lawyer, the more effective you are, meaning that the
only weapon you have as a defence lawyer is control of information”
o If despite counsel‟s pre-charge efforts, the government determines to go
forward to indictment, defence counsel is very likely to negotiate some
sort of disposition. Such dispositions may involve a negotiated plea or
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some sort of cooperation or immunity deal

 Organisational Presence
o Joint defences, which are viewed by some prosecutors as nothing more
than organised obstruction of justice, are often critical to successful white-
collar defence practice for three reasons:
 The focus of much of white-collar defence advocacy is in the pre-
indictment period
 During that period, subjects and targets of the investigation have
no formal discovery rights. Thus, to perform their information
gathering and control function effectively, defence counsel must
often depend upon others potentially within the investigatory
scope to assist them in determining the government‟s focus and
the evidence it has (and has not) uncovered
 Such sharing obviously would be dangerous if it could be
discovered by the grand jury
o Federal Govt new policy is to dispose of big-business cases by using so-
called “Deferred Prosecution” (DPAs) or “Non-Prosecution Agreements”
(NPAs). These agreements generally provide that, in return for fulsome
corporate cooperation in the investigation and prosecution of the
individual wrongdoers within an organisation (and other consideration),
the government will, after a probationary period, dismiss or forego
criminal charges against the organisation
 Parallel Proceedings
o A number of proceedings – brought by state, local, or federal regulatory
agencies, shareholders, qui tam “relators”, or alleged victims – may
therefore proceed at the same time as the federal criminal case, or before
or after it
o Such proceedings consume valuable time, constitute a serious distraction
for the client and for counsel, and create difficult strategic issues,
particularly where the imperatives of an effective criminal defence
conflict with what may be the best strategy in the collateral cases
 Multiple Actors
o In some cases – particularly where the criminal conduct at issue concerns
the failure of an entity to meet its regulatory responsibilities – assigning
criminal responsibility to a single actor or even a discrete group of actors
may be difficult
o In white collar cases, practitioners must wrestle with issues of causation,
vicarious liability, and the applicability of traditional requirements of
criminal mens rea and actus rea
 Centrality of Mens Rea
o Many white-collar cases come down to one question: whether D
possessed the requisite evil intent. Intent can be proved directly – e.g. a
co-conspirator‟s testimony that D told the witness that he was attempting
to evade his tax obligations
o More often, however, it is proved inferentially, by asking the jury to
conclude from the facts shown that D must have acted knowingly or with
wrongful intent
 Number and Vagueness of Statutory Standards
o At the very least, this indeterminacy in many of the most frequently-
invoked white-collar statutory provisions means that this practice
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presents challenging legal and policy issues that may not be present in
street crime cases
 Alternative Avenues for Redress
o Rather than “piling on” and having more than one jurisdiction address
the criminal conduct at issue, generally some allocation of responsibility
will be made between federal and state actors
o In many white-collar crime cases, it can be redressed by civil as well as
criminal remedies. Thus, it is not always necessary for a criminal case to
be made for alleged misconduct to be officially addressed
 Breadth of Prosecutorial Discretion
o The extent of their powers necessitate that all federal prosecutors have a
firm handle on, inter alia, their unique professional responsibilities and the
ethical rules that bind them
F. PROFESSIONAL RESPONSIBILITY
(1) Prosecutorial Role
(A) Federal Prosecutors‟ Duty to “Do Justice”
 The US Attorney is the representative not of an ordinary party to a controversy,

but of a sovereignty whose obligation to govern impartially is as compelling as
its obligation to govern at all; and whose interest, therefore, in a criminal
prosecution is not that it shall win a case, but that justice shall be done
 Prosecutors must not commence a case unless they have a good faith belief that
they have the evidence to prove D guilty and that prosecutors must ensure that
the adversarial system works as it should – that is, they must work towards
“procedural justice”
(B) Applicable Ethical Standards
 McDade Amendment – problematic, as an attorney for the Govt shall be subject

to State laws and rules, and local Federal court rules, governing attorneys in each
State where such attorney engages in that attorney‟s duties, to the same extent as
other attorneys in that State
 A number of other state ethics rules might affect federal prosecutorial practices:
o Limit prosecutorial authority to subpoena lawyers to give unprivileged
information
o Expand prosecutors‟ obligation to disclose evidence to the defence,
require prosecutors to expose exculpatory evidence to grand juries,
require prosecutors to discourage public statements by law enforcement
personnel, and limit the prosecutors‟ (but not the defence‟s) ability to
discourage witnesses from cooperating with their adversaries
o Several states have adopted ethics rules that forbid lawyers to compensate
fact witnesses for their testimony…[and] a reasonable argument can be
made that plea bargaining inducements do constitute „compensation‟
under the state ethics rules
o State bar organisations have recently begun to consider whether general
prohibitions against „misrepresentations‟ by attorneys should be applied
to prosecutors
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(c) Case Study – David Luban, The Conscience of a Prosecutor
 David Lemus and Olmedo Hidalgo were wrongly convicted for the Palladium
murder – as a result of mistaken identity. Around the same time the jury
convicted Lemus and Hidalgo, NYC detective Robert Addoloorato was
investigating a Bronx drug and extortion gang called C&C. One of his informants
told him that the two C&C members named Joey Pillot and Thomas “Spanky”
Morales – not Lemus or Hidalgo – were the real Palladium shooters
 Queen-for-a-day: Pillot told the investigators that he and Morales were indeed
the real Palladium shooters. Furthermore, he provided details that matched the
facts: he remembered that his own gun had jammed and that he ejected a
cartridge-and police in fact found an ejected cartridge on the scene
 The two convicted men were represented by a lawyer named Steve Cohen. The
Manhattan DA‟s Office continued to rebuff Cohen when he and Addolorato
alerted them about Pillot‟s confession
 Why had Lemus told Delores Spencer that he was involved? According to
Lemus, it was simply a pathetic story of talking big to impress a woman
 Ethics and Prosecutor:
o Bibb located truthful but adverse witnesses and persuaded them to
testify, and even revealed cross-examination to them
o He went beyond minimally complying with the Brady obligations –
pointing out connections between pieces of evidence to the opposing
lawyers
o At issue here is malpractice and ethics violations: violating the
requirements of competency; the requirement that the client, not the
lawyer, sets the goals of the representation; the requirement of diligence
(also known as “zeal”); and the conflict of interest provision forbidding
lawyers from taking cases where the lawyer‟s representation of the client
will be “materially limited” by “a personal interest of the lawyer”
o Prosecutors, however, are not supposed to win at all costs. In a time-
honoured formula, their job is to seek justice, not victory.
o Bibb‟s tactics advanced the search for truth and the protection of rights
 Why Should Prosecutors Seek Justice, Not Victory?
o Power differential between the state and the accused individual. State has
tremendous resources (i.e. police, crime labs, charging power, etc) v
accused has an overworked defender with little or no capacity to
investigate. Because of the power imbalance, it is essential that
prosecutors not take victory as their sole goal. The defence lawyer‟s role is
to be zealous in protecting the client – that is not the role of the
prosecution. GOVERN JUSTLY AND IMPARTIALLY!
Pereira v US
347 US 1, 74 S. Ct. 358 (US 1954)
Facts  Pereira had persuaded Mrs Joyce to procure funds to enable him to
complete an arrangement to purchase a Cadillac through a friend.
She secured a check for $6956.55. The price of the car was $4750,
but she instructed Pereira to return the balance of the proceeds of
the check to her. Instead, he kept the change
 Pereira had convinced Mrs Joyce through an elaborate scheme by
conning her into thinking that Pereira would be purchasing a hotel
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in Greenville, Texas. They had even exhibited an option for its

purchase for $78,000 through a supposed broker, „E. J. Wilson‟.
Pereira asked his then wife if she would join him in the hotel
venture and advance $35,000 toward the purchase price of $78,000.
She agreed
 Pereira picked up the check for $35,000 at the El Paso Bank, cashed
it there and with Brading left with the money and the Cadillac
Issue  Mail Fraud: The petitioners challenged their conviction on the
ground that there was no evidence of any mailing or of
transporting property interstate, the gist of the respective offences
 As prosecutors, we have to be creative in thinking about a mail
that would relate to mail fraud. In this case, cheques were sent to
banks. But now, cheques are mailed electronically – it is wired
fraud
Defence  Functioning is cloudy, because of what has happened to her heart.
She fumbles in answering questions. Poor memory
Prosecution  Corroboration – show her these documents and ask if it is true. Get
these documents via subpoena – use the grand jury (Gift from
God). The most powerful tool any prosecutor can get
 Federal hook – federal crimes are limited crimes. There must be
some link to the operation of the United States federal government
in order for us to use federal charges (i.e. federal mail)
Holding  It is not necessary to show that the petitioners actually mailed or
By Chief transported anything themselves; it is sufficient if they caused it
Justice to be done. Collecting the proceeds of the check was an essential
Warren part of that scheme. For this purpose, Pereira delivered the check
drawn on a Los Angeles bank to the El Paso bank. There was
substantial evidence to show that the check was mailed from Texas
to California, in the ordinary course of business
 Elements of mail fraud: (1) scheme to defraud; (2) mailing of a
letter. It is not necessary that the scheme contemplate the use of the
mails as an essential element
 Here, the scheme to defraud is established, and the mailing of the
check by the bank, incident to an essential part of the scheme, is
established. There remains only the question whether Pereira
„caused‟ the mailing
 Where one does an act with knowledge that the use of the mails
will follow in the ordinary course of business, or where such use
can reasonably be foreseen, even though not actually intended,
then he „causes‟ the mails to be used
Holding by  To convict on the substantive counts, the petitioners must have
Justice actually used the mails to transport the check from El Paso to Los
Minton, Angeles. The use may be proved by direct or circumstantial
with whom evidence, but it must be proved. To be guilty of the conspiracy,
Mr Justice Brading had only to reasonably anticipate that Pereira might use
Black and the mails, and if he did subsequently use tem, then Brading is
Mr Justice bound
Douglas  Concededly, Brading did not participate directly in the use of the
join, mails to transport the thirty-five thousand dollar check from El
concurring Paso to Los Angeles. He can be convicted, if at all, only as an aider
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in part and and abettor. There is no evidence to establish that he could

dissenting reasonably have expected that the mails would be used in the
in part carrying out the scheme
 It may well be reasonable to infer that one receiving a check drawn
on an out-of-town bank would know that it would be mailed in the
process of collection, but to that inference must be added the
inference that Brading had reason to know that a check would be
received and also that the check would be an out-of-town bank.
This is piling inference upon inference, in the absence of direct
proof
 Brading is clearly an aider and abettor of the scheme to defraud,
which a State must punish – but he is not an aider and abettor of
the federal offences of using the mails to defraud and causing the
fraudulent check to be carried across state lines
WEEK 2
MENS REA
1. Mens Rea
2. Strict Liability – speeding (no mental state in speeding required); harm to the
community; high risk; you want to get society to conform to that level of conduct; parking
ticket. Ordinarily for high risk offences – the greater the danger to the community, the
more likely the court will uphold a strict liability offences (e.g. environmental offences)
3. Negligence – breach of duty
4. Gross Negligence / Recklessness – out of control reach of a known legal duty
5. Knowledge – a general intent crime is a knowing crime. It is a mental state that the
courts will impute the knowing mental state for there to be a crime
6. Intent – more purposeful; more planned
7. Wilfulness – violation of a known legal duty; many courts have described wilfulness as
knowing you are acting bad, rather than knowing you are acting against a specific law
8. Defence of Good faith
9. Wilful Blindness
Ambiguity with the terminology:
 Congress may impose one MR requirement upon certain elements and a different
level of MR, or no MR at all, with respect to other elements
 The law at issue may not specify a MR requirement or, more commonly, is
ambiguous as to which elements an express intent requirement modifies
 “Ignorance or mistake of fact or law as a defence when it negatives the existence
of a mental state essential to the crime charged…Instead of speaking of ignorance
of mistake of fact or law as a defence, it would be just as easy to note simply that
the D cannot be convicted when it is shown that he does not have the mental
state required by law for commission of that particular offence”
 The following materials focus in particular on two lines of cases:
o Cases involving assertions that the offence at issue is a “public welfare”
violation to which a very low level of MR should be applied (such that
liability is founded on a species of strict liability and honest and
reasonable mistakes as to the underlying facts or law may not prevent
liability); and
o Cases involving assertions that a very high level of MR should be applied
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(such that ignorance that the conduct at issue was proscribed by law is a
defence to prosecution)
A. THE PUBLIC WELFARE DOCTRINE
United States v International Minerals & Chemical Corp
402 US 558 (1971)
Facts  The information charged that appellee shipped sulphuric acid and
hydroflosilicic acid in interstate commerce and “did knowingly fail
to show on the shipping papers the required classification of said
property, to wit, Corrosive Liquid, in violation of 49 CFR 173.427”
 Title 18 USC 834(a) gives the Interstate Commerce Commission
power to “formulate regulations for the safe transportation” of
“corrosive liquids” and 18 USC 834(f) states that whoever
“knowingly violates any such regulation” shall be fined or
imprisoned
 Knowledge of the shipment of the dangerous materials is required
Issue  The sole and narrow question of whether “knowledge” of the
regulation is also required. It is in that narrow zone that the issue
of MR is raised; and appellee bears down hard on the provision in
18 USC 834(f) that whoever “knowingly violates any such
regulation” shall be fined
Ruling  The principle that ignorance of the law is no defence applies
whether the law be a statute or a duty promulgated and published
regulation…We decline to attribute to Congress the inaccurate
view that that Act requires proof of knowledge of the law, as well
as the facts
 So far as possession of sulphuric acid is concerned, the
requirement of MR has been made a requirement of the Act as
evidenced by the use of the word “knowingly”. A person thinking
in good faith that he was shipping distilled water when in fact he
was shipping some dangerous acid would not be covered
 Here, where dangerous or deleterious devices or products or
obnoxious waste materials are involved, the probability of
regulation is so great that anyone who is aware that he is in
possession of them or dealing with them must be presumed to be
aware of the regulation
Notes  What is the benefit of having the ICC, an agency, decide what is
safe and unsafe, rather than Congress?
o More expertise – ability to determine what is safe or unsafe
o Speed
o Keep politics out of it
o Problem: You have bureaucrats deciding laws! People in
the industry who need to know it on a day-to-day basis
would probably be familiar with it…But how would
individuals know that it is a crime against federal
regulations?
 Anti-Holmesian – why ignorance of the law can be an excuse:
o Legal moralism – this principle asserts that law is suffused
with morality and, as a result, can‟t ultimately be identified
or applied without the making of moral judgments. It
asserts, too, that individuals are appropriately judged by
12
the law not only for the law-abiding quality of their actions
but also for the moral quality of their values, motivations
and emotions
o Prudence of obfuscation – Private knowledge of the law
isn‟t unambiguously good. The more readily individuals
can discover the law‟s content, the more readily they‟ll be
able to discern, and exploit, the gaps between what‟s
immoral and what‟s illegal
 When reading a statute that does not explicitly provide a mens rea
or where the mens rea requirement is ambiguous, courts will
impute to Congress the intent to impose a lower mens rea
requirement (or strict liability) where “dangerous or deleterious
devices or products or obnoxious waste materials are involved”
o Where you have a statute that is ambiguous, you would
need to construe it in favour of the defendant
o Problem: everybody can simply say there are too many
legislations, I cannot keep track of everything!
Staples v United States
511 US 600 (1994)
Facts  The petitioned alleged that ignorance of any automatic firing
capability should have shielded him from criminal liability for
failure to register the weapon
 He requested that the district Court to instruct the jury that the
Government must prove beyond a reasonable doubt that D “knew
that the gun would fire fully automatically”
Issue  The language of the statute, the starting place in our inquiry,
provides little explicit guidance in this case. Section 5861(d) is
silent concerning the mens rea required for a violation. It states
simply that “it shall be unlawful for any person to receive or
possess a firearm which is not registered to him in the National
Firearms Registration and Transfer Record”
Holding  Silence on this point by itself does not necessarily suggest that
Congress intended to dispense with a conventional MR element,
which would require that D know the fact that make his conduct
illegal. On the contrary, we must construe the statute in light of the
background rules of the common law in which the requirement of
some MR for a crime is firmly embedded
 The common law rule requiring MR has been “followed in regard
to statutory crimes even where the statutory definition did not in
terms include it”. Relying on the strength of the traditional rule,
we have stated that offences that require no MR generally are
disfavoured, and have suggested that some indication of
congressional intent, express or implied, is required to dispense
with MR as an element of a crime.
 If we were to accept as a general rule the Government‟s suggestion
that dangerous and regulated items place their owners under an
obligation to inquire at their peril into compliance with
regulations, we would undoubtedly reach some untoward results.
Automobiles, for example, might also be termed “dangerous”
devices
13
 Where dispensing with MR would require D to have knowledge

only of traditionally lawful conduct, a severe penalty is a further
factor tending to suggest that Congress did not intend to eliminate
a MR requirement. In such a case, the usual presumption that D
must know the facts that make his conduct illegal should apply
 Absent a clear statement from Congress that MR is not required,
we should not apply the public welfare offence rationale to
interpret any statute defining a felony offence as dispensing with
MR
Comparison  In Freed, we decided only that 5861(d) does not require proof of
with Freed knowledge that a firearm is unregistered. The question presented
by a D who possesses a weapon that is a “firearm” for purposes of
the Act, but who knows only that he has a “firearm” in the general
sense of the term, was not raised or considered. And our
determination that a D need not know that his weapon is
unregistered suggests no conclusion concerning whether 5861(d)
requires the D to know of the features that make his weapon a
statutory “firearm”; different elements of the same offence can
require different mental states.
 Our analysis in Freed likening the Act to the public welfare statute
rested entirely on the assumption that D knew that he was dealing
with hand grenades – that is, that he knew he possessed a
particularly dangerous type of weapon (one within statutory
definition of a “firearm”), possession of which was not entirely
“innocent” in and of itself.
 The predicate for that analysis is eliminated when, as in this case,
the very question to be decided is whether the D must know of the
particular characteristics that make his weapon a statutory firearm
Dissenting  Public welfare statutes render criminal “a type of conduct that a
by Justice reasonable person should know is subject to stringent public
Stevens, regulation and may seriously threaten the community‟s health or
with whom safety”. The National Firearms Act unquestionably is a public
Justice welfare statute. Congress fashioned a legislative scheme to
Blackmun regulate the commerce and possession of certain types of
joins dangerous devices, including specific kinds of weapons, to protect
the health and welfare of the citizenry. To enforce this scheme,
Congress created criminal penalties for certain acts and omissions.
The text contains no knowledge requirement
 We thus have read a knowledge requirement into public welfare
crimes, but not a requirement that D knows all the fact that makes
his conduct illegal. Although the Court acknowledges this
standard, it nevertheless concludes that a gun is not the type of
dangerous device that would alert one to the possibility of
regulation
 The court has reached the rather surprising conclusion that guns
are more analogous to food stamps than to hand grenades. Even if
one accepts that dubious proposition, the Court founds it upon a
faulty premise: its mischaracterisation of the Government‟s
submission as one contending that “all guns…are dangerous
devices that put gun owners on notice”
14
 Even assuming that the Court is correct that the mere possession
of an ordinarily rifle or pistol does not entail sufficient danger to
alert one to the possibility of regulation, that conclusion does not
resolve this case. Petitioner knowingly possessed a semiautomatic
weapon that was readily convertible into a machinegun. The
“character and nature” of such a weapon is sufficiently hazardous
to place the possessor on notice of the possibility of regulation. No
significant difference exists between imposing upon the possessor
a duty to determine whether such a weapon is registered, and
imposing a duty to determine whether that weapon has been
converted into a machinegun
Notes  Is it a public welfare offence? How is it possible for a person to be
intimately familiar with all the regulations around every state?
Once the court says that it is not a public welfare offence, you will
have a higher mens rea
 The rule of lenity was applied in this gun case – but it does not
apply to the acid case
United States v Weitzenhoff
35 F. 3d 1275 (9th Cir. 1993)
Facts  Michael Weitzenhoff was the manager and Thomas Mariani the
assistant manager of the East Honolulu Community Service
Sewage Treatment Plant, located not far from Sandy Beach, a
popular swimming and surfing beach on Oahu
 The plant was designed to treat some 4 million gallons of
residential wastewater each day
 Evidence produced by the govt at trial showed that waste
activated sludge (WAS) was discharged directly into the ocean
from the plant on about 40 separate occasions, resulting in some
436,000 pounds of pollutant solids being discharged into the
ocean, and that the discharge violated the plant‟s 30-day average
effluent limit under the permit for most of the months during
which they occurred
Issue  D was arguing that it was only 6% extra – such a little difference?
 As with certain other criminal statutes that employ the term
“knowingly”, it is not apparent from the face of the statute
whether “knowingly” means a knowing violation of the law or
simply knowing conduct that is violation of the law.
Ruling  The dumping of sewage and other pollutants into our nation‟s
waters is precisely the type of activity that puts the discharger on
notice that his acts may pose a public danger. Like other public
welfare offences that regulate the discharge of pollutants into the
air, the disposal of hazardous wastes, the undocumented shipping
of acids, and the use of pesticides on our food, the improper and
excessive discharge of sewage causes cholera, hepatitis, and other
serious illnesses, and can have serious repercussions for public
health and welfare.
 The criminal provisions of the CWA are clearly designed to protect
the public at large from the potentially dire consequences of water
pollution, and as such fall within the category of public welfare
legislation.
15
Dissenting  If negligent violation were a misdemeanour, why would Congress

want to make it a felony to violate the permit without negligence
and without even knowing that the discharge exceeded the permit
limit? That does not make any sense. It would deter people from
working in sewer plants, instead of deterring people from
violating permits. All dischargers acting lawfully pursuant to a
permit know that they are discharging pollutants
 Because construction of criminal statute must be guided by the
need for fair warnings, it is rare that legislative history or
statutory policies will support a construction of a statute broader
than that clearly warranted by the text
Notes  You are free to do anything else except you cannot do this!
 What is at work here is that you cannot do anything unless I say
you can do it!
B. AWARENESS OF LEGAL REQUIREMENTS
 Ignorance of the law is no defence unless the law under which an accused is
prosecuted makes knowledge of the law an element of the offence
Bryan v United States
524 US 184 (1998)
Facts  For three categories of offences, the intent required is that the
defendant acted “knowingly”; for the fourth category, which
includes “any other provision of this chapter”, the required intent
is that the defendant acted “wilfully”. The 922(a)(I)(A) offence at
issue in this case is an “other provision” in the “wilfully” category
(intentional violation of a known legal duty. One interpretation is that it
is bad conduct! The second way is that you know the law (applies in tax
and currency regulation cases. To be prosecuted for a tax crime, it has to
be shown that you knew it was a crime to not tax whoever you are
supposed to))
 Evidence presented was unquestionably adequate to prove that
petitioner was dealing in firearms and that he knew that his
conduct was unlawful.
o Used so-called “straw purchasers” in Ohio to acquire
pistols that he could not have purchased himself
o Made false statements when purchasing the guns
o Assured the straw purchasers that he would file the serial
numbers off the gun
o Resold the guns on Brooklyn street corners known for drug
dealings
 There was, however, no evidence that he was aware of the federal
law that prohibits dealing in firearms without a federal licence
Issue  The question presented is whether the term “wilfully” in 18 USC
924(a)(1)(D) requires proof that D knew that his conduct was
unlawful, or whether it also requires proof that he knew of the
federal licensing requirement
Holding by  The word “wilfully” is sometimes said to be “a word of many
Justice meanings” whose construction is often dependent on the context
Stevens in which it appears. Most obviously, it differentiates between
deliberate and unwitting conduct, but in the criminal law it also
typically refers to a culpable state of mind
16
 In order to establish a “wilful” violation of a statute, “the

Government must prove that D acted with knowledge that his
conduct was unlawful”
 The term “knowingly” does not necessarily have any reference to a
culpable state of mind or to knowledge of the law. As Justice
Jackson correctly observed, “the knowledge requisite to knowing
violation of a statute is factual knowledge as distinguished from
knowledge of the law” – merely requires proof of knowledge of
the facts that constitute the offence
 There are, however, technical statutes that present the danger of
ensnaring individuals engaged in apparently innocent conduct.
Thus, these statutes carved out an exception to the traditional rule
that ignorance of the law is no excuse and require that D have
knowledge of the law. The danger of convicting individuals
engaged in apparently innocent activity that motivated our
decision in the tax cases and Ratzlaf is not present here because the
jury found that this petitioner knew that his conduct was unlawful
Holding by  The Court offers no real justification for its implicit conclusion that
Justice either (1) the statute unambiguously requires only general
Scalia - knowledge of illegality, or (2) ambiguously requiring only general
Dissenting knowledge is enough. Instead, the Court curiously falls back on
the traditional rule that ignorance of the law is no excuse to
conclude that “knowledge that the conduct is unlawful is all that is
required”. In my view, this case calls for the application of a
different canon – “the familiar rule that, „where there is ambiguity
in a criminal statute, doubts are resolved in favour of the
defendant”
 It would be more reasonable to presume that, when Congress
makes ignorance of the law a defence to a criminal prohibition, it
ordinarily means ignorance of the unlawfulness of the specific
conduct punished by that criminal prohibition
Notes  When are you going to decide when the rule of lenity is going to
be applied? Sometimes it is going to be accepted, sometimes it is
going to be not accepted
C. OTHER DOCTRINES AND DEFENCES
(1) SPECIFIC AND GENERAL INTENT
 MR means the particular mental state required to be proved by the statutory

offence. This has been labelled the “elemental” meaning of MR and is the use of
the term that has been explored in these materials
 “General intent”: the crime required a MR in the culpability sense of a
blameworthy state of mind
 “Specific intent”: designation reserved for those offences that required proof of a
particular, additional state of mind
 Specific intent offence is one in which the definition of the crime (1) includes an
intent to do some future act, or achieve some future consequences (i.e. a specific
motive for the conduct), beyond the conduct or result that constitutes the AR of
the offence or (2) provides that the actor must be aware of a statutory attendant
circumstance. An offence that does not contain either of these features is termed
“general intent”
17
(2) GOOD FAITH DEFENCE
 Where the government bears the burden of proving a specific intent – to defraud
– D will often defend by asserting that their actions or statements were made in
good faith. You cannot have intent to defraud and a good faith belief that it is not
criminal at the same time. They are direct opposite!
 Honestly held belief that your action is lawful
(3) GOOD FAITH RELIANCE ON COUNSEL DEFENCE
 Reliance on counsel defence applies to “specific intent” crimes

 Often discussed as a simple variant of the good faith defence in that if the
requisites of the “good faith reliance on counsel” defence are satisfied, no finding
of the requisite of the “good faith reliance on counsel” defence are satisfied, no
finding of the requisite MR is possible
 Pitfall – (1) you would need to make full disclosure; (2) you waived attorney-
client privilege. All your information would be disclosed
(4) “WILLFUL BLINDNESS”, “CONSCIOUS AVOIDANCE” OR “OSTRICH”

INSTRUCTIONS
 The Instruction – Courts often say that they are “wary of giving a wilful
blindness instruction, because of the danger they perceive in it allowing the jury
to convict based on an ex post facto “he should have even more careful” theory or
to convict on mere negligence. Many courts have therefore stated that wilful
blindness instructions are appropriately given only in “rare circumstances”
 In cases where knowledge is the element, you will have a defendant who says “I
didn‟t know that”. The government is permitted to argue, “Should have known”
standards. The defendant cannot ignore what is obvious to him, cannot ignore
asking questions
Global-Tech Appliances, Inc. v SEB S.A.
Holding  Many criminal statutes require proof that a D acted knowingly or
wilfully, and courts applying the doctrine of wilful blindness hold
that Ds cannot escape the reach of these statutes by deliberately
shielding themselves from clear evidence of critical facts that are
strongly suggested by the circumstances
 The traditional rationale for this doctrine is that Ds who behave in
this manner are just as culpable as those who have actual
knowledge. It is also said that persons who know enough to blind
themselves to direct proof of critical facts in effect have actual
knowledge of those facts
 While the COA articulate the doctrine of wilful blindness in
slightly different ways, all appear to agree on two basic
requirements: (1) D must subjectively believe that there is a high
probability that a fact exists and (2) D must take deliberate actions
to avoid learning of that fact
Notes  The court seems to bless “wilful blindness” cases, where D
indicates that he has the subjective belief that the fact exists
18
WEEK 3
US SENTENCING GUIDELINES
 Previous law: Judges could, in extraordinary cases, “depart” from the Guidelines
range, but the US Sentencing Commission had rules and polices to guide
departures, and appellate courts were fairly vigorous in policing district courts‟
discretionary departure judgments (mostly up to the prosecution to decide).
Although denominated as “guidelines”, these rules were in fact mandatory and
were expressly designed to promote uniformity and proportionality in
sentencing by restricting the discretion of human actors in the sentencing process
 Complaints about the US Sentencing Commission:
o The Guidelines were unduly complicated and inflexible
o Shifted too much power over sentencing (and thus plea bargaining) to
prosecutors
o In reducing sentencing to mathematical formulas, they removed the
humanity and individualisation that should be inherent in criminal
sentencing
 In Jan 2005: US Supreme Court declared mandatory sentencing Guidelines
violated the Sixth Amendment in United States v Booker:
o The Court invalidated two statutory provisions that had the effect of
making it mandatory: 18 USC s 3553(b)(I), which required sentencing
courts to impose a sentence within the guidelines range absent grounds
for departure, and 18 USC s 3742(e), which set forth the applicable
standards for appellate review, including a de novos review standard for
departure
 Post-Booker: the focus is explicitly on the factors laid out in s 3553(a):
o Mandates that courts impose a criminal sentence “sufficient, but not
greater than necessary”, to comply with the need for the sentence
imposed “to reflect the seriousness of the offence, to promote respect for
the law, and to provide just punishment of the offence;…to afford
adequate deterrence to criminal conduct;…to protect the public from
further crimes of the defendant; and…to provide the defendant with
needed educational or vocational training, medical care, or other
correctional treatment in the most effective manner”
 Indeterminate Sentencing:
o If you committed a murder in New York, you can be served 25 years to
life. You would need to serve one-third, before becoming eligible or
parole
o There is a parole board and you can apply for parole
o Indeterminate part: You don‟t know when you are going out of prison!
o You have to determine if it is concurrent or consecutive sentences
 Mandatory Minimum Sentence:
o Legislature was not happy with how judges were treating sentencing
o Original philosophy – rehabilitation. Judges give first-time offenders
probation
o Mandatory minimum sentence serves as a deterrence: crime rates will go
down because of the sentences in these cases
 Good Time
o Statutory Good Time: If you are good in serving the sentence, 90 day less
19
o Day-to-Day Good Time: Every day you do your sentence, you get a good
time
o Federal Good Time: 15% of the sentence. You have to have more than a
year in order to have a good time!
o In Illinois, you must serve more than 85% of the sentence
 Determinate sentencing
o The day you go into prison, you know what your out-date is and when
you are coming out
A. REAL-VERSUS CHARGE-OFFENSE SENTENCING
 Statement of purposes:
o Required that the Commission establish sentencing policies and practices
designed to assure that the purposes of sentencing were met. Congress
decreed that those purposes are retribution, deterrence and incapacitation
(“crime control”) and in crafting non-incarceration sentences,
rehabilitation
o Required that the Commission promote reasonable uniformity and
proportionality in sentencing by “narrowing the wide disparity in
sentences imposed for similar criminal offences committed by similar
offenders” while imposing “appropriately different sentences for criminal
conduct of differing severity”
 Why: Genuine differences among defendants and that those differences that
correlate to the purposes of punishment isolated by Congress should be
considered in formulating appropriate sentences. Traditionally, these distinctions
among Ds have been considered at sentencing through what is known as “real
offence” sentencing
 In bald terms, the difference between a real-offence and a charge-offence
sentencing system is simply the amount of information that may be considered
in assessing the sentence to be imposed upon a criminal defendant after
conviction.
 In a real offence system, the sentencing authority is permitted to consider all
manner of facts not necessary to the defendant‟s conviction on the offence
actually tried. The judge can make a decision within the range
o Extra-element facts may include:
 Circumstances leading up to and following the offence
 Nature of the criminal conduct
 D‟s criminal history
 D‟s personal characteristics
 Any other criminal violations committed by D, whether or not
charged or tried
o Drawbacks:
 Primarily real-offence system will succeed in promoting the
purposes of sentencing and of sentencing reform only to the
degree that the sentencing authority is successful in isolating and
weighting those “real” elements that effectively further just
deserts and crime control goals. This task is obviously an
exceedingly difficult one from an empirical point of view
 Effective execution, that is, the isolation of each and every
potentially relevant “real” factor, if it is possible, may be achieved
20
at the expense of practical administrability

 The greater the number of “real” factors to be considered in
sentencing, the greater the likelihood of burdensome litigation and
disuniform result
 Such proceedings have traditionally been conducted under
procedures significantly more lax than those that apply in criminal
or even civil trials
 In a pure charge-offence system, D‟s sentence depends entirely upon the offence
of conviction, that is, the criminal statutory provision that D is convicted of
violating. The Federal Sentencing Guidelines move towards this framework –
rein in these judges and focus on the offences of the charge
o Advantages: Obvious simplicity, ease of administration and procedural
certainty. Similar conducts will have similar sentences
o Disadvantages: High cost in terms of the substantive aims of sentencing, at
lest given the existing federal criminal code
 Ignores any mitigation factors: serving in the military
B. GUIDELINES STRUCTURE
 Past Position:
o Before US v Booker was decided, except in unusual circumstances where a
“departure” from the Guidelines was deemed appropriate, a judge was
required to select a sentence from within the Guidelines range that lies at
the intersection of the “Offence Level” (vertical axis) and the “Criminal
History Category” (horizontal axis) applicable to a given D
 Present Position:
o After Booker was decided, these Guidelines were deemed advisory only.
o Judges must still consult the Guidelines, among other considerations, in
arriving at a sentence consistent with 18 USC s 3553(a)
o Criminal History Category: Rough effort to determine D‟s disposition to
criminality, as reflected in the number and nature of his prior contacts
with the law
o Offence Level: Designed to “measure the seriousness of the present
crime”. In essence, the Offence Level is determined by reference to three
factors:
 (1) the “base offence level” which is prescribed by the Category
Two guideline applicable to the offence of conviction;
 (2) the “specific offence characteristics” which are again included
in the applicable Chapter Two guidelines;
 (3) any “adjustments” from Chapter Three that are appropriately
assessed given the circumstances of the offence
 Zone A: Eligible for probation (0-6 months)
 Zone B – not eligible for probation, but you can do it in a county
jail or a halfway house – community confinement
 Zone C: You have to go to prison, but the judges have the
discretion to have half of your time served in a local facility, and
the other half in the bureau facility
 Zone D: Go to jail
o Chapter Three Adjustments: Further “customise” treatment of the offence
at issue, requiring courts to distinguish between offenders based upon
21
“real” extra-element facts relating to: the nature of the victim and D‟s
motivation in selecting that victim or committing the crime; D‟s
aggravating or mitigating role in the offence, abuse of a position of trust
or a special skill, or use of a minor to commit an offence; and D‟s
obstruction of justice during the investigation, prosecution, or sentencing
of the offence, or D‟s reckless endangerment of others in fleeing from law
enforcement
 Specific Offence Characteristics: The larger the loss based on the
fraud, the more serious the offence. Upward adjustments
 Number of victims
 Fiduciary duty with someone else‟s money
 Abused that position
 Relevant conduct
 Obstruction of justice – did you shred the documents
 Downward Adjustments:
 Acceptance of responsibility
 Early plea – saving trial preparation
 Minimal role – simply drove and delivered the drugs
o Note that the ceiling of the sentence may not exceed, regardless of the
Guidelines‟ calculus, set by the statutory maximum sentence prescribed
for the offence of conviction by Congress
o Guideline introduce “real-offence” element primarily through five
mechanisms, many of which may require the consideration of non-
conviction offence conduct:
 Chapter Two‟s specific offence characteristics
 Chapter Three‟s adjustments to D‟s offence level
 Chapter One‟s relevant conduct provision, which instructs courts
on what conduct may be considered in determining the applicable
base offence level, specific offence characteristics and adjustments
 Chapter Three‟s grouping rules, which control the treatment of
multi-count indictments
 Chapter Four‟s rules for computing D‟s criminal history category
o Difficulty: Chapters Two and Three tell a court what factors should be
considered in computing a sentence. Section 1B1.3‟s “relevant conduct”
rules tell the court what conduct of D or his accomplices may be
considered in applying these factors. The relevant conduct rules have
three principal dimensions: the temporal dimension; the accomplice
attribution dimension; and the third dimension
 Accomplice attribution: Dimension of relevant conduct provides that
D is responsible not only for “all acts and omission committed,
aided, abetted, counseled, commanded, induced, procured or
wilfully caused by D”, but also “in the case of a jointly undertaken
criminal activity…[for] all reasonably foreseeable acts and
omission of others in furtherance of the jointly undertaken
criminal activity” that are within the temporal dimension
described above. The accomplice attribution dimension permits
the judge to consider, in sentencing D on the count of conviction,
an uncharged conspiracy and any reasonably foreseeable
uncharged criminal actions on the part of all co-conspirators in
furtherance of the criminal activity D agreed to jointly undertake
22
 “Third factor”: defined by reference to the Guidelines‟ “grouping”

rules. In these rules, the Commission sought a way to distinguish
between (1) situations in which multi-count indictments contained
charges so closely intertwined – in terms of harm caused, victims
affected and temporal proximity – that the Guidelines range
should not be higher for the multiple counts that it would be for a
single count; (2) situations in which the multiple counts concerned
discrete harms that warranted additional punishments
o Prosecutorial Discretion
 Decide what the charge was
 Decide whether there can be a move to departure
 Increased dramatically after the Guidelines
o Commission drew a distinction between “aggregable” offences and “non-
aggregable” offences
 “Aggregable” offences: those in which the harm caused by Ds
conduct is based upon the amount of $ or quantity of substance
involved, or which involve a repetitive or continuous course of
conduct (e.g. fraud, drug offences, firearm violations, property
crimes). Where multiple counts of conviction charge such
aggregable crimes, the grouping rules total the fungible items (e.g.
dollar amount or quantity of drugs) and punish the offender as if
there were a single count involving the total amount
 “Non-aggregable” offence: by contrast, generally involve discrete
harms attributable to “single episodes of criminal behaviour”,
such as violent offences, robberies, burglaries, extortions and
immigration offences. These offense are not “grouped”, and thus
treated as one count, but through operation of the grouping rules,
the same result is achieved. A punishment scale is assigned to
these discrete offences which yields an offence level that is higher
than, but not a multiple of, the offence levels applicable to the non-
aggregable offences taken singly
CONSTITUTIONAL ANALYSIS
United States v Booker
54 US 220 (2005)
Facts  Booker was charged with possession with intent to distribute at
least 50g of cocaine base (crack). Having heard evidence that he
had 92.5g in his duffel bag, the jury found him guilty of violating
21 USC 841(a)(I) – which prescribes a minimum sentence of 10
years in prison and a maximum sentence of life for that offence
 Based upon Booker‟s criminal history records + quantity of drug =
Sentencing Guidelines required the District Court Judge to select a
“base” sentence of not less than 210 nor more than 262 months in
prison
 566 additional grams of crack were found on him + guilty of
obstructing justice = mandated that the judge selects a sentence
between 360 months and life imprisonment
Issue  Whether an application of the Federal Sentencing Guidelines
violated the Sixth Amendment
Holding by  The application of Washington‟s sentencing scheme violated D‟s
Justice right to have the jury find the existence of „any particular fact‟ that
23
Stevens – the law makes essential to his punishment. That right is

concerning implicated whenever a judge seeks to impose a sentence that is
the issue of not solely based on „facts reflected in the jury verdict or admitted
whether a by D‟
judge or a  Departures are unavailable in every case, and in fact are
jury is the unavailable in most. In most cases, as a matter of law, the
party to find Commission will have adequately taken all relevant factors into
the fact account, and no departure will be legally permissible. In those
relevant to instances, the judge is bound to impose a sentence within the
sentencing. Guidelines range.
NB: Justice  Commission v Legislature: The fact that the Guidelines were
Stevens promulgated by the Sentencing Commission, rather than
advocate for Congress, lacks constitutional significance
the position  Separation of Powers: Commission‟s authority to identify the
that he facts relevant to sentencing decisions and to determine the impact
would of such facts on federal sentences is precisely the same whether
retain the one labels such facts “sentencing factors” or “elements” of crimes.
Sentencing We have thus always recognised the fact that the Commission is
Act (and the an independent agency that exercises policy-making authority
Guidelines) delegated to it by Congress
as written,
 Any fact (other than a prior conviction) which is necessary to
but would
support a sentence exceeding the maximum authorised by the
engraft onto
facts established by a plea of guilty or a jury verdict must be
the existing
admitted by D or proved to a jury beyond a reasonable doubt
system
today‟s
Sixth
Amendment
“jury trial”
Issue  Whether or to what extent, “as a matter of severability analysis”,
the Guidelines “as a whole” are “inapplicable…such that the
sentencing court must exercise its discretion to sentence D within
the max+min set by statute for the offence of conviction
Holding by  We do not believe we can interpret the statutes‟ language to save
Justice its constitutionality because we believe that any such
Breyer reinterpretation, even if limited to instances in which a Sixth
Amendment problem arises, would be “plainly contrary to the
intent of Congress”
 Congress‟ basic statutory goal – a system that diminishes
sentencing disparity – depends for its success upon judicial efforts
to determine, and to base punishment upon, the real conduct that
underlies the crime of conviction
 To engraft the Court‟s constitutional requirement onto the
sentencing statutes, however, would destroy the system. It would
prevent a judge from relying upon a presentence report for factual
information, relevant to sentencing, uncovered after the trial. In
doing so, it would, even compared to pre-Guidelines sentencing,
weaken the tie between a sentence and an offender‟s real conduct.
It would thereby undermine the sentencing statute‟s basic aim of
ensuring similar sentences for those who have committed similar
crimes in similar ways
24
 In significant part, it is the weakening of this real-

conduct/uniformity-in-sentencing relationship, and not any
“inexplicable” concern for the “manner of achieving uniform
sentences”, that leads us to conclude that Congress would have
preferred the mandatory system to the system the dissenters
envisage
Notes  Under sentencing guidelines, facts are not proven to a jury. Power
simply given to the judges – needed to be proven beyond
reasonable doubt!
 18 USC 3553(a) – “sufficient but not greater than necessary”
would consider factors such as US Sentencing Guidelines, D‟s
rehabilitability factor, community facilities that can help D
 What then is a reasonable sentence? 70-85% are still serving
within the guidelines
 Statute would always trump the guidelines
 End-result: A system that is predictable and unpredictable. But it
becomes very difficult to argue a federal case
 AUSA Eugene Miller & Asst FD Lis Pollock – Pre-Brooker:
o Mandatory guideline system. Disagreement with the levels
under the guideline who felt that the levels were too high.
o There should be no justification for sentencing disparity
between two parties in different places.
o Improper factors such as races, genders and more may
influence the judge‟s decision.
o Subconsciously, judges will give a lighter sentence to
people who are similar to them.
o Focuses everybody on factors that the Congress and
Sentencing Commission have decided were relevant
considerations (e.g. how much losses were resulted?)
o No doubt by creating these guidelines, the result would be
somewhat arbitrary. But there is still a range that overlap
o The range can be fairly wide – from 0 to 10 years
 Post-Brooker:
o Ambiguous! (I see something in this guy); But it does
require the court to provide reason for going beyond or
under the guidelines
o Now merely a starting point given its advisory nature
o Defendant hardly makes objection to the pre-sentence
report; instead of wasting a judge‟s time over two points,
but would argue the factors to depart from the advised
sentence guidelines
o The only way that a defendant can go below the
mandatory minimum sentence is for him or her to co-
operate
 Plea / C agreement – Rule 11 – parties can come to an agreement
regarding the specific sentence (e.g. 5 years); or range (51-53
months); specific application of the sentencing guidelines (this is
the amount of loss, this is the number of victims affected).
Influenced by (1) sentencing guidelines; (2) what sort of
sentencing the judge would have
25
 Waiver of appeal
26
27
WEEK 4
ENTITY LIABILITY
 Corporate Criminal Liability

 Respondeat Superior
 MPC principles
 Intent to benefit
 Mens rea
 Both strict and vicarious liability allow the criminal sanction to be imposed on
one not technically at fault, but there is an important difference between the two
concepts:
o Strict liability: There must be a showing that D personally engaged in the
necessary acts or omissions; only the requirement of mental fault is
dispensed with altogether
o Vicarious liability: Need for a personal actus reus that is dispensed with,
and there remains the need for mental fault on the part of the employee
CRIMINALISING CORPORATE CONDUCT
Harvey L. Pitt & Karl A. Groskaufmanis, Minimising Corporate Civil and Criminal
Liability: A Second Look at Corporate Codes of Conduct
78 Geo. L.J. 1559, 1562-74 (1990)
 Corporate Tort Liability
o Two justifications for recognising respondeat superior:
 Loss distribution is the most widely accepted justification
 Means to promote better supervision of employees
o Vicarious tort liability is linked to the control a company exercises over its
employees
o Tort liability provides the means to ensure that the corporation bears the
costs of its conduct
o Legal standard: acts conducted “within the scope of [their] employment”
 Corporate Criminal Liability
o Drawing liberally from civil tort principles, current standards of corporate
criminal liability are premised on the notion that a corporation may, and
should, be held liable for crimes committed by employees while acting in
the scope of their employment with the intent to benefit the employer
o In adopting this standard, courts have expressly imported tort principles
into the criminal forum.
 Obvious tension. The primary objective of tort law and criminal
law differ – tort law distributes the loss of a harmful occurrence,
but criminal law coerces the actual or potential wrongdoer to
complicate with the set standards of society through the threat or
application of sanctions
o Rationale for extending principles of respondeat superior: belief that a broad
standard is needed to combat organisational roots of white collar crime
 BP Oil Spill Crisis
o What‟s the basis for BP‟s civil liability: Respondeat superior.
o A state could revoke or decharter the corporation (death penalty for
corporations)
 It would be meaningless! They can start another corporation
28
afresh
o Possible sanction of debarment: State of being excluded from certain
possessions, rights, privileges or practices and the act of prevention by
legal means. No government contracts
o Goal of these criminal prosecutions? Deterrence and retribution
o Stigma: The stigma from the spill itself – but why is it not enough? $4.5
billion is not much of a deterrent compared to what they are earning.
Corporate entities are meant to insulate individuals from liabilities
Brent Fisse, Reconstructing Corporate Criminal Law: Deterrence, Retribution, Fault
and Sanctions
56 S. Cal. L. Rev. 1141, 1145-67 (1982)
 Need for both criminal and civil means of corporate regulation:
o The traditional utilitarian aims of individual criminal law are deterrence,
rehabilitation and incapacitation; of these aims, deterrence is the only one
that is important in corporate criminal law
o Deterrence plays a more significant role in corporate than in individual
criminal law because “corporate activity is normally undertaken in order
to reap some economic benefit” and “corporate decisionmakers choose
courses of action based on a calculation of potential costs and benefits”
o Successful deterrence of corporate crime requires the threat of a
sufficiently high level of monetary deprivation, a requirement which
implies recourse merely to civil monetary penalties as opposed to
criminal fines.
 These propositions underestimate the role, both actual and potential, of corporate
criminal liability in attaining utilitarian objectives
o They take insufficient account of the deterrent value resulting from the
stigma of criminal conviction and punishment
o They neglect important nonfinancial values in corporate decisionmaking
– values which may render the use of only civil means of deterrence
inadequate
o They do not recognise the rehabilitation and incapacitation may be
subgoals of corporate deterrence that cannot be realised by civil
regulation alone
 Deterrent Value of Criminal Stigma
o Purpose of imposing criminal stigma on individuals:
 Blameworthiness of the actor in causing the harm
 Unwantedness of the harm caused by the actor even if the victim
is compensated
 Deterrent effect of the stigma resulting from conviction and
punishment
o May not necessarily apply to corporate entities:
 Corporations are not appropriate subjects of blame (no
blameworthiness!)
 When people blame corporations, they are not merely
channelling aggression against a deodand or some other
symbolic object; they are condemning the fact that people
within the organisation collectively failed to avoid the
offence to which corporate blame attaches
 Corporate offences are not “unwanted” in the same way that
crimes committed by individuals are unwanted
29
 In the past, corporate offences were often spoken of as

“morally neutral”
 Today, a recent unpublished study of attitudes towards the
seriousness of crimes reveal that a national sample of 8000
respondents had rated white-collar crimes causing injury
to persons, such as lethal toxic waste pollution, as
extremely serious
 Corporations cannot feel stigmatised by punishment
 Importance of good public image that business
corporations usually attach to
 Because society views corporations as capable of
committing unwanted or morally offensive acts, and
because corporations can be held blameworthy and can be
stigmatised as responsible agents, the stigma of criminal
punishment warrants serious consideration as a device to
deter corporations
 Corporations are more likely to react positively to criminal
stigma by attempting to repair their images and regain
public confidence
 Nonfinancial Values In Organisational Decisionmaking and Deterrent
Punishment
o Probationary orders requiring corporations to rectify defective standard
operating procedures or to make other structural changes within the
organisation may have a significant deterrent as well as rehabilitative
effect because such intervention detracts from managerial autonomy
o Media publicity + formal, court-order publicity sanctions increase stigma
to the corporation
 Deterrence as a Catalyst for Rehabilitation and Incapacitation
o When a corporate offender is punished or threatened with punishment,
the message is catalytic as well as inhibitory. The message conveyed, for
corporate offences of commission as well as for those of omission, is
“refrain from committing that offence and take such steps as are
necessary organisationally to guard against repetition”
o Under a scheme of corporate deterrence, punishment or a threat of
punishment requires corporations to do more than merely exercise
inhibition and self-restraint; they are expected to institute effective crime
prevention policies, discipline controls and changes in SOPs
 Crime Prevention Policies: Threats of punishment catalyse the
adoption of sound policies of compliance
 Internal Disciplinary Controls: Punishment or the threat of
punishment should also catalyse internal disciplinary controls
 Crime-Preventive SOPs
 Catalytic Deterrence and Punitive Injunctions
Julie Rose O‟ Sullivan, Professional Discipline for Law Firms? A Response to
Professor Schneyer’s Proposal
16 Geo. J. Legal Ethics I (2002)
 “The evidentiary difficulty of penetrating the corporate „black box‟ to locate the
appropriate agent or agents to prosecute for a crime”, “proceeding against the
enterprise is often less costly and more fruitful”. This is so because, under at least
the federal respondeat superior standard, a criminal conviction may be secured
30
against an entity even when no one agent can be identified who both possessed
the requisite guilty intent and performed the guilty act
 Juries are reluctant to criminally sanction individuals where the “bulk of harm-
causing corporate conduct does not typically have, at its root, a particular agent
so clearly “to blame” that he or she merits” sanction. Juries reluctant to
“scapegoat” individuals may be willing to convict an impersonal entity such as a
corporation, thus filling a “gap in enforcement”
 Giving entity liability will ease prosecutors‟ burden in imposing sanctions on
someone does not necessarily justify such liability
o Not necessarily fair, effective and/or necessary to further the aims of
criminal law because only then are these evidentiary or instrumental
considerations relevant
 A corporation has “no soul to be damned, and no body to be kicked”
 There are two potentially overlapping but analytically distinct ways in which an
entity may be deemed “responsible” in a causal sense for the agents‟ misconduct:
o An entity may fail to put in place organisational policies or practices
sufficient to prevent certain types of misconduct
o An entity may possess a bad “culture” or “ethos”, which may in some
case explain the above management deficiencies, but which may also
actually encourage employee wrongdoing
 Two additional objections to the imposition of corporate criminal liability should
be considered:
o Some argue that vicarious criminal liability is unfair because its penalties
unjustly fall “on the innocent rather than the guilty – that is, the penalty is
borne by stockholders and others having an interest in the corporation
rather than by the guilty individual”: affects “innocent” shareholders and
other corporate constituencies who did not participate in or knowingly
condone the misconduct, thereby creating a perception that the law is
unjust and ultimately undermine compliance with that law
o In order to minimise unfair “flow-through” effects, entity liability should
only be imposed when it is clear that the entity is actually the culprit –
that is, that the entity‟s culture, policies or procedures caused,
encouraged or condoned the misconduct at issue
 Major distinction between respondeat superior and MPC principles:
o MPC states: We want that crime to be truly reflective of this corporation
and its policies. For the corporation to be held liable in a MPC state, the
agent has to be a high-ranking officers –who speak for the authority of the
corporation.
o Incentive for corporations to hire someone just below high-ranking level
o It does not make any difference by differentiating the levels of the agents!
 What protection does corporations have?
o Burden of proof – beyond a reasonable doubt
PRINCIPLES OF LIABILITY
“Within The Scope of Employment” Requirement
New York Central & Hudson River R.R. Co. v United States
212 US 481 (1989)
Facts  The railroad company and Fred L Pomeroy, its assistant traffic
manager, were convicted for the payment of rebates to the
American Sugar Refining Company and others, upon shipments
of sugar from the city of New York to the city of Detroit,
31
Michigan. The indictment was returned against the company, its

general traffic manager and assistant traffic manager
 The sugar companies were engaged in selling and shipping their
products in Brooklyn and Jersey City and WH Edgar & Son were
engaged in business in Detroit, Michigan, where they were
dealers in sugar. By letters between Palmer, in charge of the traffic
of the sugar refining companies and of procuring rates for the
shipment of sugar, and the general and assistant traffic managers
of the railroad company, it was agreed that Edgar & Son should
receive a rate of 18c per 100 pounds from NY to Detroit. This
concession was given to Edgar & Son to prevent them from
resorting to transportation by the water route between NY &
Detroit, thereby depriving the roads interested of the business,
and to assist Edgar & Son in meeting the severe competition with
other shippers and dealers. The shipments were made accordingly
and claim of rebate made on the basis of a reduction of five cent a
hundred pounds from the published rates
Issue  Constitutional validity of certain features of the Elkins Act –
Congress has no authority to impute to a corporation the
commission of criminal offences, or to subject a corporation to a
criminal prosecution by reason of the things charged.
 The argument is that to thus punish the corporation is in reality to
punish the innocent stockholder, and to deprive them of their
property without opportunity to be heard, consequently without
due process of law
Holding  A corporation is held responsible for acts not within the agent‟s
corporate powers strictly construed, but which the agent has
assumed to perform fro the corporation when employing the
corporate powers actually authorised, and in such cases there
need be no written authority under seal or vote of the
corporation in order to constitute the agency or to authorise the
act.
 This statute does not embrace things impossible to be done by a
corporation; its objects are to prevent favouritism, and to secure
equal rights to all in interstate transportation, and one legal rate,
to be published and posted and accessible to all alike
 You cannot be a person for the purpose of the law and then
engage in economic benefits; and at the same time say we are not
really a person. Who can we get to change the corporate attitude
and not permit this kind of conduct to deter others from doing it?
The corporation!
“Intention To Benefit the Corporation” Requirement
 Both the act and the intent of the corporate agent who committed the crime are
imputed to the corporation under principles of respondeat superior
 What do you look for in the benefits? Show me the money – does it lead to
corporate funds?
 Problem:
o Imputes to the corporation only the mens rea of the agent who committed
the crimes, but ignores the mental states of other corporate agents
o Fails to distinguish between offences committed with the participation or
32
encouragement of upper management, pursuant to corporate policies or

procedures, and those committed by “rogue employees” whose acts
violated company policy or could not have been prevented by careful
supervision
o Overinclusiveness of respondeat superior
United States v Sun-Diamond Growers of California
138 F.3d 961 (D.C.Cir. 1998), aff‟d on other grounds, 526 US 398 (1999)
Facts  An independent counsel charged Sun-Diamond, a large
agricultural cooperative (raisin farmers), with making illegal gifts
to Espy, the former Secretary of Agriculture – thereby committing
wire fraud, and making illegal campaign contributions
 Central figure: Richard Douglas – a lobbyist. Responsible for
representing the interests of the corporation and its member
cooperatives in Washington
 Richard Douglas and James Lake had helped to repay the debts of
the failed congressional campaign of Mike Espy‟s brother, Henry
 Douglas had to raise $5000 fast and needed Lake‟s help. If Lake
would get five RLSM (the law firm that handles communication
and PR matters for Sun-Diamond) to write a check for $1000 each,
Douglas would find a way for Sun-Diamond to reimburse them
all. Lake knew the scheme was illegal – corporations are
forbidden to make contributions “in connection with any election”
and no one may make a campaign contribution in the name of
another person – but agreed to participate anyway
 Douglas use the Joint Center Dinner, an annual benefit for which
RLSM and Lake had in the past routine bought tickets on sun-
Diamond‟s behalf, as a vehicle for reimbursement
Issue  Threshold question: Sun-Diamond argued that Richard Douglas‟s
campaign cannot be attributed to it, because Douglas was not
acting with an intent to benefit the corporation. Douglas‟s scheme
was designed to – and did in fact – defraud his employer, not
benefit it. In the circumstances, it strenuously argues, there can be
no imputation
Holdings  Sun-Diamond‟s argument of how the imputation rules must be
the same on both the perpetrator and victim sides is faulty. They
need not be and indeed are not. The law imputes the
wrongdoer‟s conduct to the corporation in order to encourage
monitoring, but it is not at all clear that imputation on the other
side of the equation would be useful in eliciting additional
caution on the part of would-be fraud victims
 You gave RSLM immunity so that Sun-Diamond and Douglas can
be prosecuted. No benefits to Sun-Diamond, fails the respondeat
superior test. James Lake is an agent for both RSLM (his law firm)
and Sun-Diamond. James is violating his own fiduciary obligation
to his own law firm (deprived the law firm of honest services)!
Liability Where Criminal Action Is Contrary to Corporate Policy/Orders
United States v Hilton Hotels Corp.
467 F.2d 1000 (9th Circ. 1972)
Facts  Operators of hotels, restaurants, hotel and restaurant supply
companies, and other businesses in Portland, Oregon, organised
33
an association to attract conventions to their city. To finance the

association, members were asked to make contributions in
predetermined amounts. Companies selling supplies to hotels
were asked to contribute an amount equal to 1% of their sales to
hotel members
 To aid collections, hotel members, including appellant, agreed to
give preferential treatment to suppliers who paid their
assessments, and to curtail purchases from those who did not
 Appellant‟s president testified that it would be contrary to the
policy of the corporation for the manager of one of its hotels to
condition purchases upon payment of a contribution to a local
association by the supplier. The purchasing agent confirmed the
receipt of instructions by the appellant that he would not be
paying the contribution, but admitted that despite them, he had
threatened a supplier with loss of the hotel‟s business unless the
supplier paid the association assessment
Holding  The construction of the Sherman Act that best achieves its purpose
is that a corporation is liable for acts of its agents within the
scope of their authority even when done against company
orders
 With important public interests at stake, it is reasonable to
assume that Congress intended to impose liability upon business
entities for the acts of those to whom they choose to delegate the
conduct of their affairs, thus stimulating a maximum effort by
owners and managers to assure adherence by such agents to the
requirements of the Act.
 Identification of the particular agents responsible for a Sherman
Act violation is especially difficult, and their conviction and
punishment is peculiarly ineffective as a deterrent. At the same
time, conviction and punishment of the business entity itself is
likely to be both appropriate and effective. For these reasons, we
conclude that as a general rule a corporation is liable under the
Sherman Act for the acts of its agents in the scope of their
employment, even though contrary to general corporate policy
and express instructions to agent.
 Any corporation can show that they have bylaws rules to show
the policies, but ultimately, the corporation is going to benefit
from the misconduct.
Amicus Brief for the Association of Corporate Counsel, Et Al.
In United States v Ionia Management, S.A., 555 F. 3d (2d Cir. 2009)
 The Supreme Court has never addressed how vicarious liability
should be determined for corporations in the absence of a statute
that explicitly includes instructions for imputing the liability of an
employee to the corporation
 The Kolstad Court reasoned that the “scope of employment” rule,
even if limited to imputing conduct of managerial level agents,
would create “perverse incentives” for a corporation to avoid
taking remedial measures if such measures provide no defence
and may expose the corporation to liability. The Court therefore
felt “compelled to modify these principles” to assure that, “in the
34
punitive damages context, an employer may not be vicariously

liable for the misconduct of managerial agents where the
misconduct is contrary to the employer‟s good faith efforts”
 Where a company has undertaken all reasonable measures to
determine and detect the employee‟s criminal actions, the
company has done all that can be expected, i.e. there is nothing
that the criminal law is serving to deter or punish since there is no
action by the corporation that it should have otherwise taken. If
the corporation has taken all actions that can be expected,
applying criminal liability would result in the same “perverse
incentives” rejected by the Supreme Court in Kolstad
Error of the  The district court‟s instruction on vicarious liability was plainly
District erroneous: the instruction made it easier to impute conduct and
Court knowledge to a corporation in a criminal case than it would be in
a civil case
 The purpose of the civil justice system typically make application
of respondeat superior principles sensible, at least where the key
objective is to afford redress to P. In contrast, the criminal justice
system seeks to promote compliance with society‟s dictates as
expressed in the criminal code. Vicarious liability principles with
respect to corporate criminal liability should foster that objective;
the district court‟s jury charge failed to do so
 This court added an additional element to criminal liability that
requires the prosecution to prove that a corporation lacks
“effective policies and procedures to deter and detect criminal
actions by their employees”
o Benefits:
 Encouraging effective self-policing
 Protecting corporations and shareholders from
rogue employees who commit crimes despite a
corporation‟s diligence
 This alternative set of principles both encourage effective
corporate compliance programs while mitigating the harsh effects
of respondeat superior, which allows a corporation to be liable for
the acts of one low-level individual employee acting against the
corporation‟s express instructions. The application of VL
principles that allows corporations to present evidence of an
effective compliance programs is far more consistent with
Supreme Court precedent and the purpose of corporate criminal
liability than an approach based on a minimal application of
respondeat superior
Difficulties Where Responsibility Is Defused
 Under respondeat superior principles, VL may only be imposed where there is a
primary violator – that is, where an agent of the corporation has committed a
crime. This requirement would seem to imply “that the corporation could not be
convicted if the agent committing the AR lacked the requisite intent”
 Difficulties would arise in applying these imputation principles in cases where it
is not clear which individual within an organisation took the actions (or failed to
take the actions) alleged to lead to corporate liability, or where the knowledge or
intent necessary to prove the violations may be fragmented among many
35
employees within a large corporate hierarchy. Thus, were the principle to be

strictly applied, they would be underinclusive and overinclusive because “there
are situations in which corporate policies or procedures do cause a crime, yet the
doctrine of respondeat superior is unable to find the corporation culpable because
there is no individual culpability to impute”. But the difficulties have been
obviated!
o Intent may be imputed to the corporation from a person distinct from the
one who commits the AR, such as the supervisory official who realised
the significance of the act
o Some decisions have accepted a theory of “collective knowledge”, under
which no single individual had the requisite knowledge to satisfy the
intent requirement, but various individuals within the organisation
possessed all the elements of such knowledge collectively.
United States v Bank of New England, NA
821 F.2d 844 (1st Cir. 1987)
Example of both toleration of inconsistent verdicts and use of aggregated MR in order to
sustain corporate criminal liability that might not be sustained under a strict reading of
respondeat superior principles.
Facts  Bank of New England was found guilty of having failed to file
Currency Transaction Reports (CTR) on cash withdrawal made by
James McDonough. It is undisputed that on 31 separate occasions
between May 83 and July 84, McDonough withdrew from the
Prudential Branch of the Bank more than $10,000 in cash by using
multiple checks – each one individually under $10,000 – presented
simultaneously to a single bank teller
 Before a grand jury, it was alleged that James McDonough, the
Bank, Carol Orlandella and Patricia Murphy – both of whom were
former head tellers with the Bank‟s Prudential Branch –
unlawfully conspired to conceal from the IRS thirty-six of
McDonough‟s currency transactions.
Issue  Criminal liability under 31 USC 5322 only attaches when a
financial institution “wilfully” violates the CTR filing
requirement.
Holding  A collective knowledge instruction is entirely appropriate in the
context of corporate criminal liability. The acts of a corporation
are, after all, simply the acts of all of its employees operating
within the scope of their employment. The law on corporate
criminal liability reflects this.
 Wilful blindness: Corporations compartmentalise knowledge,
subdividing the elements of specific duties and operations into
smaller components. The aggregate of those components
constitutes the corporation‟s knowledge of a particular operation.
It is irrelevant whether employees administering one component
of an operation know the specific activities of employees
administering another aspect of the operation.
 Even if some Bank personnel mistakenly regarded McDonough as
engaging in multiple transactions, there was convincing evidence
that the Bank knew that his withdrawals were reportable. An
internal memo was sent by project coordinator to all branch
managers and head tellers stated that “reportable transactions are
36
expanded to include multiple transactions which aggregate more

than $10,000 in any one day”. This includes deposits or
withdrawals by a customer to or from more than one account
 Collective Intent: The sum of its total parts = Total MR of its
company
 General Rule: If we prove the mens rea of the agent, we can then
impute it to the corporation
Notes Three concepts of MR:
 Managerial MR: MR based on the mental state of a person acting
on behalf of the organisation in a senior managerial capacity. This
is not a concept of genuinely corporate fault and is usually very
difficult to prove.
 Composite MR: MR pieced together from the knowledge of
various individuals within an organisation. This mental state may
be easier to prove but bears no necessary connection with
corporate blameworthiness
 Strategic MR: MR based on express or implied organisational
policy. This concept reflects genuinely corporate blameworthiness
but only rarely can be prove.
Department of Justice and Sec Charging Policies
 Charging policy for corporations and organisational defendants
o Scrutinise the authenticity of a corporation‟s cooperation
o Great controversy: the memoranda‟s discussion of requests for waivers of
the attorney-client privilege and work product protection as evidence of
corporate “cooperation” with the investigation was abused by line
prosecutors
 Legislation entitled the “Attorney-Client Privilege Protection Act” was
introduced that would bar federal prosecutors from, inter alia, asking
organisations to disclose information protected by the attorney-client privilege or
the work product doctrine as a condition for cooperation credit or declination of
criminal charges
 The McNulty Memo altered the policies expressed in the Holder and Thompson
Memoranda in two principal respects:
o In response to the Stein ruling, it tightened the circumstances in which
prosecutors can take into account whether a corporation is advancing
attorney‟s fees to its employees or agents under investigation or
indictment
o Puts in place a more stringent internal approval and reporting regime for
waiver request
 When this failed to meet approval, Deputy Attorney General Mark Filip issued
another memorandum in Aug 2008. As of the writing of the textbook, it is not
clear whether the DOJ‟s actions will be successful in fending off congressional
action on the waiver issue
Principles of Federal Prosecution of Business Organisation
 General Considerations of Corporate Liability
o Public benefits from corporations that take immediate remedial steps
when one is indicted for criminal misconduct that is pervasive
throughout a particular industry, and thus an indictment can provide a
unique opportunity for deterrence on a broad scale
o Corporate indictment may result in specific deterrence by changing the
37
culture of the indicted corporation and the behaviour of its employees

o Certain crimes that carry with them a substantial risk of great public harm
– e.g. environmental crimes or sweeping financial frauds – may be
committed by a business entity, and there may therefore be a substantial
federal interest in indicting a corporation under such circumstances
 To hold a corporation liable for such actions, the government must establish that
the corporate agent‟s actions:
o Were within the scope of his duties and
o Were intended, at least in part, to benefit the corporation
 Factors to be Considered
o Nature and seriousness of the offence, including the risk of harm to the
public and applicable policies and priorities, if any, governing the
prosecution of corporations for particular categories of crime
o Pervasiveness of wrongdoing within the corporation, including the
complicity in, or the condoning of, the wrongdoing by corporate
management
o The corporation‟s history of similar misconduct, including prior criminal,
civil, and regulatory enforcement actions against it
o Corporation‟s timely and voluntary disclosure of wrongdoing and its
willingness to cooperate in the investigation of its agents
o The existence and effectiveness of the corporation‟s pre-existing
compliance program
o Corporation‟s remedial actions, including any efforts to implement an
effective corporate compliance program or to improve an existing one, to
replace responsible management, to discipline or terminate wrongdoers,
to pay restitution and to cooperate with the relevant government agencies
o Collateral consequences, including whether there is disproportionate
harm to shareholders, pension holders, employees and others not proven
personally culpable, as well as impact on the public arising from the
prosecution
o Adequacy of the prosecution of individuals responsible for the
corporation‟s malfeasance
o Adequacy of remedies such as civil or regulatory enforcement actions
 Special Policy Concerns:
o The nature and seriousness of the crime, including the risk of harm to the
public from the criminal misconduct, are obviously primary factors in
determining whether to charge a corporation.
o Corporate conduct, particularly that of national and multi-national
corporations, necessarily intersects with federal economic, tax and
criminal law enforcement policies.
o In applying these Principles, prosecutors must consider the practices and
policies of the appropriate Division of the Dept, and must comply with
those policies to the extent required by the facts presented.
 Pervasiveness of Wrongdoing Within the Corporation
o Charging a corporation for even minor misconduct may be appropriate
where the wrongdoing was pervasive and was undertaken by a large
number of employees, or by all the employees in a particular role within
the corporation, or was condoned by upper management
o May not be appropriate to impose liability upon a corporation,
particularly one with a robust compliance program in place, under a strict
38
respondeat superior theory for the single isolated act of a rogue employee
 The Corporation‟s Past History
o Prosecutors may consider a corporation‟s history of similar conduct,
including prior criminal, civil and regulatory enforcement actions against
it, in determining whether to bring criminal charges and how best to
resolve cases
 The Value of Cooperation
o In determining whether to charge a corporation and how to resolve
corporate criminal cases, the corporation‟s timely and voluntary
disclosure of wrongdoing and its cooperation with the government‟s
investigation may be relevant factors
 Attorney-Client and Work Product Protections
o Allowing for a corporation to have full and comprehensive legal advice is
particularly important, where corporations often face complex and
dynamic legal and regulatory obligations
o Waiving the attorney-client and work product protections has never been
a prerequisite under the Dept‟s prosecution guidelines for a corporation
to be viewed as cooperative
 Cooperation: Disclosing the Relevant Facts
o The sort of cooperation that is most valuable to resolving allegations of
misconduct by a corporation and its officers, directors, employees, or
agents is disclosure of the relevant facts concerning such misconduct
o So long as the corporation timely discloses relevant facts about the
putative misconduct, the corporation may receive due credit for such
cooperation, regardless of whether it chooses to waive privilege or work
product protection in the process. Likewise, a corporation that does not
disclose the relevant facts about the alleged misconduct – for whatever
reason – typically should not be entitled to receive credit for cooperation
 Obstructing the Investigation
o Examples:
 Directions not to be truthful or to conceal relevant facts
 Making representations or submissions that contain misleading
assertions or material omissions
 Incomplete or delayed production of records
 Offering Cooperation: No Entitlement To Immunity
o A corporation‟s offer of cooperation itself does not automatically entitle it
to immunity from prosecution
 Qualifying for Immunity, Amnesty, or Reduced Sanctions Through Voluntary
Disclosures
o Corporations to conduct internal investigations and to disclose the
relevant facts to the appropriate authorities
o Some agencies may have formal voluntary disclosure (e.g. Securities and
Exchange Commission and the Environmental Protection Agency)
o Even in the absence of a formal program prosecutors may consider a
corporation‟s timely and voluntary disclosure in evaluating the adequacy
of the corporation‟s compliance program and its management‟s
commitment to the compliance program
o Amnesty, immunity or reduced sanctions may not be appropriate where
the corporation‟s business is permeated with fraud or other crimes
 Oversight Concerning Demands for Waiver of Attorney-Client Privilege or
39
Work Product Protection by Corporations Contrary to This Policy

o Counsel for corporations who believe that prosecutors are violating such
guidelines are encouraged to raise their concerns with supervisors,
including the appropriate United States Attorney or Assistant Attorney
General
 Corporate Compliance Programs
o Compliance programs are established by corporate management to
prevent and detect misconduct and to ensure that corporate activities are
conducted in accordance with applicable criminal and civil laws,
regulations, and rules. The existence of a compliance program is not
sufficient, in and of itself, to justify not charging a corporation for criminal
misconduct undertaken by its officers, directors, employees or agents
o Is it a “paper program” or is it designed, implemented, reviewed and
revised in an effective manner?
 Restitution and Remediation
o Although neither a corporation nor an individual target may avoid
prosecution merely by paying a sum of money, a prosecutor may consider
the corporation‟s willingness to make restitution and steps already taken
to do so. A prosecutor may also consider other remedial actions, such as
improving an existing compliance program or disciplining wrongdoers,
in determining whether to charge the corporation and how to resolve
corporate criminal cases
 Collateral Consequences
o Prosecutors may consider the collateral consequences of a corporate
criminal conviction or indictment in determining whether to charge the
corporation with a criminal offence and how to resolve corporate criminal
cases
 Other Civil or Regulatory Alternatives
o In evaluating the adequacy of non-criminal alternatives to prosecution –
e.g. civil or regulatory enforcement actions – the prosecutor may consider
all relevant factors, including:
 Sanctions available under the alternative means of disposition
 The likelihood that an effective sanction will be imposed and
 The effect of non-criminal disposition on federal law enforcement
interests
o Depends on whether they can meet the goals o criminal law (deterrence,
punishment and rehabilitation)
 Selecting Charges
o Once a prosecutor has decided to charge a corporation, the prosecutor at
least presumptively should charge, or should recommend that the grand
jury charge, the most serious offence that is consistent with the nature of
D‟s misconduct and that is likely to result in a sustainable conviction.
 Plea Agreements with Corporations
o In negotiating plea agreements with corporations, as with individuals,
prosecutors should generally seek a plea to the most serious, readily
provable offence charged
o The plea agreement should contain appropriate provisions to ensure
punishment, deterrnence, rehabilitation, and compliance with the plea
agreement in the corporate context.
John Hansas, Ethics and the Problem of White Collar Crime
40
54 Am. U. L. Rev. 579, 632-637 (2005)

 Stockholder Theory: Views corporate officers as agents of the organisation‟s owners
(the stockholders) who have a fiduciary obligation to pursue their principals‟
interests, usually characterised as the maximisation of profits, in preference to
those of all other parties
 Stakeholder and Social Contract Theories: View corporate officers as having ethical
obligations to not merely the organisation‟s owners, but, in the case of the
stakeholder theory, to all parties whose interests are significantly affected by the
organisation‟s activities, such as employees, customers, suppliers, and the local
community – or even society as a whole
 What principles govern the treatment of employees who are suspected of
criminal wrongdoing by federal authorities:
o Reciprocity: Obligation to honour one‟s commitment to a mutually
beneficial relationship when the other party has met his or her
commitment to you
o Presumption of innocence: Because of employees‟ limited resources and
dependence on the employer, and because it is so difficult to prove a
negative, justice requires that organisations not assume that their
employees have behaved improperly in the absence of adequate evidence
o Due process: One be judged by fair processes, which include an
opportunity to speak in one‟s own defence
 If the organisation knows the employee is innocent, the Guidelines place it in an
impossible situation. To gain [cooperation credit towards a declination or a
sentencing break], the organisation must help the government try to convict an
innocent person.
o The organisation must breach reciprocity by eschewing aid to a loyal
employee, act in contravention of the presumption of innocence by taking
action against the employee despite the lack of evidence of wrongdoing,
and violate due process by either denying the employee a fair hearing or
acting in derogation of what such a hearing would establish. Yet if the
organisation‟s managers do not act in this way, they expose the
organisation to criminal indictment and potentially massive financial
penalties
 The same holds true in those cases in which the organisation does not know
whether the employee is guilty or innocent!
Securities and Exchange Commission Securities Exchange Act of 1934
Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of
1934 and Commission Statement on the Relationship of Cooperation to Agency
Enforcement Decisions
 Leon-Meredith
o Former controller of the public company‟s subsidiary
o Meredith caused the parent company‟s books and records to be inaccurate
and its periodic reports misstated, and then covered up facts
 Parent Company
o No action taken against it
o Company‟s internal auditors had conducted a preliminary review and
had advised company management who, in turn, advised the Board‟s
adutir committee, that Meredith had caused the company‟s books and
records to be inaccurate and its financial reports to be misstated
o Four days later, Meredith was dismissed – as were two other employees
41
who had inadequately supervised Meredeith

o Company had also disclosed publicly and to the Securities Commission
that its financial statement would be restated
o Produced details of its internal investigation, including notes and
transcripts of interviews of Meredith and others; and did not invoke the
attorney-client privilege, work product protection or other privileges or
protections with respect to any facts uncovered in the investigation
 Caveats
o What best protects investors in every enforcement judgment: There may be
circumstances where conduct is so egregious, and harm so great, that no
amount of cooperation or other mitigating conduct can justify a decision
not to bring any enforcement action at all. No set of criteria can be strictly
applied in every situation to which they may be applied
o We are not adopting any rule or making any commitment or promise
about any specific case – seek to only convey an understanding of the
factors that may influence decisions
o Not an exhaustive list of criteria
 List of criteria to consider and determine whether, and how much, to credit self-
policing, self-reporting, remediation and cooperation – and what sort of sanction
to give:
o What is the nature of the misconduct involved?
o How did the misconduct arise?
o Where in the organisation did the misconduct occur?
o How long did the misconduct last?
o How much harm has the misconduct inflicted upon investors and other
corporate constituencies?
o How was the misconduct detected and who uncovered it?
o How long after discovery of the misconduct did it take to implement an
effective response?
o What steps did the company take upon learning of the misconduct?
o What processes did the company follow to resolve many of these issues
and ferret out necessary information?
o Did the company commit to learn the truth, fully and expeditiously?
o Did the company promptly make available to our staff the rsults of its
review and provide sufficient documentation reflecting its response to the
situation?
o What assurances are there that the conduct is unlikely to recur?
o Is the company the same company in which the misconduct occurred, or
has it changed through a merger or bankruptcy organisation?
US Sentencing Guidelines: Organisational Sentencing
 Post-Booker, the Guidelines applied to organisations are merely advisory – judges
will not be required to follow them
 In developing its set of guidelines, the Commission considered and rejected a law
and economics based “optimal penalties” approach
o Centered upon a formula designed to achieve fines perfectly calibrated to
“bring about perfectly efficient crime-avoiding responses by
corporations”
o Fines were to be set according to this formula: optimal fine = monetised
harm (i.e. loss) [divided by] probability of conviction
 The centrepiece of the Sentencing Guidelines was its fine range – which seeks to
42
achieve two philosophical objectives: punishment for the offence and deterrence.
This “carrot and stick” approach grew out of the Commission‟s acceptance of
three propositions:
o The Commission recognised that the respondeat superior principles of
liability studied within did not adequately respond to gradations in
corporate culpability
o The Commission came to believe that corporations could “hold out the
promise of fewer violations in the first instance and greater detection and
remediation of offences when they occur” through internal discipline,
reformation of standard operating procedures, auditing standards, and
the corporate culture, and institution of corporate compliance programs
o Create incentives for responsible corporate actors to foster crime control
by he creation of a mandatory guidelines penalty structure that rewarded
responsible corporate behaviour and ensured certain and harsh sanctions
for truly culpable corporations
 Two components to look at:
o Seriousness of the offence
o Culpability of the corporation
KEY FEATURES:
 Part B – Remedying the Harm from Criminal Conduct – Restitution
o Intended to be remedial, not punitive
o Regardless of the perceived culpability of an organisation, the
Commission determined that all convicted organisations should be
required to remedy any harm caused by the offence. This will generally
take the form of an order of restitution “for the full amount of the victim‟s
loss”
o While it may not be punitive in nature, it can be so onerous as to feel like
punishment!
o Not appropriate when:
 Full restitution has been made
 Number of identifiable victims is so large as to make restitution
impracticable
 When “determining complex issues of fact related to the cause or
amount of the victim‟s losses would complicate or prolong the
sentencing process to a degree that the need to provide restitution
to any victim is outweighed by the burden on the sentencing
process”
 Part C – Fines
o If an organisation “operated primarily for a criminal purpose or primarily
by criminal means”, the sentencing judge may set the fine “at an amount
(subject to the statutory maximum) sufficient to divest the organisation of
all its net assets”
o The balance of the fine provisions of Part C does not apply to all
organisational sentencing. While Parts B and D apply to all federal felony
or Class A misdemeanour convictions, counsel must convict 8C2.1 to
determine whether the offence is one that is covered by the Part C fine
guidelines
o Important categories of cases, such as environmental offences, and food
and drug, RICO and export control violations, are not presently covered
by the fine guidelines
43
o Where it is “readily ascertainable that the organisation cannot and is not

likely to become able (even on an instalment schedule) to pay restitution”,
no guidelines fine calculation need be done because restitution
obligations trump any fine imposed
o The statutory maximum (or where applicable, minimum) sentence always
trump. Thus, even if, after applying the fine guidelines, the court arrives
at a fine range that exceeds the maximum set by statute, the court may not
exceed the statutory maximum
 Part D – Organisational Probation
o A term of organisational probation is required in many circumstances –
two of the most common being (1) where immediate payment is excused,
if probation is necessary to ensure that restitutionary or remedial
obligations are met or that the fine is paid or (2) if, at the time of
sentencing, an organisation having 50 or more employees does not have
an effective compliance program in place
 Effective Compliance Program: The Caremark Decision
o In 1995, Caremark International Inc pleaded guilty to a mail fraud charge
for illegally paying physicians for patient referrals and then falsely billing
the government
o Caremark agreed to reimburse various private and public parties,
ultimately paying $250 million in criminal and civil fines
o The important decision for the wider corporate community, however,
came a year later when the Delaware Chancery Court was asked to
approve the settlement of a shareholder derivative case alleging that the
Caremark directors had breached their duty of care by failing to supervise
the conduct of Caremark‟s employees.
o The court approved the settlement, finding that “there was a very low
probability that it would be determining that the directors of Caremark
breached any duty to appropriately monitor and supervise the
enterprise”. It went on, however, to underscore the importance of
compliance efforts
o Issue: What is the board‟s responsibility with respect to the organisation
and monitoring of the enterprise to assure that the corporation functions
within the law to achieve its purposes?
o The Chancery Court stated that “modernly this question has been given
special attention by an increasing tendency, especially under federal law,
to employ the criminal law to assure corporate compliance with external
legal requirements” and by the Organisational Guidelines, “which impact
importantly on the prospective effect these criminal sanctions might have
on business corporations”
o The Guidelines “offer powerful incentives for corporations today to have
in place compliance programs to detect violations of law, promptly to
report violations to appropriate public officials when discovered, and to
take prompt, voluntary remedial efforts”
o The court concluded that “a director‟s obligation includes a duty to
attempt in good faith to assure that a corporate information and reporting
system, which the board concludes is adequate, exists, and that failure to
do so under some circumstances may, in theory at least, render a director
liable for losses caused by non-compliance with applicable legal
standards”
44
Corporate Internal Investigations

 Upjohn Co v United States
o Permitted the corporation to resist government efforts to secure the work
product of its corporate counsel generated in the course of counsel‟s
investigation into questionable payments (i.e. bribes) that the company
had made to foreign government officials
o In some instances, federal investigators will ask the corporations to waive
the privilege protections that shield the results of (and documentation
underlying) such investigations
o Federal law does not recognise a “selective” waiver – if a corporation
should elect to turn over its attorney-client privileged material or
corporate counsel‟s work product to the government in an effort to seek
credit for full “cooperation” (and thus a declination), it may well have to
turn over the same, often inculpatory information to private litigants who
seek to impose civil liability on the company
Julie R. O‟Sullivan, Does DOJ’s Privilege Waiver Policy Threaten the Rationales
Underlying the Attorney-Client Privilege and the Work Product Doctrine? A
Preliminary “No”
45 Am. Crim. L. Rev. 1237, 1280-85, 1258-63 (2008)
 A company that conducts an internal investigation on its own gains the
advantage of knowing what the facts are, and, if there is no legal requirement
that such investigation be disclosed, can then take appropriate internal action
and then decide whether or not to bring such results to the government‟s
attention
 Advantages of investigation:
o Such investigations may be required by statute (e.g. Anti-Kickback
Enforcement Act of 1986, Medicare Fraud Reporting Act and federal
banking regulations)
o Ensure that whatever wrongdoing has gone on has ceased
o Even if the conduct itself has ceased, the organisation must recognise that,
unless it takes prompt remedial action, the wrongdoing may morph into
other legal problems (e.g. Upjohn: IRS was investigating in part to
determine whether Upjohn improperly treated the “questionable
payments” as deductible business expense)
o Public corporations find themselves increasingly relying on internal
investigations as both a way to ferret out potential wrongdoing and to
insulate themselves and their directors and officers from liability
 Increasingly, large-scale or particularly sensitive investigations are conducted by
outside counsel from a law firm expert. Two varieties of circumstances are
identified as relevant:
o Lacks a Fifth Amendment privilege – thus, a corporation can protect the
results of its investigation – at least until it chooses how it will act on the
report – only by using lawyers who can shield their work under the
attorney-client privilege and work product doctrine. Thus, the
investigation must be pursued for the purpose of securing legal advice
(attorney-client) or done in anticipation of litigation (work product)
o At least when the investigation is announced publicly, as it often is, the
company is hoping to reassure a number of constituencies beyond
criminal prosecutors regarding the corporation‟s remediation of the
problem
45
Managerial Liability: “Responsible Corporate Officer” Doctrine

 Three theories under which corporate officers or agents may be held liable for
criminal violations that occur during the course of their employment:
o An agent who actually performs the criminal act may be liable even
though he committed the act in his official or representative capacity
o Corporate agents may be liable as aiders and abettors
o Premised upon an employee‟s or agent‟s failure to control the misconduct
of others. The harm sought to be avoided in the applicable statute or
regulation results not from a supervisor‟s actions in actively committing
or aiding and abetting, but rather from the supervisor‟s failure to discover
or to correct a problem that lies within his managerial mandate – a
“responsible corporate officer” may be criminally sanctioned even though
he did not personally participate in the wrongdoing and even though he
had no personal knowledge of the misconduct perpetrated by his
subordinates
United States v Park
421 US 658 (1975)
Facts  Acme Markets, Inc, is national retail food chain with 36,000
employees, 874 retail outlets, 12 general warehouses and four
special warehouses
 The Government charged Acme and its respondent, Park (CEO of
the corporation), with violations of the Federal Food, Drug and
Cosmetic Act
 Each count of the information alleged that D had received food
that had been shipped in interstate commerce and that, while the
food was being held for sale in Acme‟s Baltimore warehouse
following shipment in interstate commerce, they caused it to be
held in a building accessible to rodents and to be exposed to
contamination by rodents
 Acme pleaded guilty – respondent pleaded not guilty
 Evidence at trial demonstrated that the respondent had been
informed by the FDA of the insanitary conditions at the
Philadelphia and Baltimore warehouses
 He testified that, although all of Acme‟s employees were in a
sense under his general direction, the company had an
“organisational structure for responsibilities for certain functions”
according to which different phases of its operation were
“assigned to individuals who, in turn, have staff and departments
under them”
Issue  Standard of liability of corporate officers under the federal Food,
Drug and Cosmetic Act as construed in United States v Dotterweich
and because of the importance of the question to the
Government‟s enforcement program
 Whether the manager of a corporation, as well as the corporation
itself, may be prosecuted under the Federal Food, Drug and
Cosmetic Act of 1938 for the introduction of misbranded and
adulterated articles into interstate commerce
Holdings  Cases under the Federal Food and Drugs Act of 1996 reflected the
view both that knowledge or intent were not required to be
proved in prosecutions under its criminal provisions, and that
46
responsible corporate agents could be subjected to the liability

thereby imposed
 The principle had been applied whether or not the crime required
“consciousness of wrongdoing”, and it had been applied not only
to those corporate agents who themselves committed the criminal
act, but also to those who by virtue of their managerial positions
or other similar relation to the actor could be deemed responsible
for its commission
 Actus Reus: Where the statute under which they were prosecuted
dispensed with “consciousness of wrongdoing”, an omission or
failure to act was deemed a sufficient basis for a responsible
corporate agent‟s liability
 The requirements of foresight and vigilance imposed on
responsible corporate agents are beyond question demanding,
and perhaps onerous, but they are no more stringent than the
public has a right to expect of those who voluntarily assume
positions of authority in business enterprises whose services and
products affect the health and well-being of the public that
supports them
Dissenting  Before a person can be convicted of a criminal violation of this
Act, a jury must find – and must be clearly instructed that it must
find – evidence beyond a reasonable doubt that he engaged in
wrongful conduct amounting at least to common law negligence.
There were no such instructions, and clearly, therefore, no such
finding in this case.
United States v Brittain
931 F.2d 1413 (10th Cir. 1991)
Facts  D, as public utilities director for the city of Enid, Oklahoma, had
general supervisory authority over the operations of the Enid
wastewater treatment plant and was responsible for filing the
plant‟s discharge monitoring reports. D directed the plant
supervisory to falsify eighteen monthly discharge monitoring
reports and the supporting laboratory records by recording 25 to
30 milligrams per liter of effluent for two specific pollutants
regardless of the actual measurements at the point of discharge
 The original NPDES permit provided for two discharge point
sources, outfalls 001 and 002; whereas the new permit allowed for
only one discharge point source, outfall 001. Discharge from
outfall 002, although expressly prohibited by the renewed NPDES
permit, continued during times of heavy rain. The discharge
resulted from a 36-inch bypass pipe which would divert raw
sewage through outfall 002 when heavy rain caused excess water
to flow through the sewage point
Issue  D contended that an “individual” is only subjected to s 1319(c)‟s
criminal sanctions for NPDES permit violations only if he is the
permittee. In addition, he relied on s 1319(c)(3)‟s addition of
“responsible corporate officers” is meaningless if s 1362(5) already
makes “persons” of “individuals” who merely are related to
discharging permittees.
Holding  Under this interpretation, a “responsible corporate officer”, to be
47
held criminally liable, would not have to “wilfully or negligently”

cause a permit violation. Instead, the wilfulness or negligence of
the actor would be imputed to him by virtue of his position of
responsibility. This in no way limits other “persons”, as defined
by s 1362(5), to permittees. The statute plainly states that any
“person”, permittee or nonpermittee who causes a permit
violation through wilful or negligent conduct, is subject to
criminal sanctions. We hold that D, as an “individual”, is a
“person” subject to criminal liability under the Act
United States v MacDonald & Watson Waste Oil Co.
933 F.2d 35 (1st Cir. 1991)
Facts  MacDonald & Watson Oil Co and Eugene K. D‟Allesandro
(President) were convicted of knowingly transporting and causing
the transportation of hazardous waste, namely toluene and soil
contaminated with toluene, to a facility which did not have permit
 They were responsible for the excavation, transportation and
disposal of toluene-contaminated soil as a result of a hole in a tank
by Master Chemical Company
 MacDonald & Watson operated a disposal facility on land in
Providence, Rhode Island, known as the “Poe Street Lot”, leased
from appellant NIC. MacDonald & Watson operated the Poe
Street Lot under NIC‟s Rhode Island RCRA permit, which
authorised the disposal at the lot of liquid hazardous wastes and
soils contaminated with non-hazardous wastes such as petroleum
products. Neither NIC nor MacDonald & Watson held a RCRA
permit authorising them to dispose of solid hazardous wastes
such as toluene-contaminated soil at the lot.
Issue  D‟Allensandro contended that the district court incorrectly
charged the jury regarding the element of knowledge in the case
of a corporate officer
 Section 3008(d)(I) penalises “Any person who…(I) knowingly
transports or causes to be transported any hazardous waste
identified or listed under this subchapter…to a facility which does
not have a permit”. In his closing, the prosecutor conceded that
the government had “no direct evidence that Eugene
D‟Allesnandro actually knew that the Master Chemical shipments
were coming in”, i.e. were being transported to the Pot Street Lot
under contract with his company
 The Government argued that D‟Allesandro was guilty of violating
s 3008(d)(I) because, as the responsible corporate officer, he was in
a position to ensure compliance with RCRA and had failed to do
so even after being warned by a consultant on two earlier
occasions that other shipments of toluene-contaminated soil and
been received from other customers, and that such material
violated NIC‟s permit
Holding  D‟Allesandro challenged the jury‟s instruction which read that
“the third requirement is that the officer must have known or
believed that the illegal activity of the type alleged occurred”. He
contended that the use of the “responsible corporate officer”
doctrine is improper under s 3008(d)(I) which expressly calls for
48
proof of knowledge, i.e. requires scienter.

 We agree with D‟ Allesandro that the jury instructions improperly
allowed the jury to find him guilty without finding he had actual
knowledge of the alleged transportation of hazardous waste on
July 30 and 31 1986, from Master Chemical Company, Boston,
Massachusetts, to NIC‟s site, knowledge being an element the
statute requires. We must therefore vacate his conviction
 Proving circumstantial evidence: By instructing the jury to point
out that knowledge could be established by circumstantial
evidence, it would have sufficed (and even elaborate on the extent
to which D‟Alessandro‟s responsibilities and duties might lead to
a a reasonable inference that he knew of the Master Chemical
transaction)
 Instead, the district court charged, in effect, that proof of that
D‟Allesandro was a responsible corporate officer would
conclusively prove the element of his knowledge of the Master
Chemical shipments. In a crime having knowledge as an express
element, a mere showing of official responsibility under
Dotterwich and Park is not an adequate substitute for direct or
circumstantial proof of knowledge
49
50
WEEK 5
PERJURY, FALSE STATEMENTS AND FALSE
CLAIMS
 Perjury
 18 USC 1621
 18 USC 1623
 Two witness rule
 Recantation defence
 False Statements
o Judicial Function
o Legislative Function
o False reculpatory number
 False Claims
 Qui tan

 PERJURY
o Judicial contempt sanction where there is some evidence that the perjury
obstructed the court in the performance of its duty
o Federal sentencing guidelines provide for an enhancement of D‟s sentence
who is convicted of the crime originally charged and whose perjurious
testimony at trial constituted a wilful attempt to obstruct justice
o For the purpose of sentencing guidelines, you can get two more points
 Elements/Principles of Liability
o Under either 18 USC 1621 or 1623, Govt bears the burden of showing four
essential elements:
 That the testimony was given (or under s 1623, the
described record or document was used) while D was
under oath
 The testimony (or the record or document used) was false
 D knew when he made the statement (or gave or used the
document or record) to the tribunal that it was false
 The matters about which D testified falsely (or the false
documents or records used) were material
o Whether the truthful/false answer was capable of
influencing the proceedings
 Agency account/oath administered (18 USC 1621)
 Similarities: 1623 – Court or ancillary proceedings
(deposition in Bill Clinton‟s case). Non-court places are
covered by 18 USC 1621 (which also include 18 USC 1623)
 Differences: 1621 has the two-witness rule (you cannot just
have one witness testifying to the falsehood; you need
either one witness + corroborating evidence, or two
witnesses). If I can bring it under 1623, why would I bring
it under 1621?
 Inconsistent Statement Rule (1623): Two statements
presented in the same suit as contradictory can be
51
presented as falsity
 Recantation Defence (1623): Rarely used. If the witness
recants before the proceedings have been substantially
affected. But it would not work if there are intervening
events before the witness reports it
o The two sections differ in:
 Scope
 S 1623 applies only to false declarations “in any
proceedings before or ancillary to any court or grand jury
of the United States” which includes pre-trial civil
depositions but excludes at least one important area –
congressional investigations – in which perjury may be
committed
 S 1621 covers congressional investigations – broader. But it
is more limited in scope because s 1621 case must rest upon
false statements while s 1623 cases may lie where a witness
“makes or uses” false information or false materials,
including false exhibits, documents, records or other
evidence that contains a false material declaration
 Evidentiary Considerations
 S 1623 was enacted in response to “perceived evidentiary
problems in demonstrating perjury under the existing
federals statute, 18 USC 1621 – strict common law
requirements for establishing falsity”
o Proof of falsity: Under 1621, govt must always
prove that D‟s statement was actually false. In 1623,
Congress authorised the govt to meet its burden of
proving the falsity of declaration at issue by “proof
that D while under oath made irreconcilably
contradictory declarations material to the point in
question in any proceeding before or ancillary to
any court or grand jury”. By relieving Govt of
burden of proving which of two or more
inconsistent declarations was false, Congress
sought to afford „greater assurance that testimony
obtained in grand jury and court proceedings will
aid the cause of truth‟
o Two-Witness Rule: Under the two-witness rule, the
“uncorroborated oath of one witness is not enough
to establish the falsity of the testimony of the
accused”. This rule does not require that two
witnesses demonstrate the falsity of D‟s statements;
rather, “what actually is needed is one witness plus
some independent corroboration (that is, the
uncorroborated oath of one prosecution witness is
still insufficient)” and “[m]ost courts appear to
subscribe to the view that circumstantial evidence
will do for the corroboration”. S 1621 retains the
two-witness rule but Congress eliminated that
requirement in s 1623 cases
52
o Mens rea: Both statutes require proof that D made

the statement or declaration, or used the
information, knowing that it was false. In addition,
however, s 1621 requires that the perjury be
“wilful” while s 1623 does not
o Defences
 Recantation
 Not available under s 1621 perjury – the crime is deemed
complete the moment that the false statement is uttered
 S 1623 – express recantation defence. In this respect,
Congress gave Ds one evidentiary advantage in s 1623 that
they do not have under s 1621 – the possibility of avoiding
prosecution by recanting their perjurious testimony (note:
demanding requirements!)
o Requirements:
 D must recant in the “same continuous
court or grand jury proceeding” in which
the false declaration was made
 Declaration must not have “substantially
affected the proceeding” and
 Cannot have become “manifest that such
falsity has been or will be exposed”
 “Literal Truth” and “Ambiguity”
 It is sometimes suggested that proof that D told the literal
truth, while, perhaps, hoping to mislead, is a defence to a
perjury charge under 18 USC sections 1621 and 1623, and
under 18 USC section 1001…However, it is important to
remember that the burden of proving falsity remains with
the prosecution
 Although not technically a defence in that the govt bears
the burden of proving actual falsity beyond a reasonable
doubt, the “literal truth” rule permits D to put the govt to
its burden and occasionally to defeat a perjury, false
declarations or false statement prosecution
Bronston v United States
409 US 352 (1973)
Facts  The statement at question here is “Have you ever [had any bank
accounts in Swiss banks]?”. The petitioner replied, “The company
had an account there for about six months, in Zurich”
 The Govt‟s prosecution for perjury went forward on the theory
that in order to mislead his questioner
 But the following facts are true:
o Petitioner did not at the time of questioning have a Swiss
bank account
o Bronston Productions, Inc., did have the account in Zurich
described by petitioner
o Neither at the time of questioning nor before did petitioner
have nominees who had Swiss accounts
Issue  Whether a witness may be convicted of perjury for an answer,
under oath, that is literally true but not responsive to the question
53
asked and arguably misleading by negative implication.

Holdings  The statute (18 USC 1621) does not make it a criminal at for a
witness to wilfully state any material matter that implies any
material matter that he does not believe to be true.
 Under the pressure and tensions of interrogation, it is not
uncommon for the most earnest witnesses to give answers that are
not entirely responsive.
Notes  Encourage people who are not used to the gamesmanship that
lawyers bring to advocacy, and to protect them. Witnesses may not
be paying particular attention to the questions. Erred on the side of
protecting witnesses, and puts the burden of careful examination
on counsel
 A related defence to a prosecution under s 1621 and 1623 is
alluded to but not addressed in Bronston: the contention that the
question to which D falsely responded was too ambiguous to serve
as the basis for a perjury or false declarations count. Generally
speaking, courts will defer to the jury‟s determination of the
meaning of the question and the truthfulness of D‟s answer
 Where a question is “fundamentally ambiguous”, however,
reviewing courts have overturned convictions in order to “(1)
preclude convictions grounded on surmise or conjecture; (2)
prevent witnesses from unfairly bearing the risk of inadequate
examination; and (3) encourage witnesses to testify (or at least not
discourage them from doing so)”
 Another popular defence theory in perjury or false declarations
prosecutions is to move to bar the prosecution on the ground that
the government improperly created a “perjury trap” into which D
fell, usually in the course of grand jury proceedings. A perjury tap
is created when the govt calls a witness before the grand jury for
the primary purpose of obtaining testimony from him in order to
prosecute him later for perjury
FALSE STATEMENTS
 18 USC 1001 is the most commonly invoked section for false statements:
o May be used instead of, or in conjunction with, statutes covering a broad
spectrum of criminal activity, including such matters as fraud, perjury,
obstruction of justice and false claims (e.g. punishes false statements but does
not require that the object of the statement be to defraud the government out of
money or property)
o May be used to avoid some of the evidentiary strictures of s 1621;
 The two-witness rule applied in s 1621 cases does not control in
s 1001 cases and prosecutors may avoid proving the offending
statement actually false, as required in perjury cases, by charging
that D misled through concealment under s 1001 (S 1001 may have
a more limited role in supplanting s 1623 because that section
applies only where the perjury is ancillary to a court or grand jury
proceeding and s 1001‟s applicability at least to false statements
made by parties or their counsel in judicial proceedings is limited
by the terms of the statute)
o The false statements statute is often applied to simple and relatively easy
to prove false statements made during a larger criminal case, or during
54
the course of the investigation of a criminal matter. As such, it opens up

the possibility that the government may secure a conviction (or plea) on a
false statement count even when it does not have the proof to make its
case on the underlying criminal case under investigation
ELEMENTS/PRINCIPLES OF LIABILITY
1. Uttering falsehood or concealing facts (duty to disclose) by trick: D either made

or used a false or fraudulent statement, representation or writing; or falsified, or
affirmatively concealed or covered up by trick, scheme, or device, a fact that D
had a legal duty to disclose
 Best way to mitigate against this is to advise client to keep quiet till he has
counselled lawyers
2. Material: False statement or information concealed was “material”
 All the prosecution need show is that the “statement is capable of
influencing or affecting a federal agency”
 The test is the intrinsic capabilities of the false statement itself, rather than
the possibility of the actual attainment of its end as measured by collateral
consequences
 Possible element of gamesmanship – used as a tool to scare the defendant,
and hopefully, to get the scared defendant to say something he otherwise
would not say
3. Jurisdiction – Department of US: Subject-matter involved was within the
“jurisdiction”
 United States v Rodgers: The most natural, nontechnical reading of the
statutory language is that it covers all matters confined to the authority of
an agency or department
4. Of the executive, legislative or judicial branches of the Govt of the US
 Morgan v United States: The statute does apply to the type of action with
which appellant was charged, action which essentially involved the
“administrative” or “housekeeping” functions, not the “judicial”
machinery of the court
 Issues relating to the identity of a person before a criminal court were
usually deemed “administrative”, along with false statements or non-
disclosure on standard court forms. Such matters could be pursued under
s 1001
 In contrast, falsely denying to a bankruptcy judge that one had forged a
bankruptcy document, fictitious letter of recommendation for
consideration by a sentencing judge, and statements at bail hearings, were
all deemed matters that fell within the judicial function exception and
thus could not be prosecuted under s 1001
 The 1996 amendment was made to respond to Hubbard, and now
expressly includes false statements and fraudulent concealments made
“in any matter within the jurisdiction of the executive, legislative, or
judicial branch of the Govt of the US”. Quare: What is intended by this
limitation – did Congress through legislation revive and reinstate the case
law regarding a judicial function exception?
5. Knowingly and wilfully: D acted “knowingly and wilfully”
 To commit an act „knowingly‟ is to do so with knowledge or awareness of
the facts or situation, and not because of mistake, accident or some other
55
innocent reason
 The statement must have been made with an intent to deceive, a design to
induce belief in the falsity or to mislead, but s 1001 does not require an
intent to defraud – that is, the intent to deprive someone of something by
means of deceit
 Although the Court in Yermian held that proof of actual knowledge of
federal agency jurisdiction is not a necessary element of a s 1001
conviction, the Court left open the issue of whether some lesser standard
of culpability must be read in the statute. The majority of courts to
address this issue since Yermian have held that “no mental state is
required”
 Judicial Function
o Judicial function should not be confused with the administrative

function of false statements
o Example: A lawyer pleaded not guilty on behalf of the client, even though
the lawyer knew that he was indeed guilty. False statements do not
apply to lawyers in normal judicial proceedings
 Intention to promote advocacy
 Eliminates the fear of the defence lawyer being possibly arrested
o Distinction between s 1623 and 1001 – OATH
 Legislative Function Exception： Submittals to Congress are a form of advocacy

– we want to encourage, not a chilling effect, on Congress
United States v Herring
916 F.2d 1543 (11th Cir. 1990)
Facts  Herring filed for unemployment insurance benefits for lack of
work and was unemployed for the week prior to Jan 14. However,
he actually began working for an Ohio construction company on
Jan 12
 He made requests and received unemployment compensation
from the Georgia Department of Labour while he was gainfully
employed. He was paid a total of $870
Issue  Jurisdiction and materiality are at issue in this case
Holdings  Jurisdiction:
o Herring argued that although the Georgia Dept of Labour
receives federal funds from US Dept of Labour for
administrative purposes, his false statements did not affect
an authorised function of the US Dept of Labour
o False statements need not be presented to an agency of the
US and that federal funds need not actually be used to pay
a claimant for federal agency jurisdiction to exist under s
1001: US v Suggs
 Materiality:
o Test for determining materiality under s 1001: Whether the
false statement has the capability of affecting or influencing
the exercise of a government function. Materiality is
satisfied even if the federal government was not actually
influenced by the false statements. The false statements
56
need not be made directly to the federal agency to sustain a

s 1001 conviction as long as federal funds are involved
o In this case, payment of fraudulent claims frustrates the
function of the Georgia unemployment law because such
claims are outside the proper and efficient administration
of the law
Notes  Should there be a direct relationship between the falsehood and
concealment?
o Circuit split between 9 and 11 Circuit
o Circuits that worry about this would be concerned with the
“nexus” between the falsehood and concealment, and the
functioning of federal agents
DEFENCES
Brogan v United States
322 US 398 (1998)
Facts  The federal agents from the Department of Labour and the Internal
Revenue Service asked the petitioner if he would answer some
questions – one of which was whether he had received any cash or
gifts from JRD when he was a union officer. The response was
“no”. At that point, the agents disclosed that a search of JRD
headquarters had produced company records showing the
contrary. They told the petitioner that lying to federal agents in the
course of an investigation was a crime
Issue  Whether there is an exception to criminal liability under 18 USC
1001 for a false statement that consists of the mere denial of
wrongdoing, the so-called “exculpatory no”
Holdings  We cannot imagine how it could be true that falsely denying guilt
in a Government investigation does not pervert a governmental
function. Certainly the investigation of wrongdoing is a proper
governmental function; and since it is the very purpose of an
investigation to uncover the truth, any falsehood relating to the
subject of the investigation perverts that function
 Regarding the exculpatory no doctrine: Whether or not the
predicament of the wrongdoer run to ground tugs at the
heartstrings, neither the text nor the spirit of the Fifth Amendment
confers a privilege to lie: Proper invocation of the Fifth
Amendment privilege against compulsory self-incrimination
allows a witness to remain silent, but not to swear falsely
 Because the plain language of s 1001 admits of no exception for an
“exculpatory no”, we affirm the judgment of the COAs
Notes  Congress intent did reflect such an intention today – they are not
afraid to act. If members of Congress did not like the „false
reculpatory no‟ doctrine, they could have acted to exclude it
 The US Attorney Manual still has this particular doctrine in its
handbook – „false reculpatory no‟ doctrine is still recognised
FALSE CLAIMS
 18 USC 287 is frequently cited and used to criminally pursue false statements to
the government
 There is also a civil equivalent statute – False Claims Act, 31 USC s 3729-3733
 The FCA encourages private citizens, known as “relators”, to file suit on behalf of
57
the government in order to recover civil damages from other private citizens for
their frauds against the government. The relators who file such actions – known
as qui tam suits – are statutorily entitled to a healthy percentage of the potentially
large damages and penalties that may be recovered (with attorneys fees) in such
FCA litigation
 Criminal False Claims:
o Elements:
 Claim to US: D presented a claim against the US or any agency or
department of the United States
 False, Fictitious, Fraudulent: The claim was false, fictitious or
fraudulent
 Knowingly: D knew that the claim was false, fictitious or
fraudulent
o Differences between Criminal False Claims and False Statements:

 Specific Intent (wilfully)
 What defence is available for intent?
 Good faith – acted in good faith; custom in the industry
 No materiality critieria
o Primary distinction between s 287 and s 1001 is that the former requires
that a false claim be made and may not rest, as may the latter, on the
simple provision of any false statement (or, in appropriate cases,
concealment)
 Civil False Claims (Qui Tam Litigation):
o Private attorney statute: A private citizen can bring as a “relator”, in the
name of the USA, against the organisation or individual defrauding
against the country. They must notify the government. If the government
wants to, they can intervene and take over the claim. If they do not want
to, they can still proceed. If you win, you can get treble damages, fees, etc
– 30% of the recovery. If the government intervenes, you get 25%
o FCA allowed private citizens, known as “relators”, to bring what are
known as qui tam suits in the name of the government, based on the
individual‟s knowledge of fraud against the government, and to secure
for their trouble a portion of the funds recovered in the suit
Riley v St Luke‟s Episcopal Hospital
252 F.3d 749 (5th Cir. 2001)
Issue  Consider whether the qui tam provisions of the False Claims Act,
which permits private citizens, or relators, to pursue actions for
fraudulent claims in the name of the federal government, violate
the constitutional separation of powers doctrine.
Holdings  A private citizen may pursue qui tam litigation under the FCA,
whether the government chooses to intervene or does not choose,
does not interfere with the President‟s constitutionally assigned
functions. Although the Clause states that the Executive must
“take Care that the Laws be faithfully executed”, it does not
require Congress to prescribe litigation by the Executive as the
exclusive means of enforcing federal law.
 The powers of a qui tam relator to interfere in the Executive‟s
58
overarching power to prosecute and to control litigation are seen

to be slim indeed when the qui tam provisions of the FCA are
examined in the broad scheme of the American judicial system
 Any intrusion by the qui tam relator in the Executive‟s Article II
power is comparatively modest, especially given the control
mechanisms inherent in the FCA to mitigate such an intrusion and
the civil context in which qui tam suits are pursued
Dissenting  The Attorney General loses all control over the decision whether to
initiate the suit. Even if the Attorney General determines that there
are “no reasonable grounds” for the fraud action, the relator may
override that judgment and initiate a lawsuit. The action goes
forward in the government‟s name, under total control of the self-
interested and publicly unaccountable relator, even if the Attorney
General has concluded that proceeding with a lawsuit is not
merited or is otherwise not in the US‟s interests.
CHARGING CONSIDERATIONS: DOUBLE JEPOARDY
 Double Jeopardy – no one should be charged for the same offence twice
 Look for one fact that must be proved that will differentiate the two offences
 Applicable legal rules depend upon whether D is challenging:
o Prosecutor‟s decision to proceed in a single proceeding against D on a
number of charges which D contends would, upon conviction, subject
him to multiple punishments for the same offences OR
o After conviction or acquittal on some charges in one criminal case, a
prosecutor‟s decision to bring in another proceeding criminal charges that
D alleges subject him to double jeopardy for the same offence already
adjudicated
 The Double Jeopardy Clause applies in both multiple punishment and successive
prosecution cases, but the interests it seeks to protect – and thus the rules that
control – differ depending upon which type of case is at issue
United States v Woodward
Holding  Congress‟ intent to allow punishment under both 18 USC 1001 and
31 USC 1058 is shown by the fact that the statutes “are directed to
separate evils”.
 The currency reporting statute was enacted to develop records that
would “have a high degree of usefulness in criminal, tax or
regulatory investigations”.
 The false statement statute, on the other hand, was designed “to
protect the authorised functions of governmental departments and
agencies from the perversion which might result from the
deceptive practices described”
59
60
WEEK 6
OBSTRUCTION OF JUSTICE
 Obstruction of Justice
 Omnibus Clause
 § 18 USC 1503, 1505, 1512
 Endeavour
 Nexus
 Corruptly

“Omnibus” Clause of 18 USC § 1503
 s 1503: specifically targets conduct that interferes with the duties of a juror or
court officer
 The “omnibus” clause is the portion of the statute with which we are principally
concerned and it states that “[w]hoever…corruptly or by threats or force, or by
any threatening letter or communication, influences, obstructs or impedes, or
endeavours to influence, obstruct, or impede, the due administration of justice,
shall be punished”. This clause is essentially a catch-all provision which generally
prohibits conduct that interferes with the due administration of justice
United States v Aguilar
515 US 593 (1995)
Facts  A motion was assigned to Judge Stanley Weigel. Tham, seeking to
enhance the odds that his petition would be granted, asked Edward
Solomon and Abe Chapman, to assist him by capitalising on their
respective acquaintances with another judge in the Northern District
of California, respondent Augilar. Respondent knew Chapman as a
distant relation by marriage and knew Solomon from law school.
Solomon and Chapman met with respondent to discuss Tham‟s
case; respondent spoke with Judge Weigel about the matter
 Five months after Aguilar learned that Chapman had been named in
a wiretap authorisation, he noticed a man observing his home
during a visit by Chapman. He alerted his nephew to this fact and
conveyed the msg (with an intent that his nephew relay the info to
Chapman) that Chapman‟s phone was being wiretapped
Issues  A grand jury began to investigate an alleged conspiracy to influence
the outcome of Tham‟s habeas case. Two FBI agents questioned
respondent. During the interview, respondent lied about his
participation in the Tham case and his knowledge of the wiretap.
The grand jury returned an indictment; a jury convicted Augilar of
one count of disclosing a wiretap (he knew of the wiretap, but he
was not authorised to inform about it. If the attorney is directly
involved with the crime fraud, arguably there would not be an attorney-
client privilege) and one count of endeavouring to obstruct the due
administration of justice
 Because the respondent knew of the pending proceeding, the Govt
therefore contends that Augilar‟s statements are analogous to those
made directly to the grand jury itself
Holding  “Nexus” Requirement: The action taken by the accused must be with
an intent to influence judicial or grand jury proceedings; it is not
61
enough that there be an intent to influence some ancillary

proceeding, such as an investigation independent of the court‟s or
grand jury‟s authority. Some courts have phrased this showing as a
“nexus” requirement – that the act must have a relationship in time,
causation, or logic with the judicial proceedings. In other words, the
endeavour must have the “‟natural and probable effect‟” of
interfering with the due administration of justice. That is not to say
that D‟s action need be successful; an “endeavour” suffices
 We think the transcript citation relied upon by the Government
would not enable a rational trier of fact to conclude that respondent
knew that his false statement would be provided to the grand jury,
and that the evidence goes no further than showing that respondent
testified falsely to an investigation agent. Such conduct, we believe,
falls on the other side of the statutory line from that of one who
delivers false documents or testimony to the grand jury itself.
Conduct of the latter sort all but assures that the grand jury will
consider the material in its deliberations
Dissenting  Instead of reaffirming that “natural and probable consequence” is
by Justice one way of establishing intent, it substitutes “natural and probable
Scalia effect” for intent, requiring that factor even when intent to obstruct
justice is otherwise clear. But while it is quite proper to derive an
intent requirement from s 1503‟s use of the word “endeavour”, it is
quite impossible to derive a “natural and probable consequence”
requirement.
Notes  The 18 USC § 1503 is a catch-all provision: Vague provision – not
adequately put on notice that your behaviour is criminal
 If he was not being truthful to an FBI agent, why was he not being
charged under 18 USC § 1001?
o This was a false exculpatory no, and it was decided before
Brogan, because the court recognises false exculpatory no!
 Elements of the “Nexus” Requirements – relationship in time, cause or
logic with the judicial proceedings. Is this judicial legislation, by
putting words in the statute that Congress did not intend?
o Knowing that a judicial proceeding was pending
o Corruptly
o Endeavoured
o To influence, obstruct, or impede the due administration of
justice
 The Court indicates that an “intent to obstruct” is a “requisite” – is
this a separate element to be charged and proved, or is it implicit in
the above list of elements?
 To show an obstruction based on false testimony, then, the
government generally must show that the “statements had the
natural and probable effect of impending justice”
 So long as there is proof that a D knows of the pending proceeding,
however, “the law is clear that neither a subpoena nor a court order
directing the production of documents must be issued or served as a
prerequisite to a s 1503 prosecution, and that the concealment and
destruction of documents likely to be sought by subpoena is
actionable under the statute”
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United States v Cueto

151 F.3d 620 (7th Cir. 1998)
Facts  Thomas Venezia owned B & H Vending/Ace Music Corporation, a
vending and amusement business, and operated an illegal video
gambling business through a pattern of racketeering activities and
illegal gambling payouts, in violation of state and federal anti-
gambling and racketeering laws. He hired Amiel Cueto, an attorney,
to represent him as well as to defend the tavern owners associated
with B&H in the event of any arrests and/or criminal charges for
their participation in the illegal gambling operation.
 In Mar 1995, Venezia and B&H were indicted on federal
racketeering charges, in addition to other related charges including
illegal gambling. Throughout the investigation and prior to
Venezia‟s indictment, Cueto served as Venezia‟s lawyer and
advisor. Cueto was not Venezia‟s attorney of record during the trial;
nonetheless, the record indicates that Venezia continued to rely on
Cueto‟s advice
 Venezia is now allowed to rent space in Cueto‟s building, even
though Cueto was representing him as a counsel (landlord-tenant
relationship). Together, Venezia and Cueto participated in various
business transactions, in which millions of dollars exchanged hands
to finance the purchases of various real estate interests and
construction costs relating to various development projects,
including certain gambling operations
Issue  The indictment alleged that Cueto corruptly endeavoured to use his
office as an attorney to influence, obstruct, and impair the due
administration of justice in various court proceedings in connection
with the prosecution of Venezia, is illegal gambling operation and
the racketeering enterprise
Holding  It is not the means employed by D that are specifically prohibited by
the statute; instead, it is D‟s corrupt endeavour which motivated
the action.
 It is undisputed that an attorney may use any lawful means to
defend his client, and there is no risk of criminal liability if those
means employed by the attorney in his endeavours to represent his
client remain within the scope of lawful conduct. However, it is the
corrupt endeavour to protect the illegal gambling operation and to
safeguard his own financial interest which motivated Cueto‟s
otherwise legal conduct that separates his conduct from that which
is legal.
 Cueto‟s repeated filings were motivated by his attempt to protect his
client from prosecution and to safeguard his financial interest.
Cueto‟s actions may qualify as traditional litigation-related conduct
in form, but not in substance, and the evidence presented at trial
demonstrates that Cueto clearly intended and corruptly
endeavoured to obstruct the due administration of justice.
Holding  Amiel was too aggressive, he filed too many motions. He could have
asked for another lawyer to represent him
 Corrupt is vague at this point of time
o When we talk about corruptly – it means wrongful purpose.
63
It has to be something more than the natural and probable

consequences of my act
o There was a wrongful purpose that Amiel had – the purpose
here is for him to earn his own profits
Obstruction of Proceedings Before Congress and Federal Agencies Under 18 USC
1505
Elements:
 D knowing that there is a proceeding pending before a department or agency of
the US or an inquiry or investigation being before either House, any committee of
either House, or a joint committee of the Congress
 Corruptly
o If it is a part of the “due administration of justice” element, the nexus
requirement may not apply
o If the nexus requirement inheres in the “corruptly” element, however, it
may well apply
 Endeavours
 To influence, obstruct, or impede the “due and proper administration of the law”
under which the pending agency proceeding is being had, or “the due and
proper exercise of the power” of the congressional inquiry
Witness Tampering Under 18 USC 1512
 Under 1512, only one of the proscribed activities – persuasion – requires proof of
a “corrupt” motive.
 Instead of s 1503‟s broad prohibition on any type of activity that obstructs the
“due administration of justice”, s 1512 focuses more narrowly on specific types of
conduct through which physical evidence can be compromised or witnesses
tampered with. In short, s 1512 is said to change the focus from corrupt motives
to presumptively corrupt methods – raising concerns among the defence bar that
s 1512 may pose an even greater threat to legitimate defence functioning that
s 1503
Arthur Andersen LLP v United States
544 US 696 (2005)
Facts  Significance of the Document Retention Policy (Documents are
destroyed after a certain period of time)
Holding  Essence of the charge: s 1512. Destruction of Documents
 It is one thing to say that a proceeding “need not be pending or
about to be instituted at the time of the offence”, and quite another
to say a proceeding need not even be foreseen. A
“knowingly…corrupt persuader” cannot be someone who
persuades others to shred documents under a document retention
policy when he does not have in contemplation any particular
official proceeding
Notes  Alternative provisions:
o s 1503
o s 1505 – must relate to Congressional hearing. Due
administration clause
 SEC governs publicly held companies
 SEC is likely to investigate
o S 1512 – Witness tampering statute
o Was there any difference in potential penalties in the
employment of different provisions?
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 Prosecuting a corporation of partnerships

 Looking for ease of corporation – the best way to get
conviction
 An important distinction between s 1503 and s 1512 concerns the
type of proceedings to which the alleged obstructive activity must
relate
o Section 1512(b)(I), (b)(2)(A)-(D) and (c)(I)-(2) all require that
the proscribed conduct occur in the context of an “official
proceeding” (including those conducted before bankruptcy
judges) and before a federal grand jury
o Section 1512‟s application to myriad “official proceedings
makes it much more broadly applicable than s 1503, which
may be invoked only when the due administration of justice
in judicial proceeding (such as grand jury or court
proceedings) is threatened”
 After Andersen, is there a need for awareness of pending
proceedings?
o Yes
o But 18 USC 1512(g)(1) does not require such an awareness!
How do you reconcile 18 USC 1512(g)(1) with Nexus and
Materiality? You cannot!
o Corruptly – acting with an improper purpose
 After Andersen, is there a…
o Nexus Requirement in 1503? It must be proved that the
official proceeding was foreseeable (prof not too sure what it
means)
o Materiality Requirement in 1503? The documents must be
material in some way for this set of proceedings
 We now have 18 USC 1519 – but this was implemented after
Andersen
o Make it easier for Government to prove
o No corruptly, no official proceeding
o Has not really been used much
o Part of Sarbane-Oxley‟s response to Enron
Sarbanes-Oxley Act of 2002 Prohibition of Destruction of Records and
Whistleblower
 Section 1519 is restricted to circumstances in which the destruction or alteration
of physical evidence takes place in connection with “any matter within the
jurisdiction of any department or agency of the United States” or a bankruptcy
case under title 11, which applies to obstructive activity pertinent to an “official
proceeding”
 Aimed at obstructive activity that affects the investigation, or proper
administration, of any matter within the jurisdiction of the executive branch or
the independent agencies. This limitation is consistent with the context in which
the statue was enacted: Congress was, at least in part, concerned with the
obstructive activity of Arthur Andersen that was aid to impede the investigation
of Enron‟s financials by the SEC
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18 USC 1503 (Omnibus Provision: 18 USC 1505 (Obstruction in Federal 18 USC 1512(b) (Non-coercive 18 USC 1512(c) (Tampering with
Obstruction in Judicial Proceedings) Agency Proceedings and Witness Tampering) Physical Evidence & Omnibus
Congressional Investigation) Provision)
Knowing that a judicial proceeding is Knowing that there is a pending Knowingly Corruptly
pending and corruptly (probably proceeding before a department or
includes Aguilar “nexus” requirement) agency of the United States or an
inquiry or investigation being had in
Congress, corruptly
Endeavours to influence, obstruct, or Endeavours to influence, obstruct or Uses intimidation, threatens, corruptly (2) otherwise obstructs, influences or
impede the due administration of impede the due and proper persuades, or engages in misleading impedes any official proceeding (or
justice administration of the law under which conduct toward another person (or attempts to do so)
the pending proceeding is being had attempts to do so)
before any department or agency of
the United States or the due and
proper exercise of the power of
congressional inquiry.
With a specific intent to obstruct With intent to (1) influence, delay or (1) alters, destroys, mutilates, or
prevent the testimony of any person in conceals an object (or attempts to do
an official proceeding; (2) cause or so) with the intent to impair the
induce any person to (a) withhold object‟s integrity or availability for use
testimony or an object from an official in an official proceeding
proceeding; (b) alter, destroy or
conceal an object with intent to impair
the object‟s integrity or availability for
use in an official proceeding, (c) evade
legal process summoning that person
to appear or to produce an object in an
official proceeding; or (d) be absent
from an official proceeding despite
service of legal process; or 93) hinder,
delay or prevent the communication
to a law enforcement officer or US
judge of information relating to the
commission or possible commission of
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a Federal offence
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WEEK 6
MAIL AND WIRE FRAUD
 Mail Fraud / Wire Fraud
 Elements
 Mailing / Wire
 Innocent mailing
 Variance
 Materiality
 Scheme to Defraud
 Intent to Defraud
 Money or Property
 Honest Services
 Intangible Rights
 Conflict of interest
 Bribes and kickbacks
Federal White Collar Crime p 419 - 502

 Why are mail and wire fraud statutes so popular?
o Inchoate offences – these statutes apply to fraudulent schemes that have
not necessarily come to fruition or caused any loss
o Simple offences – proscribe use of the mails or wires (including faxes,
telephone calls, e-mails, etc) to further fraudulent activity
o Tool against public corruption
o Use of the mail fraud statutes against high-ranking public officials
 Mail Fraud Elements
o Scheme to defraud
o Mailing of a letter, etc, for the purpose of executing the scheme
 Wire Fraud Elements
o Scheme to defraud
o Use of interstate wire communications in furtherance of the scheme
 Class Discussion: Submitting reports to the federal commission knowing that it
is not true. Used credit cards totalling $582,000 caused interstate wired
communication to occur. Client violated the election laws, by taking money
donated for election campaign and spending it on anything but it:
o Scheme: Money for false pretenses – repetition
o Mail – interstate common carrier / interstate wire communication
(telephone; they amended the statutes such that wireless phones are
wired) / mail
o Knowingly
o Intent to Defraud – Significant element. Done as a matter of business,
pursuant to counsel‟s advice or govt‟s instruction could negate this intent
to defraud
o Materiality
o Why charge under mail fraud? Easiest for imprisonment!
o Rule 11 C Agreement – the Government and D enter an agreement that he
is going to plea guilty. The judge will bind himself to the upper range of
the agreement
 Innocent Mailing:
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o Stole someone‟s credit card, and every night he would stop at the hotel
and use the credit card. The hotel would take his credit card invoice and
mail it to the bank and pay him. Not a mail fraud
o School board members use credit cards to buy gas and would pay for the
gas by paying the credit card statements
o Elements:
 Mailing Required by Law (e.g. income tax returns)
 Scheme is complete – I have got my goods
 Note that the odds of succeeding on this defence are very slim
18 USC § 1341
Whoever, having devised or intending to devise any scheme or artifice to defraud, or
for obtaining money or property by means of false or fraudulent pretenses,
representations, or promises, or to sell, dispose of, loan, exchange, alter, give away,
distribute, supply, or furnish or procure for unlawful use any counterfeit or spurious
coin, obligation, security, or other article, or anything represented to be or intimated
or held out to be such counterfeit or spurious article, for the purpose of executing
such scheme or artifice or attempting so to do, places in any post office or authorized
depository for mail matter, any matter or thing whatever to be sent or delivered by
the Postal Service, or deposits or causes to be deposited any matter or thing whatever
to be sent or delivered by any private or commercial interstate carrier, or takes or
receives therefrom, any such matter or thing, or knowingly causes to be delivered by
mail or such carrier according to the direction thereon, or at the place at which it is
directed to be delivered by the person to whom it is addressed, any such matter or
thing, shall be fined under this title or imprisoned not more than 20 years, or both. If
the violation occurs in relation to, or involving any benefit authorized, transported,
transmitted, transferred, disbursed, or paid in connection with, a presidentially
declared major disaster or emergency (as those terms are defined in section 102 of the
Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5122)), or
affects a financial institution, such person shall be fined not more than $1,000,000 or
imprisoned not more than 30 years, or both.
7th Circuit Instruction: 18 USC § 1341 & 1343 – Mail/Wire/Carrier Fraud Elements
[The indictment charges the defendant[s] with; Count[s] __ of the indictment
charge[s] the defendant[s] with] [mail] [wire] [carrier] fraud. In order for you to find
[a; the] defendant guilty of this charge, the government must prove each of the [four]
following elements beyond a reasonable doubt:
1. That the defendant knowingly [devised] [or] [participated in] a scheme [to
defraud], as described in Count[s] ___; (are all the words there – where’s
knowingly?) and
2. That the defendant did so with the intent to defraud; and
3. The scheme to defraud involved a materially false or fraudulent pretense,

representation, or promise; (the word material isn’t there) and
4. That for the purpose of carrying out the scheme or attempting to do so, the
defendant [used [or caused the use of]] [the United States Mails] [a private or
commercial interstate carrier] [caused interstate wire communications to take place]
in the manner charged in the particular count.
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If you find from your consideration of all the evidence that the government has
proved each of these elements beyond a reasonable doubt [as to the charge you are
considering], then you should find the defendant guilty [of that charge].
If, on the other hand, you find from your consideration of all the evidence that the
government has failed to prove any one of these elements beyond a reasonable doubt
[as to the charge you are considering], then you should find the defendant not guilty
[of that charge].
The Mailing or Wiring in Furtherance Element
Schmuck v United States
489 US 705 (1989)
Facts  Schmuck was charged with devising and executing a scheme to
defraud Wisconsin retail automobile customers who based their
decisions to purchase certain automobiles at least in part on the low-
mileage readings provided by the tampered odometers
 Had employed a man known only as “Fred” to turn back the
odometers on about 150 different cars. Marketed these cars to a
number of dealers, several of whom he dealt with on a consistent
basis over a period of about 15 years (There was an ongoing
fraudulent venture!)
 Mail fraud: To complete the resale of each automobile, the dealer
who purchased it from Schmuck would submit a title-application
form to the Wisconsin Department of Transportation on behalf of his
retail customer. The receipt of a Wisconsin title was a prerequisite
for completing the resale; without it, the dealer could not transfer
title to the customer and the customer could not obtain Wisconsin
tags
Holding  Although the registration-form mailings may not have contributed
directly to the duping of either the retail dealers or the customers,
they were necessary to the passage of title, which in turn was
essential to the perpetuation of Schmuck‟s scheme.
 A mailing that is “incident to an essential part of the scheme”
satisfies the mailing element of the mail fraud offence
Dissenting  For though the Government chose to charge a defrauding of retail
customers (to whom the innocent dealers resold the cars), it is
obvious that regardless of who the ultimate victim of the fraud may
have been, the fraud was complete with respect to each car when
petitioner pocketed the dealer‟s money. As far as each particular
transaction was concerned, it was as inconsequential to him whether
the dealer resold the car as it was inconsequential to D in Maze
whether the defrauded merchant ever forwarded the charges to the
credit company.
Notes  You can show that it is a mail fraud if you can prove that it is an
ongoing scheme, or alternatively, use the “lulling” theory (i.e. lull
the victims into a false sense of security, postpone their ultimate
complaint to the authorities, and therefore make the apprehension
of the defendants less likely than if no mailings had taken place)
 The mailing only needs to be foreseeable – natural, probable chain of
events, that would otherwise further the scheme
 Problem: Mail fraud – not mail and fraud!
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In MSI  16 counts – 16 invoices were paid. The defendant caused to be

mailed to the State of Illinois these 16 invoices
 The defendants wanted the money so bad, they walked over to the
Comptroller‟s Office to hand deliver the invoice.
 Variance: The indictment alleged X acts and the proof showed hand
delivered!
o Fatal Variance: D cannot possibly be prepared for trial,
cannot possibly have mounted the defence because it was
such a complete surprise
 Prosecution: We didn‟t have to prove that was the only mailing. The
proof was that the defendant mailed the cheques for the invoices.
Thus, being able to show constructive mailing is fine
Scheme to Defraud Element
(i) Materiality and Reliance
Neder v United States
527 US 1 (1999)
Facts  Neder argued that one of the elements – materiality – is not met
 If there were statutes that touch and concern the same topic, the
definitions must be in material (i.e. mail fraud, bank fraud, securities
fraud)
Holding  Under the rule that Congress intends to incorporate the well-settled
meaning of the common-law terms it uses, we cannot infer from the
absence of an express reference to materiality that Congress
intended to drop that element from the fraud statutes. On the
contrary, we must presume that Congress intended to incorporate
materiality “‟unless the statute otherwise dictates‟”
 The Government is correct that the fraud statutes did not
incorporate all the elements of common-law fraud. The common-
law requirements of “justifiable reliance” and “damages” plainly
have no place in the federal fraud statutes. By prohibiting the
“scheme to defraud”, rather than the completed fraud, the elements
of reliance and damages would clearly be inconsistent with the
statutes Congress enacted. But while the language of the fraud
statutes is incompatible with these requirements, the Government
has failed to show that this language is inconsistent with a
materiality requirement
Notes  Reflection of the complete mess that the mail fraud statute is in!
 The issue of materiality could be directed towards D‟s intent, rather
than the act. He could be a brilliant criminal, but still a criminal!
Bridge v Phoenix Bond & Indemnity Co.
553 US 639 (2008)
Holding  Petitioners were accused of fraudulently obtaining a
disproportionate share of liens by violating the Single, Simultaneous
Bidder Rule (I can‟t have 10 bidders at the sale and bid for the same
thing, and was assigned the same property!) at the auctions held
from 2002 to 2005. According to respondents, petitioner Sabre
Group LLC and its principal Barrett Rochman arranged for related
firms to bid on Sabre Group‟s behalf and directed them to file false
attestations that they complied with the Single, Simultaneous Bidder
Rule.
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 Having thus fraudulently obtained the opportunity to participate in

the auction, the related firm collusively bid on the same properties
at a 0% rate. As a result, when the county allocated liens on a
rotating basis, it treated the related firms as independent entities,
allowing them collectively to acquire a greater number of liens than
would have been granted to a single bidder acting alone. The related
firms then purchased the liens and transferred the certificates of
purchase to Sabre Group.
 In this way, respondents allege, petitioners deprived them and other
bidders of their fair shares of liens and the attendant financial
benefits
Holding  If petitioners‟ proposed requirement of first-party reliance seems to
come out of nowhere, there is a reason: Nothing on the face of the
relevant statutory provisions imposes such a requirement. Using
the mail to execute or attempt to execute a scheme to defraud is
indictable as mail fraud, and hence a predicate act of racketeering
under RICO, even if no one relied on any misrepresentation
Notes Q: It is a RICO case, a patent of mail fraud, which is the definition of
mail fraud. Should the interpretation rule be the same for both
criminal and civil cases? What if the RICO statute says that it should
be construed in reference to the remedies?
A: Possibly they were able to use the rule of remedy, but the case would
still come out the same way it had resulted. To the extent the RICO
statute requires some form of reliance, it may be indirect reliance, and
clearly reliance is not an element of mail fraud.
(ii) Intent to Defraud: Intent to Injure?
United States v Regent Office Supply Co.
421 F.2d 1174 (2d Cir. 1970)
Facts  The client called all the secretaries of these major firms, informing
that they had leftover stationeries and needed to be disposed of.
Issue  Does solicitation of a purchase by means of false representations not
directed to the quality, adequacy or price of goods to be sold, or
otherwise to the nature of the bargain, constitute a “scheme to
defraud” or “obtaining money by false pretenses” within the
prohibition of 18 USC 1341?
Holding  While the prosecution must show that some harm or injury was
contemplated by the scheme, it need not show that direct, tangible
economic loss resulted to the scheme‟s intended victims
Notes  Isn‟t this a materiality case, in sheep‟s clothings? Isn‟t it the little
white lie to get the foot into the door?
United States v Siegel
717 F.2d 9 (2d Cir. 1983)
Issue  The fraudulent scheme underlying Ds‟ convictions involved
unrecorded cash sales of Mego merchandise which had either been
closed out and marked down for clearance or returned because of
damage or defect.
 Abrams conducted some cash transactions himself. Siegel also dealt
in cash transactions, supervising cash sales through a retail store of
imported shirts worth over $30,000. Other cash transactions were
conducted with the aid of William Stuckey, who was manager of
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Mego‟s Long Island warehouse and who became a principal witness

for govt. At the direction of Abraham and Siegel, Stuckey sold Mego
merchandise to various street peddlers and merchants for cash. The
“off the books” sales together generated in excess of $10,000 in cash
 Even though the cash sales were not recorded on Mego‟s books,
Siegel and Abrams told Mego‟s auditors that there were no
unrecorded assets. In addition, no information about the cash sales
were divulged to Mego‟s stockholders
Notes  Fraud alleged here was non-disclosure of a fiduciary breach by one
under a duty to disclose
Holding  In affirming defendants‟ convictions on the wife fraud counts, we in
no way wish to encourage the type of indictment prosecuted here.
Twenty counts were brought against five defendants, all but two of
whom were acquitted of all charges. Siegel and Abrams, although
convicted of the wire fraud charges (which might more properly
have been redressed in a shareholder‟s derivative suit or in a state
criminal prosecution), were acquitted on several other
counts…While we applaud the government‟s concentration on
unrecorded cash sales, a particularly common form of criminal
activity, we nevertheless urge the government to think carefully
before instituting other massive prosecutions having such slender
foundations as this one.
Dissenting  What the majority does is infinitely worse, for it holds that the wire
fraud statute creates a federal law of fiduciary obligations. There is
no pretense that the source of the fiduciary duty at issue in this case
was anything but federal law. There is no reference in the majority
opinion to state law or even to Mego‟s state of incorporation. The
jury simply was told that it was up to it to decide whether, as part of
the obligation “to act in the best interest of the corporation”, the
defendants were under a duty to disclose the off-book transactions
to shareholders.
 The “material” information not disclosed to shareholders in the
instant case is a series of transactions of roughly $11,000 annually
over nine years, a wholly trivial sum in light of Mego‟s sales. In
holding that these transactions “would be important to a Mego
shareholder”, the majority simply closes its eyes to investment
realities, for there is not a shred of evidence that such a sum would
affect share price in the slightest.
Notes  This is a corporation. Whether executives of a corporation own some
duty to the shareholders, this is an issue concerning state law, not a
federal crime!
Permissible Objects of a Scheme to Defraud
 Mail and wire fraud prosecutions may be founded upon a defendant‟s fraudulent
attempts to deprive others of:
o Intangible property (such as confidential business information or a
business‟s right to control its assets)
o Intangible non-property rights, such a right to “honest services”
 Elements of these crimes are:
o A scheme or artifice to defraud; and
o A mailing or interstate wiring in furtherance of the scheme
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 In public corruption cases, the government did not have to prove that the
governmental entity or citizenry “victimised” by this concealment lost money or
property – it was sufficient that the defendant deprived his victims of their “right
to his honest services” through his concealment of breaches of his duty
(i) Property
McNally v United States
483 US 350 (1987)
Facts  The Wombwell Insurance Company agreed with Hunt that in
exchange for a continued agency relationship it would share any
resulting commissions in excess of $50,000 a year with other
insurance agencies specified by him
 From 1975 to 1979, Wombwell funnelled $851,000 in commissions to
21 separate insurance agencies designated by Hunt. Among the
recipients of these payments were Seton Investments Inc, a company
controlled by Hunt and petitioner Gray and nominally owned and
operated by petitioner McNally
 Gray and Hunt established Seton for the sole purpose of sharing in
the commissions distributed by Wombwell
 Mail fraud count was based on the mailing of a commission check to
Wombwell by the insurance company from which it had secured
coverage for the State
 Principal theory: Petitioners‟ participation in a self-dealing patronage
scheme defrauded the citizens and govt of Kentucky of certain
“intangible rights”, such as the right to have the Commonwealth‟s
affairs conducted honestly
Issue  Whether the jury charge permitted a conviction for conduct not
within the scope of the mail fraud statute
Holding  After 1909, therefore, the mail fraud statute criminalised schemes or
artifices “to defraud” or “for obtaining money or property by means
of false or fraudulent pretenses, representations or promises”.
Because the two phrases identifying the proscribed schemes appear
in the disjunctive, it is arguable that they are to be construed
independently and that the money-or-property requirement of the
latter phrase does not limit schemes to defraud to those aimed
causing deprivation of money or property. This is the approach that
has been taken by each of the Courts of Appeals that has addressed
the issue: schemes to defraud include those designed to deprive
individuals, the people, or the government of intangible rights, such
as the right to have public officials perform their duties honestly.
 It was not charged that in the absence of the alleged scheme the
Commonwealth would have paid a lower premium or secured
better insurance. Hunt and Gray received part of the commissions
but those commissions were not the Commonwealth‟s money. Nor
was the jury charged that to convict it must find that the
Commonwealth was deprived of control over how its money was
spent
Notes  How can the court ignore 50 years of holding? The ballot box! Not
the criminal courts. Congress should address this – not the courts
 Conflict of interests? The falsehood is the lack of transparency
involved within the whole scheme. In honest services, these men
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should have disclosed what was going on (conflict of interests).

 In what way does the failure to disclose conflict of interests be
material (an important element that is capable of influencing the
decision to be made)? The other decision-makers would want to
know. The failure to disclose deprives them of the full facts
(ii) Intangible Property
Carpenter v United States
484 US 19 (1987)
Facts  The official policy and practice at the Wall Street Journal was that
prior to the publication of the daily column, “Heard on the Street”,
the contents of the column were the Journal‟s confidential info
 In spite of this rule, with which Winans (a reporter) was familiar, he
entered into a scheme with Peter Brant and petitioner Felis, both
connected with the Kidder Peabody brokerage firm in NYC, to give
them advance info as to the timing and contents of the scheme
 This permitted Brant and Felis and another conspirator, David
Clark, a client of Brant, to buy or sell based on the probable impact
of the column on the market. Profits were to be shared. The
conspirators agreed that the scheme would not affect the journalistic
purity of the “Heard” column
Holding  “Property” held protected by the mail fraud statute in McNally was
not confined to “tangible” property such as cash or securities.
 Here, the object of the scheme was to take the Journal‟s confidential
business information – the publication schedule and contents of the
“Heard” column – and its intangible nature does not make it any
less “property” protected by the mail and wire fraud statutes.
McNally did not limit the scope of s 1341 to tangible as distinguished
from intangible property rights
 The confidential information was generated from the business, and
the business had a right to decide how to use it prior to disclosing it
to the public
Notes  Confidential information has been held as a specie of properties in
many states
(iii) “Honest Services”: Section 1346
Skilling v United States
US 130 S. Ct. 2896 (2010)
Charge  Conspiracy
o Deprive money or property
o Securities
o Honest services
Holding  They are presumed constitutional…but 1346 is enacted to what they
said in McNally
 In view of this history, there is no doubt that Congress intended s
1346 to reach at least bribes and kickbacks. Reaching the statute to
proscribe a wider range of offensive conduct, we acknowledge,
would raise the due process concerns underlying the vagueness
doctrine. To preserve the statute without transgressing
constitutional limitations, we now hold that s 1346 criminalises only
the bribe-and-kickback core of the pre-McNally case law (What is the
logic here? We held in McNally that breach of fiduciary duties were
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not covered by the mail fraud statute. What Congress was saying
that they want the courts to extend to breach of fiduciary duty that
involved a conflict of interests)
 Void-for-vagueness doctrine addresses concerns about (1) fair notice
and 92) arbitrary and discriminatory prosecutions. A prohibition on
fraudulently depriving another of one‟s honest services by accepting
bribes or kickbacks does not present a problem on either score
Notes  All nine members of the Court concerted that s 1346 is vague; they
disagree on the appropriate remedy – whether to restrict the scope
of the statute or to strike it as unconstitutional
 Once Congress responded with s 1346, it waited another 22 years to
resolve the many circuit splits surrounding that statute, only to find
that the many people convicted of honest services fraud not based
on bribery or kickbacks were also legally innocent
 The Court took the Skilling, Black and Weyhrauch cases to decide
three issues, although it ultimately failed to address them:
o Whether the govt must prove that it was reasonably
foreseeable that the honest services scheme could cause some
economic or pecuniary harm to victims in private sector
cases
o Whether the duty to disclose, the violation of which
constitutes the “fraud”, must arise under state law in a
public sector case
o Whether D must intend to obtain private gain from the
victim to whom honest services are owed
United States v Blackmon
839 F.2d 900 (2d Cir. 1988)
Facts  Indictment alleged an elaborate scheme to defraud 6 victims in
NYC. Scheme is a variation of a street confidence game known as
the “pigeon drop” – game involved persuading wealthy old women
that they had “found” cash earmarked for Iran or the PLO, and then
convincing the women to withdraw their own money from banks in
an amount equivalent to their “share” of the found cash, convert
them to foreign currency, give it to the appellants for high-return
foreign investment
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WEEK 7
PUBLIC CORRUPTION
 Public corruption
 Bribery
 Gratuities
 Quid Pro Quo
 Hobs Act
 Extortion – “Property”
 Colour of Official Right

 Statute expressly criminalising federal public corruption: 18 USC § 201:
o § 201(b) criminalises bribery, which is punishable by up to 15 years‟
imprisonment, a fine of up to three times the monetary equivalent of the
bribe, and disqualification from any federal office
o § 201(c) prohibits the payment and receipt of official gratuities, which is
punishable by up to 2 years‟ imprisonment and a fine
 Difference – bribery requires proof of a quid pro quo – specific intent to give or
receive something of value in return for an official act – and a gratuity offence
does not
 Elements – to secure a conviction for bribery under § 201(b)(I), which targets the
briber, the govt must prove that D:
o Corruptly
o Directly or indirectly, gave, offered, or promised to any “public official”
or person who has been selected to be a “public official” or offered or
promised any “public official” or person who has been selected to be a
public official to give “to any other person or entity”
o Anything of value
o With intent…to influence any official act (under § 201(b)(I)(A)) or to
induce such public official...to do or omit to do any act in violation of the
lawful duty of such official or person (under § 201(b)(I)(C))
How do you distinguish bribery from illegal gratuity?

 Govt official – look at the reporting requirement. See how it was delivered
 How the person who receive the money spends the money!
 To secure a conviction for bribery under § 201(b)(2) of the person bribed, the
govt must prove that:
o A “public official” or a person who has been selected to be a “public
official”
o Corruptly
o Directly or indirectly, demanded, sought, received, accepted or agreed to
receive or accept “personally or for any other person or entity”
o “Anything of value”
o “In return for…being influenced in the performance of any official act”
(under § 201(b)(2)(A)) or being induced to do or omit to do any act in
violation of the official duty of such official or person” (under §
201(b)(2)(C))
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 To secure a conviction for gratuities conviction under § 201(c)(I)(A), which

targets the person making the illegal payment, the govt must prove that:
o D knowingly and willfully
o Directly or indirectly, gave, offered or promised
o “anything of value”
o to any “public official”, former “public official”, or person selected to be a
“public official”
o “For or because of any official act performed or to be performed by such
public official, former public official, or person selected to be a public
official”
 To secure a conviction for gratuities conviction under § 201(c)(I)(B), to whom the

gratuity was offered, the govt must prove that:
o A “public official”, former “public official” or person selected to be a
“public official”
o Knowingly and willfully
o Otherwise than as provided by law for the proper discharge of official
duty, directly or indirectly demanded, sought, received, accepted or
agreed to receive
o “Anything of value”
o “personally or for or because of any official act performed or to be
performed by such official or person”
 Public official – not only members of Congress and federal government officers
or employees, but also “person[s] acting for or on behalf of the US, or any
department, agency or branch of Govt thereof…in any official function, under or
by authority of any such dept, agency or branch of Govt”
o Dixson v United States, 465 US 482 (1984): Officers of a private, non-
profit corporation administering and expending federal community
development block grants were “public officials” for purposes of the
federal bribery statute
 “Thing of Value” –
o Broad definition, encompassing anything that has subjective value to the
recipient
o Includes items that, although worthless, were elieved by the recipient to
have commercial value
 “Official Acts” and “Violations of Official Duties” –

o Not limited to duties set forth in a written job description but may include
as well those duties customarily associated with a particular job
o Valdes v United States, 475 G.3d 1319 (D.C. Cir. 2007) – Misuse of govt
property and position to search govt database did not constitute a
“decision on action on any question, matter, cause, suit, proceeding or
controversy” brought or pending “before any public official, in such
official‟s official capacity”
o Difference between § 201(c)(I)(C) and § 201(c)(I)(A)&(B): Bribery may be
proved where D corruptly gives a public official something of value “to
induce such public official…to do or omit to do any act in violation of the
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lawful duty of such official or person”
 Bribery v Gratuities Differences

o Unlike most of § 201‟s anti-bribery provisions, the anti-gratuity provision
has no requirement that the payment actually influence the performance
of an official act
o The bribery statute contemplates that the thing of value may be given to
the public official or to “any other person or entity” with the intent to
influence an official act
o More critical distinctions:
 Nexus – the degree of the nexus that must be shown to exist
between the thing of value offered and the official act
 Sun-Diamond: In order to establish a violation of 18 USC §
201(c)(I)(A), the Govt must prove a link between a thing of
value conferred upon a public official and a specific
„official act‟ for or because of which it was given
 United States v Schaffer, 183 F.3d 833, 840 (D.C.Cir 1999):
o Bribery requires a quid pro quo, and accordingly can
be seen as having a two-way nexus
o Bribery typically involves an intent to affect the
future actions of a public official through giving
something of value, and receipt of that thing of
value then motivates the official act
o A gratuity, by contrast, requires only a one-way
nexus: “the gratuity guideline presumes a situation
in which the offender gives the gift without
attaching any strings”
 Applicable mens rea element(s) of the two crimes
Federal Bribery and Gratuities Under § 201
United States v Sun-Diamond Growers of California
526 US 398 (1999)
Facts  Petitioner United States sought review of the court of appeal's
decision reversing respondent trade association's conviction for
illegally bestowing gifts on a former secretary of agriculture. The
court held that, in order to establish a violation of the "illegal
gratuity statute," 18 U.S.C.S. § 201(c)(1)(A), petitioner was required
to prove a link between a thing of value conferred upon a public
official, plus a specific "official act" as defined in 18 U.S.C.S. §
201(a)(3) for or because of which the gift was given.
 To hold otherwise would criminalize token gifts made to public
officials by special interest groups without proof that a political
favor was expected in return. The court found that the district
court's jury instructions on the nature of illegal gratuities were not
harmless error. The court affirmed the judgment and remanded the
case to the district court for retrial.
Ruling  The court affirmed the judgment of the court of appeals which held
that petitioner federal government was required to prove more
than the mere fact that respondent made a gift to a public official
in order to convict respondent of a violation of the illegal gratuity
statute. Petitioner was required to show that respondent expected a
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favorable act in return.

Holding  For bribery, there must be a quid pro quo – a specific intent to give or
receive something of value in exchange for an official act (Show in
isolation that the payor is paying the money for that, and that is a
specific thing). An illegal gratuity, on the other hand, may
constitute merely a reward for some future act that the public
official will take (and may already have determined to take), or for
a past act that he has already taken [quid pro quo v for or because of]
 Official act: The insistence upon an “official act”, carefully defined,
seems pregnant with the requirement that some particular official
act be identified and proved
 The government must prove a link between a thing of value
conferred upon a public official and a specific “official act” for or
because of which it was given
Notes  Because of the payment to the crop-growers, and without the
because, it could not be a gratuity – sounds close to the quid pro quo
United States v Alfisi
308 F.3d 144 (2d Cir. 2002)
Facts  D, a representative of a produce broker, was caught in a sting
operation paying funds to a United States Department of
Agriculture produce inspector to regulate downgrade the
assessment of the grade level of the produce lot, so that the
wholsalers can renegotiate the price of the lot downward.
 In the initial jury charge, the district court confused the distinction,
but when the jury requested clarification, the court properly
instructed it on the specific intent of corruption and quid pro quo
element – “the court described bribery as the giving of money to a
public official „for or because of an official act [and] with a corrupt
intention specifically to influence the outcome of the official act”.
Therefore, since the error had been fully cured, a majority of the
court upheld the convictions as properly obtained.
Ruling  Majority of the panel affirmed conviction.
Holding  Bribery requires that the payor intend “to influence” an official act
“corruptly” while the payment of an unlawful gratuity requires
only that the payment be “for or because of” an official act
 The “corrupt” intent necessary to a bribery conviction is in the
nature of a quid pro quo requirement; that is, there must be “a
specific intent to give…something of value in exchange for an
official act”. Putting it only slightly differently, bribery involves the
giving of value to procure a specific official action from a public
official. The element of a quid pro quo or a direct exchange is absent
from the offence of paying an unlawful gratuity
Dissenting  Disagrees that there is a quid pro quo element to the word
„corruptly‟. A fundamental concept of a „corrupt‟ act is a breach of
some official duty owed to the govt or the public at large. Argued
that the quid pro quo element arises not from the term “corruptly”,
but rather from the term “to influence”
 Our cases thus provide that a payment made in the course of a
shakedown where the public official demands payment as a quid pro
quo for proper execution of his duty is not a bribe
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 To act corruptly and therefore to commit bribery, a person must do

more than merely seek to secure some benefit or quid pro quo.
Rather, a person must do more than merely seek to secure some
benefit or quid pro quo. Rather, the benefit sought must entail a
breach of duty or trust.
Notes  The court may have meld the two requirements of “corrupt” and
“quid pro quo”
 Mens rea of bribe = D acted “corruptly”
 Mens rea of gratuity = D acted “knowingly and willingly”
Extortion Under Colour of Official Right Under §1951 (The Hobbs Act)
Obtaining the property of another with threat of force, actual force or colourable
official right in interstate congress.
Evans v United States
504 US 255 (1992)
Facts  D was convicted of extortion in violation of the Hobbs Act, 18
U.S.C.S. § 1951, as a result of bribes taken from an undercover
agent. The conviction was affirmed by the appellate court, which
held that petitioner need not take any specific action to induce the
offering of the benefit. An FBI agent posed as a real estate developer
talked to him on the phone and met him on a number of occasions.
Most were recorded on tape or video
 Petitioner filed a petition for certiorari, which was accepted by the
court. The court affirmed the decision of the appellate court because
the government needed only to show that petitioner obtained a
payment to which he was not entitled, knowing that the payment
was made in return for official acts.
 The court found that there was nothing in either the statutory text
or the legislative history of § 1951 that was a contrary direction by
Congress to the common-law meaning of extortion. The wrongful
acceptance of a bribe established all the inducement that the statute
required. The court found that the jury instruction was proper
because the quid pro quo requirement was satisfied. The offense
was completed at the time petitioner received the payment in return
for his agreement to perform specific official acts. The fulfillment of
the quid pro quo was not an element of the offense.
Ruling Rejected the inducement element in colour of official right cases
The Government need only show that a public official has obtained a
payment to which he was not entitled, knowing that the payment was
made in return for official acts
Holding No need for quid pro quo –
Why the court disagreed and rejected courts that applied the common
law definition which interpreted the word “induced” as requiring a
wrongful use of official power that “begins with the public official,
not with the gratuitous actions of another”:
 We think the word “induced” is a part of the definition of the
offence by the private individual, but not the offence by the
public official. In the case of the private individual, the victim‟s
consent must be “induced by wrongful use of actual or threatened
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force, violence or fear”. In the case of the public official, however,

there is no such requirement. The statute merely requires of the
public official that he obtain “property from another, with his
consent,…under colour of official right”. The use of the word “or”
before “under colour of official right” supports this reading
 Even if the statute were parsed so that the word “induced”
applied to the public official, we do not believe that the word
“induced” necessarily indicates that the transaction must be
initiated by the recipient of the bribe. Many of the cases applying
the majority rule have concluded that the wrongful acceptance of a
bribe establishes all the inducement that the statute requires
 The Government need only show that a public official has
obtained a payment to which he was not entitled, knowing that
the payment was made in return for official acts
Justice Need for quid pro quo:
Kennedy,  Rule of lenity should apply: With regard to the question whether
concurring the word “induced” in the statutory definition of extortion applies
in part and to the phrase “under colour of official right”, I find myself in
concurring substantial agreement with the dissent. Scrutiny of the placement of
in commas will not, in the final analysis, yield a convincing
judgment answer…Under these circumstances, I agree with the dissent that
the rule of lenity requites that we avoid the harsher one.
 Presence of quid pro quo: Something beyond the mere acceptance
of property from another is required, however, or else the word
“induced” would be superfluous. That something, I submit, is the
quid pro quo.
o This essential element is derived from the statutory
requirement that the official receive payment under colour
of official right, as well as the inducement requirement
 A public official who labours under the good-faith but erroneous
belief that he is entitled to payment for an official act does not
violate the statute (though that circumstance is not presented here)
Dissenting:  Extortion under colour of office, at common law: required that the
Justice money or property was obtained “under the pretense that the
Thomas, officer was entitled thereto by virtue of his office”
Chief  The more natural construction is that the verb “induced” applies to
Justice and both types of extortion described in the statute. Thus, the unstated
Justice “either” belongs after “induced”: “The term „extortion‟ means the
Scalia obtaining of property from another, with his consent, induced
either [1] by wrongful use of actual or threatened force, violence or
fear, or [2] under colour of official right”…Given the text of the
statute and the rule of lenity, I believed that inducement is an
element of official extortion under the Hobbs Act.
 A particular public official, to be sure, may wield his power in such
a way as to coerce unlawful payments, even in the absence of any
explicit demand or threat. But it ignores the reality to assert that
every public official, in every context, automatically exerts coercive
influence on others by virtue of his office.
Notes  No need for explicit agreement between the payor and payee –
quid pro quo in this instance refers to the degree to which the payor
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and payee were aware of its terms, regardless of whether those

terms were articulated
Type of Property that must be “obtained” through extortion in order to meet the
requirements of the statute
United States v Gotti
459 F.3d 296 (2d Cir. 2006)
Facts  Earlier court held that Scheidler II did not invalidate the challenged
extortion counts in this case, because Scheidler II -- far from holding
that a Hobbs Act extortion could not be premised on the extortion
of intangible property rights -- simply clarified that for Hobbs Act
liability to attach, there had to be a showing that the defendant did
not merely seek to deprive the victim of the property right in
question, but also sought to obtain that right for himself. That
standard, which could be satisfied regardless of whether the
property right at issue was tangible or intangible, was met by each
of the Hobbs Act counts in this case.
Ruling  The court affirmed all of the convictions. However, in light of the
Supreme Court's decision in Booker and certain of the court's own
decisions, the court remanded for resentencing of three of the
defendants.
Holding Expansive Definitions in Tropiano
 Property: Any valuable right considered as a source or element of
wealth and does not depend upon a direct benefit being conferred
on the person who obtains the property
 Obtaining of Property: Whether D is (1) alleged to have carried out
(or, in the case of attempted extortion, attempted to carry out) the
deprivation of a property right from another, with (2) the intent to
exercise, sell, transfer, or take some other analogous action with
respect to that right.
Scheidler – Narrow Interpretation

 Struck down the expansive interpretation
 In its anti-abortion case, the protesters had neither pursued nor
received something of value from respondents that they could
exercise, transfer or sell. To conclude that such actions constituted
extortion would effectively discard the statutory requirement that
property must be obtained from another, replacing it instead with
the notion that merely interfering with or depriving someone of
property is sufficient to constitute extortion
This case - Gotti

 This court felt that Scheidler II was only tightening the “obtaining”
requirement of the Hobbs Act, and that in this regard, an important
inquiry was whether the defendants had “pursued [or] received
something of value from [victims] that they could exercise, transfer,
or sell”. In the case of the anti-abortion protestors who sought only
to shut down abortion clinics, they had not
 Generally speaking, intangible property rights – such as for
instance, non-competition or exclusivity agreements – are certainly
things of value that are capable of being exercised, transferred or
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sold
 Obtaining: Had the protesters sought to take further action after
having deprived the clinics of their right to conduct their business
as they wished –(e.g. forcing the clinic staff to provide different types of
services, forcing the clinic to turn its operations over to the protestors, or
selling the clinic or its property to a third party) – we believe that they
would have satisfied the Schediler II Court‟s definition
 Similar to the distinction between honest services and customer
list / news item (you could put a value on it. State law would
recognise it as a species of the property)
Federal Program Bribery, Theft And Fraud Under §666
(a) Whoever, if the circumstance described in subsection (b) of this section exists--
 (1) being an agent of an organization, or of a State, local, or Indian tribal
government, or any agency thereof--
o (A) embezzles, steals, obtains by fraud, or otherwise without authority
knowingly converts to the use of any person other than the rightful owner or
intentionally misapplies, property that--
 (i) is valued at $ 5,000 or more, and
 (ii) is owned by, or is under the care, custody, or control of such
organization, government, or agency; or
o (B) corruptly solicits or demands for the benefit of any person, or accepts or
agrees to accept, anything of value from any person, intending to be
influenced or rewarded in connection with any business, transaction, or series
of transactions of such organization, government, or agency involving any
thing of value of $ 5,000 or more; or
 (2) corruptly gives, offers, or agrees to give anything of value to any person, with
intent to influence or reward an agent of an organization or of a State, local or
Indian tribal government, or any agency thereof, in connection with any
business, transaction, or series of transactions of such organization, government,
or agency involving anything of value of $ 5,000 or more;
shall be fined under this title, imprisoned not more than 10 years, or both.
Fischer v United States
529 US 667 (2000)
Facts  Petitioner was convicted of defrauding a hospital which received
benefits in excess of $ 10,000 per year from Medicare. Petitioner
argued that:
1. Medicare payments to the hospital did not constitute
benefits, within the meaning of 18 U.S.C.S. § 666(b). He
argued Medicare provided benefits only to the elderly and
disabled.
2. Medicare payments to providers, such as the hospital at
issue, were for the limited purposes of compensating those
providers or reimbursing them for ordinary expenditures.
Ruling Court disagreed; The funds health care organizations receive for
participating in Medicare program were held to constitute benefits
within the meaning of the federal bribery statute because those
providers were found to have derived significant advantages through
satisfaction of the Medicare participation standards imposed by the
government.
Holding The payments in question have attributes and purposes well beyond
85
those described in subsection (c). These attributes and purposes are

consistent with the definition of “benefit”. While the payments might
have similarities to payments an insurer would remit to a hospital
quite without regard to the Medicare program, the Govt does not
make the payment unless the hospital complies with its intricate
regulatory scheme. The payments are made not simply to reimburse
for treatment of qualifying patients but to assist the hospital in
making available and maintaining a certain level and quality of
medical care, all in the interest of both the hospital and the greater
community.
Dissenting, The only persons who receive “benefits” under Medicare are the
by Justice individual elderly and disabled Medicare patients, not the medical
Thomas providers who serve them. Payments made by the Federal Government
and Justice to a Medicare health care provider to reimburse the provider for the
Scalia costs of services rendered, rather than to provide financial aid to the
hospital, are not “benefits”
Medicare aims to ensure that the beneficiaries of the program – patients

– are able to receive the program‟s intended benefits. It does not
establish that Medicare exists to put hospitals on the dole.
Sabri v United States
541 US 600 (2004)
Facts Basim Omar Sabri was not confident in his ability to adapt to the lawful
administration of licensing and zoning laws, and offered three separate
bribes to a city councilman, Brian Herron, who was a member of the
Board of Commissioners of the Minneapolis Community Development
Agency, a public body created by the city council to fund housing and
economic development within the city.
Issue Whether 18 USC 666(a)(2), proscribing bribery of state, local, and tribal
officials of entities that receive at least $10,000 in federal funds, is a
valid exercise of congressional authority under Art I of the
Constitution. We hold that it is.
Ruling The United States Supreme Court affirmed and remanded the
judgment of the court of appeals.
Holding To qualify as a valid exercise of Art I power, the statute must require
proof of connection with federal money as an element of the offence:
 While not every bribe or kickback offered or paid to agents of
governments would be traceably skimmed from specific federal
payments, that possibility portended no enforcement beyond the
scope of federal interest because corruption did not have to be
that limited to affect the federal interest.
 It was enough that the statute conditioned the offense on a
threshold amount of federal dollars defining the federal interest and
on a bribe that went well beyond liquor and cigars. Congress's
decision to enact it only after other legislation had failed to protect
federal interests was further indication that it was acting within the
ambit of the Necessary and Proper Clause
Notes  Can‟t be prosecuted under 201, he is not a public official.
 This isn‟t federalization, it is over-federalisation
 No nexus required – this case has nothing to do with the federal
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money at all!
 In the name of prosecuting public corruption, we cannot have
statutes that have bright line – that it is okay to prosecute senators,
congressional representatives, state senators, state representatives,
mayors, city council members…
 Federal govt is no longer a govt of limited power in this context
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WEEK 7
SECURITIES FRAUD
 Securities Fraud
 Insider Trading
o Traditional Theory
o Misappropriation
 Tipper/Tippee Liability
 Cady Robers Rule
 Wilfulness – Get out of jail!

Rationale for Insider Trading Prohibition
Donald C. Langevoort, Insider Trading: Regulation, Enforcement and Prevention
1:2 to 1:6, at 1-8 to 1-17 (West 2002)
 No economic harm done – suppose that the friend buys 1000 shares at $7 as a
result of a tip, thus being able to make a quick $5000 profit, when unknown to the
public, the acquiring company is prepared to pay $12 per share in a friendly
merger
 Were insiders permitted to profit from trading, they would have an incentive to
delay disclosure of information until their personal profit from the information
has been captured
 Unfair exploitation of information that properly belongs to somebody else
Traditional Theory
 They have a duty to the shareholders of the company.
(i) Principal Liability
Chiarella v United States
455 US 222 (1980)
Facts  Petitioner was hired by the Tender Company. He did not have any
shares of the Tender Company – but he would buy stocks of the
Target Company. He owes no duty to the Target Company
 While working for a financial printer, petitioner handled
announcements of corporate takeover bids. While these documents
were delivered to the printer, the identities of the acquiring and
target corporations were concealed by blank spaces or false names.
The true names were sent to the printer on the night of the final
printing. The petitioner, however, was able to deduce the name of
the target companies before the final printing from other
information contained in the documents.
 Without disclosing his knowledge, petitioner purchased the
targeted companies stock, selling the shares immediately after the
takeover attempts were made public.
Ruling  The Court held that petitioner had not violated the duty to disclose
material information where no relationship of trust or confidence
existed between petitioner and the shareholders.
 While noting that silence in connection with the purchase or sale of
securities could have been fraud under § 10(b), the Court held that
petitioner had not violated § 10(b) where he was under no
affirmative duty to disclose the information before trading.
Because petitioner was not an agent or fiduciary of the sellers, the
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Court found that he had no duty to the sellers.

Holding  The obligation to disclose or abstain derives from:
o Existence of a relationship affording access to insider
information intended to be available only for a corporate
purpose, and
o Unfairness of allowing a corporate insider to take advantage
of that information by trading without disclosure
 Silence in connection with the purchase or sale of securities may
operate as a fraud actionable under 10(b) despite the absence of
statutory language or legislative history specifically addressing the
legality of nondisclosure. But such liability is premised upon a duty
to disclose arising from a relationship of trust and confidence
between parties to a transaction
 The petitioner was convicted of violating 10(b) although he was not
a corporate insider and he received no confidential information
from the target company. The “market information” upon which he
relied did not concern the earning power or operations of the target
company, but only the plans of the acquiring company. Petitioner‟s
use of that information was not a fraud unless he was subject to
an affirmative duty to disclose it before trading.
Dissenting  Neither party to an arm‟s length business transaction has an
by Chief obligation to disclose information to the other unless the parties
Justice stand in some confidential or fiduciary relation.
Burger  Any time information is acquired by an illegal act it would seem
that there should be a duty to disclose that information. CJ read
10(b) and Rule 10b-5 to encompass and build on this principle: to
mean that a person who has misappropriated nonpublic
information has an absolute duty to disclose that information or to
refrain from trading
Notes  Cady Roberts Rule: If you have inside information and you
are trading on the market, you have the responsibility to
disclose that information or abstain from trading.
 Petitioner owns a duty to the printer, which then owns a duty to
tender company A. It is possible to catch him by misappropriation
 A variance! Could someone, after a variance has been proved, can
be liable. Court however held that there was such a variance
between the traditional and misappropriation that he could not be
held liable
(ii) Tipper/Tippee Liability
Dirks v SEC
463 US 646 (1983)
Facts
EFA Seacrist
(Insider) Client
Client
Dirks
(Tippee)
Client
 Petitioner was an officer of a broker-dealer firm and specialized in

investment analysis of insurance company securities to investors.
Petitioner received information that a corporation, Equity Funding,
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had vastly overstated assets.

 Secrist (insider) gave the tip to Driks
 Petitioner discussed this information with clients, and some of
those clients sold holdings in the corporation. When respondent
learned of petitioner's actions, respondent found that petitioner
aided and abetted violations of § 17(a) of the Securities Act of 1933,
and § 10(b) of the Securities Exchange Act of 1934, by repeating the
allegations to members of the investment community. Dirks himself
did not trade
 In a divided opinion, the appellate court found against petitioner
and he sought the Court's review. The U.S. Supreme Court held
there was no actionable insider-trading violation by petitioner
where petitioner was a stranger to the corporation, had no fiduciary
duty to corporation's shareholders, did not try to gain corporate
shareholder's confidence, and did not illegally obtain the
information about the corporation. Therefore, petitioner had no
duty to abstain from the use of the inside information, and the
lower court's judgment was reversed.
Issue  Whether a tippee is required to disclose the information or refrain
from trading
Holding  Unlike insiders who have independent fiduciary duties to
both the corporation and its shareholders, the typical tippee
has no such relationships. In view of this absence, it has been
unclear how a tippee acquires the Cady, Roberts duty to refrain from
trading on insider information
 A duty to disclose arises from the relationship between parties, and
not merely from one‟s ability to acquire information because of his
position in the market
 Imposing a duty to disclose or abstain solely because a person
knowingly receives material nonpublic information from an insider
and trades on it could have an inhibiting influence on the role of
market analysts, which the SEC itself recognises is necessary to the
preservation of a healthy market
 However, some tippees must assume an insider‟s duty to the
shareholders not because they receive inside information, but rather
because it has been made available to them improperly
 A tippee assumes a fiduciary duty to the shareholders of a
corporation not to trade on material nonpublic information only
when the insider has breached his fiduciary duty to the
shareholders by disclosing the information to the tippee and the
tippee knows or should know that there has been a breach
 Whether disclosure [by the tipper] is a breach of duty…depends in
large part on the purpose of the disclosure (i.e. whether the insider
personally will benefit, directly or indirectly, from his disclosure)
 Footnote 14: The Court carves out very important category of
persons potentially subject to insider trading sanctions: “quasi-“ or
“temporary” insiders. Certain persons who are formally “outsiders”
– lawyers, accountants or bankers not employed by an entity but
performing services for it – may be deemed temporary or quasi-
insiders when they have “entered into a special confidential
91
relationship in the conduct of the business of the enterprise and are

given access to information solely for corporate purposes”
(iii) Misappropriation Theory
United States v O‟Hagan
521 US 642 (1997)
Facts
GM Pilsbury
Dorsey
 O‟Hagan
 Respondent was a partner in a law firm which represented a

company regarding a potential tender offer for the common stock of
another company. During the representation, respondent
purchased call options for the other company's stock and sold them
for a significant profit.
 After the SEC initiated an investigation into respondent's
transactions, a jury convicted respondent of securities fraud. On
writ of certiorari, the Court held that criminal liability under § 10(b)
of the Securities Exchange Act of 1934 may be predicated on the
misappropriation theory.
Issue Is a person who trades in securities for personal profit, using
confidential information misappropriated in breach of a fiduciary duty
to the soruce of the information, guilty of violating 10(b) and Rule 10b-
5?
Ruling Yes
Holding  “Misappropriation theory”: holds that a person commits fraud “in
connection with” a securities transaction, and thereby violates 10(b)
and Rule 10b-5, when he misappropriates confidential
information for securities trading purposes, in breach of a duty
owed to the source of the information
 Willfulness: intentional violation of a known act. If O‟Hagan
subjectively believed that he was not in violation of the law in
doing such a trading, he can present it as a defence and not go to
jail
 Under this theory, a fiduciary‟s undisclosed, self-serving use of a
principal‟s information to purchase or sell securities, in breach of a
duty of loyalty and confidentiality, defrauds the principal of the
exclusive use of that information. In lieu of premising liability on a
fiduciary relationship between company insider and purchaser or
seller of the company‟s stock, the misappropriation theory premises
liability on a fiduciary-turned-trader‟s deception of those who
entrusted him with access to confidential information
 The misappropriation theory outlaws trading on the basis of
nonpublic information by a corporate “outsider” in breach of a duty
owed not to a trading party, but to the source of the information
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 “In connection with the purchase or sale of [a] security”: Satisfied

because the fiduciary‟s fraud is consummated, not when the
fiduciary gains the confidential information, but when, without
disclosure to his principal, he uses the information to purchase or
sell securities
 Emphasizes the need to interpret 10(b)‟s requirement that a
deceptive device be “used or employed, in connection with the
purchase or sale of any security”: Undisclosed misappropriation
of confidential information would meet such a criteria
Dissenting  Unlike the majority, however, I cannot accept the Commission‟s
interpretation of when a deceptive device is “used in connection
with” a securities transaction.
 If the relevant test under the “in connection with” language is
whether the fraudulent at is necessarily tied to a securities
transaction, then the misappropriation of confidential information
used to trade no more violates 10(b)than does the misappropriation
of funds used to trade. As the Commission concedes that the latter
is not covered under its theory, I am at loss to see how the same
theory can coherently be applied to the former
SECURITIES FRAUD UNDER 18 USC 1348
 Whoever knowingly executes, or attempts to execute, a scheme or artifice--
o (1) to defraud any person in connection with any commodity for future
delivery, or any option on a commodity for future delivery, or any security of
an issuer with a class of securities registered under section 12 of the Securities
Exchange Act of 1934 (15 U.S.C. 78l) or that is required to file reports under
section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(d)); or
o (2) to obtain, by means of false or fraudulent pretenses, representations, or
promises, any money or property in connection with the purchase or sale of
any commodity for future delivery, or any option on a commodity for future
delivery, or any security of an issuer with a class of securities registered
under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l) or that
is required to file reports under section 15(d) of the Securities Exchange Act of
1934 (15 U.S.C. 78o(d));
 shall be fined under this title, or imprisoned not more than 25 years, or both.
ACCOUNTING FRAUD
 Revenue Recognition
o Incomplete transactions: Seller‟s rights to collect what is owed, or an
obligation to refund what already has been paid, or that the seller still has
substantial performance obligations before that seller can truly say it has
“substantially accomplished what it msut do to be entitled to the benefits
represented by the revenues”
o Round Trippers: Takes place where Companies A and B agree to buy each
other‟s products or services (usually in approximately equal amounts) to
boost the revenues – and sometimes reported profits – of each
o Barter Transactions: Barter, or “non-monetary” transactions are special
version of round trippers where the transaction involves little or no
exchange of cash
o Channel Stuffing: Occurs where a manufacturer that sells through
distributors “makes forecast” by unusually large sales to those
distributors. These transactions often take place at or near quarter end
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and result in the distributors carrying an unusually large inventory of the

manufacturer‟s goods. The distribution channel is thus “stuffed” in the
same sense as the aggressive eater at Thanksgiving. The process may be
aided by one time offers of special pricing or other incentives to the
customers
o Keeping the Books Open: Keep the books open at quarter end long enough
to report results in line with forecasts. This is almost always done with
legitimate sales; they are simply recorded in an earlier quarter than
otherwise would be the case
 Cost Deferrals
o Inventory: Simply invent some inventory
o Property, Plant and Equipment: Costs of PPE, including costs incurred to
prepare the assets for its intended use, are deferred and amortised over
the asset‟s estimated life. There is an incentive to recharacterise ordinary
expenses as part of PPE
 Cookie Jar
o Cookie jar reserves can be created in a variety of ways using both routine
and not-so-routine accrual (liability) and allowance (contra asset)
accounts, including:
 Bad debt allowances
 Accrual for sales returns and warranties
 Litigation accruals
 Inventory lower of cost or market (LOCOM) reserves
 Deferred revenue accounts
 General (unspecified) reserves
United States v Ebbers
458 F.3d 110 (2d Cir. 2006)
Facts  D engineered a scheme to disguise a publicly traded company's
declining operating performance by falsifying its financial reports.
On appeal, defendant principally contended that the district court
erred in permitting the government to introduce testimony by
immunized witnesses while denying immunity to potential defense
witnesses who were rendered unavailable to defendant by their
invocation of the Fifth Amendment privilege against self-
incrimination.
 He also asserted error in jury instructions and claimed that, as to
securities fraud charges under 15 U.S.C.S. § 78ff and 78j(b), the
government should have been required to allege and prove
violations of Generally Accepted Accounting Principles (GAAP).
Affirming, the court rejected each of defendant's arguments.
Holding  Adopting an abuse of discretion standard regarding the immunity
issues, the court noted that the immunity decisions were consistent
with legitimate law enforcement concerns. There was no evidence
of overreaching or manipulation of immunity expressly for tactical
reasons. Given the policy decisions of Congress on sentences for
fraud, the court concluded that defendant's 25-year sentence was
harsh but not unreasonable.
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WEEK 8
CONSPIRACY
Notes
18 USC 371:
 Existence of an agreement to achieve an unlawful objective
 D‟s knowing and voluntary participation in the conspiracy
 Commission of an overt act in furtherance of the conspiracy
Practical Consequences of a Conspiracy Charge
 Fed R. Evid. 801(D)(2)(E)
o Lower evidential burden for hearsay: A statement is not hearsay if it is offered
against a party and is “a statement by a co-conspirator of a party during
the course and in furtherance of the conspiracy”
o Coconspirator‟s statements, if believed, can be very damaging to the
defence because they often constitute the only direct evidence regarding
such central issues as D‟s knowledge or intent
o Low hurdles or govt to surmount: To get a coconspirator‟s statement
admitted against D, the govt must establish that a conspiracy existed and
that the D against whom it is sought to be admitted and the declarant
were parties to that conspiracy
o The existence of a conspiracy is a question for determination, under a
preponderance of evidence standard, by the trial court
o Statement must be made during the course and in furtherance of the
conspiracy
 Joinder
o Rule 8(b): Joinder of Ds in one trial may be substantially eased by
inclusion of a conspiracy charge, particularly where the activities at issue
involved disparate crimes by many Ds
 Venue
o Govt bears the burden of proving by a preponderance of the evidence that
venue is proper
o Problem: Many white-collar crimes are often “continuing offences” – can
be committed jointly by multiple parties all over the place! A conspiracy
under 371 is deemed committed not only where the agreement is formed,
but also where the overt acts occurred
 Statutes of Limitations
o Limitations period commences upon the occurrence of the last overt act
committed in furtherance of the conspiracy. Even if the agreement, most
of the overt acts and even crimes that were the object of the conspiracy
would be time-barred if pursued independently, a criminal conspiracy
prosecution based on the same evidence is still viable if one overt act
occurred within the statutory period
Conspiracy to Defraud Clause Case – What Does the Govt need to show?
 D entered into an agreement
 To obstruct a lawful function of the govt
 By deceitful or dishonest means
 At least one overt act in furtherance of the conspiracy
Elements/Principles of Liability
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Defraud and Offence Clauses

United States v Arch Trading Co.
987 F.2d 1087 (4th Cir. 1993)
Facts  Nov 1988: Arch Trading entered into a $1.9 million contract with
Agricultural Supplies Company, a “quasi-governmental body
owned by the government of Iraq” to ship to Iraq and install there
laboratory equipment, including a “virology fermenter” and a
“bacteriology machine”
 Aug 2 1990: When Iraq invaded Kuwait, President Bush issued
executive order prohibiting United States persons from, among
other things, exporting goods, technology or services to Iraq;
performing any contract in support of an industrial, commercial or
governmental project in Iraq; and engaging in any transaction
relating to travel to Iraq by United States persons
 Notwithstanding the prohibitions of the first executive order, two
executives of Arch Trading immediately attempted to enter Iraq to
install the laboratory equipment that had already been delivered
Holding  To conspire to defraud the United States means primarily to cheat
the Government out of property or money, but it also means to
interfere with or to obstruct one of its lawful governmental
functions by deceit, craft or trickery, or at least by means that are
dishonest
 While it may be that executive orders cannot alone establish crimes,
when such orders are duly authorised by an act of Congress and
Congress specifies a criminal sanction for their violation, the
consequence is different. In this case, the IEEPA authorised the
President to issue executive orders proscribing conduct, and 50 USC
1705(b) makes criminal the disobedience of an order issued under
the Act. There is no question that violation of a federal criminal
statute may properly be charged under the “offence” clause. We
therefore hold that when Congress provides criminal sanctions for
violations of executive orders that it empowers the President to
issue, such violation constitutes an “offence” for the purposes of 18
USC 371
Agreement
(a) Plurality
United States v Stevens
909 F.2d 431 (11th Cir. 1990)
Facts  Steven was the sole shareholder of four corporations formed for the
purpose of performing government contract work. Stevens
misrepresented that certain work had been performed in several
requests for progress payments.
Holding  A sole stockholder who completely controls a corporation and is the
sole actor in performance of corporate activities, cannot be guilty of
a criminal conspiracy with that corporation in the absence of
another human actor.
 The argument that a single human actor can be convicted of
conspiracy under 371 under the circumstances of this case flies in
the face of the traditional justification for criminal conspiracies.
Conspiracy is a crime separate from the substantive criminal
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offence which is the purpose of the conspiracy. This separate

punishment is targeted not at the substantive offences themselves,
but at the danger posed to society by combinations of individuals
acting in concert.
 The threat posed to society by these combinations arise from the
creative interaction of two autonomous minds. It is for this reason
that the essence of a conspiracy is an agreement. The societal threat
is of a different quality when one human simply uses the corporate
mechanism to carry out his crime. The danger from agreement does
not arise.
(b) Intent, Imposibility and Withdrawal
United States v Reico
537 US 270 (2003)
Holding  A conspiracy does not automatically terminate simply because the
Government, unbeknownst to some of the conspirators, has
“defeated” the conspiracy‟s “object”
 A conspiracy may end where “the defendant abandoned, withdrew
from, or disavowed the conspiracy or defeated its purpose”
 Affirmative acts of withdrawal: Notifying each member of the
conspiracy that the former coconspirator will no longer participate
or disclosure of the illegal scheme to law enforcement authorities
(c) Defining the “Essential Nature” of the Agreement
United States v Stavroulakis
952 F.2d 686 (2d Cir. 1992)
Issue  Whether a conspiracy to violate 18 USC 1956(a)(3) requires that the
co-conspirators believe that the money to be laundered is derived
from the same specified unlawful activity. To be more specific, is
there a conspiracy to launder money when one of the conspirators
believes the cash stems from narcotic transactions while the other
believes the money came from illegal gambling?
Ruling  Yes
Holding  A conspiracy involves an agreement by at least two parties to
achieve a particular illegal end. While the conspirators need not
agree on every detail of their venture, there must be proof
beyond a reasonable doubt that they agreed on the “essential
nature of the plan”.
 The policies underlying conspiratorial liability could easily be
thwarted by the careful compartmentalization of information, and
“conspirators would go free by their very own ingenuity”, if it were
required that they agree on all details of the scheme.
 Where, as here, the indictment charges a conspiracy under the
“offence” clause of the conspiracy statute, the conspirators must
have agreed to commit the same offence to satisfy the rule that they
have agreed on the essential nature of the plan.
 So long as the unlawful source is proven to be one of the illegal
activities enumerated in 1956(c)(7), it is not essential that the
conspirators agree on the same illegal activity.
Scope of the Conspiracy
 Issue that frequently is litigated is whether the government has appropriately
charged the scope of the conspiracy – that is, whether D is a conspirator with
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each of the persons alleged in a large, single conspiracy or whether the criminal
activity at issue involve several small conspiracies
United States v Gatling
96 F.3d 1511 (D.C.Cir 1996)
Facts  Appellant Cheryl Walker began working at the District of
Columbia‟s Department of Public and Assisted Housing in 1989 as
Chief of the Section 8 Division, which helped to disburse subsidies
to qualified applicants in the form of vouchers or certificates to help
them cover their rent. Appellant Jennifer Gatling was a Housing
Specialist of the Section 8 Division. Both Walker and Gatling were
suspended from their positions at DPAH in 1993
 They had conspired to accept bribes in return for section 8
subsidies. Walker and Gatling were charged with several counts of
accepting bribes, mail fraud and making false statements. In
exchange for bribes, they gave subsidies to individuals who were
not eligible to receive them because they were not DC residents and
were not on the wait list, or if they were on the wait list, not next in
line in the appropriate need category
 Indictment charged Walker and Gatling with engaging in a single
conspiracy to commit bribes which covered the issuance of
subsidies to ineligible residents in both Chicago and DC
Issue  Walker contends that the evidence at trial established at most the
existence of two conspiracies, one involving Chicago residents and
the other involving DC residents. If Walker‟s claim were correct,
then there would have been a variance between the indictment and
the evidence offered at trial. Such a variance can be grounds for
reversal if it substantially prejudices the defendant – if the jury were
“substantially likely to transfer evidence from one conspiracy to a
defendant involved in another”
Holding  In determining whether the evidence supports a finding of a single
conspiracy or instead only demonstrates multiple conspiracies, we
look at whether Ds “shared a common goal”, any
“interdependence between the alleged participants” and “any
overlap among alleged participants”, such as the presence of
core participants linked to all Ds
 Both the Chicago and DC schemes shared a common purpose,
namely obtaining money in exchange for s 8 subsidies. The
difference between the two schemes – that Bufford contacted the
appellants by phone to see if he could procure subsidies for two
Chicago residents and sent the appellants $1000 for each subsidy,
whereas Jackson brought numerous DC residents to DPAH where
they gave Gatling $500 in an envelope in exchange for their
subsidies – are simply differences in their modus operandi and
not differences in their underlying objectives
 There were also significant overlaps between the timing and
participants in both the Chicago and DC schemes
 Note: The variance argument does not work. The defendant can
claim surprise, but the prosecutor/judge would argue that it is
hogwash – no fatal variance. You knew all these people
98
involved, and how they may be involved in another

conspiracy
Overt Acts
 Proof of an overt act is an element of 371 prosecution. The statute essentially fixes
the point of legal intervention at agreement to commit a crime…coupled with an
overt act
 The overt act may be a mailing, a meeting, a telephone call or other facially
innocent acts done in furtherance of the conspiracy
Pinkerton Liability
 Pinkerton liability
o 1937 – Dan Walter Moonshine paid no taxes
o 1940 – Dan went to jail
o 1942 – Walter Moonshine paid no taxes
o Walter was Daniel‟s conspirator agent. That is Pinkerton liability – the
conspiracy did not end even though Dan went to jail!
o NB: You can have Pinkerton liability even though there was no formal
charge of conspiracy. The jury still needs to find that they were members
of the conspiracy, and the crimes were committed in furtherance of the
conspiracy
o Even though A did not lift a finger, A will be liable for all of B‟s acts – so
long as there were substantive crimes
o C cannot be held responsible for the bank fraud, unless in some way it is
committed in furtherance of the conspiracy
United States v Tilton
610 F.2d 302 (5th Cir 1980)
Facts  While each invoice was not overstated by exactly $20 to Tilton, all
of the invoices for the chassis taken together were inflated to
produce the bribe for him!
 While each invoice was not false, testimony revealed that at least
one invoice in every group mailed on specified dates was false
Holding  To sustain a conviction for conspiracy to commit mail fraud, the
evidence must merely show a scheme or artifice to defraud,
use of the mails caused by someone associated with the
scheme, and use of the mails in executing the fraud
 Pinkerton rule: Because the evidence is sufficient to demonstrate
that Tilton was a member of a conspiracy to commit mail fraud, he
can also be convicted of the substantive offence based upon acts
committed by a co-conspirator in furtherance of the conspiracy as
long as the acts fall within the scope of the conspiracy and could
reasonably be foreseen as a necessary or natural consequence of the
unlawful agreement
 The mailing of the inflated invoices furthered the conspiracy and
was a natural consequence of the unlawful agreement since the
bribe money would have to be generated from some source
99
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WEEK 10
THE RACEKETEER INFLUENCED AND
CORRUPT ORGANISATIONS ACT (“RICO”)
 RICO
 Enterprise
 Pattern – open/closed ended
 Operation+Management Test
 Racketeering-predicate Acts

Notes
Organised Crime Structure:
 Boss (Capo d. tuth capi – boss of the bosses) – more often than not, the bosses would be
insulated from the acts of the lower structure
 Underboss – does his biding
 Consigliore
 Capos – lower level bosses
 Made members (soldiers who committed themselves to the family)
 Associates – people who want to be soldiers, willing to do the dirty work
 Hangers on – people who like to be known to be affiliated to the family in some
way
Intention: Designed to “seek the eradication of organised crime in the United States
by…establishing new penal prohibitions and by providing enhanced sanctions and
new remedies to deal with the unlawful activities of those engaged in organised
crime. If you can eliminate this family, you can eliminate organised crime
 The organisation would make a lot of money!
 The enterprise must affect interstate commerce
 It is both criminal and civil – liable for punishments of both sides
 Racketeering activity – defined very broadly (i.e. mail fraud, murder, etc)
Substantive provisions:
 1962(a) – Use or invest
 1962(b) – acquire control – particularly labour unions
 1962(c) – participation – can get any of these characters who would take part in
the organised crime activity
 1962(d) – RICO Conspiracy – a conspiracy to violate any of the three above
mentioned provisions
Issues:
 Prosecutors have however used the RICO even outside the organised crime
context, because of the “enhanced sanctions and new remedies” made available:
o Treble civil damages
o Awards of costs and attorneys fees
o Divestiture, corporate dissolution and reorganisation
 Wide definition of “racketeering activity”
 Capable of reviving the dead: even where the predicate “racketeering activity”
would be time-barred, prosecutors may proceed with a RICO case built upon
101
those crimes assuming the requisites of the RICO statute are satisfied
 Anytime the RICO statute is ambiguous, Congress has legislated the rule of
remedy to cure any ambiguity – very liberal definition!
ELEMENTS/PRINCIPLES OF LIABILITY
(i) Enterprise
United States v Turkette
452 US 576 (1981)
Facts  Indictment describe the enterprise as “a group of individuals
associated in fact for the purpose of illegally trafficking in narcotics
and other dangerous drugs, committing arsons, utilizing the US
mails to defraud insurance companies, bribing and attempting to
bribe local police officers, and corruptly influencing and attempting
to corruptly influence the outcome of state court proceedings”
 Respondent argued that RICO was intended solely to protect
legitimate business enterprises from infiltration by racketeers and
that RICO does not make criminal the participation in an
association which performs only illegal acts and which has not
infiltrated or attempted to infiltrate a legitimate enterprise
Issue  Whether the term “enterprise” as used in RICO encompasses both
legitimate and illegitimate enterprises, or is limited to the former
Holding  The term “enterprise” is defined as including “any individual,
partnership, corporation, association, or other legal entity”. There is
no restriction upon the associations embraced by the definition: an
enterprise includes any union or group of individuals associated in
fact.
 On its face, the definition appears to include both legitimate
and illegitimate enterprises within its scope; it no more
excludes criminal enterprises than it does legitimate ones.
 Had Congress not intended to reach criminal associations, it could
easily have narrowed the sweep of the definition by inserting a
single word, “legitimate”. But it did nothing to indicate that an
enterprise consisting of a group of individuals was not covered by
RICO if the purpose of the enterprise was exclusively criminal.
 In order to secure a conviction under RICO, the Government must
prove both the existence of an “enterprise” and the connected
“pattern of racketeering activity”. The enterprise is an entity, for
present purposes a group of persons associated together for a
common purpose of engaging in a course of conduct. The pattern
of racketeering activity is, on the other hand, a series of criminal
acts as defined by the statute.
Notes  A group of persons “associated in fact” to pursue entirely
illegitimate purposes can constitute a RICO enterprise
 Later in Boyle v United States, the court did away with the need for a
hierarchical structure – “such a group need not have a hierarchical
structure or a “chain of command”; decision may be made on an ad
hoc basis and by any number of methods – by majority vote,
consensus, a show of strength”. Professor felt that the federal
government is overstepping – where does the line draw?
Cedric Kushner Promotions, Ltd v King
533 US 158 (2001)
102
Issue  The plaintiff claims that the president has conducted the
corporation‟s affairs through the forbidden “pattern”, though for
present purposes it is conceded that, in doing so, he acted within
the scope of his authority as the corporation‟s employee. In these
circumstances, are these two entities, a “person” and a separate
“enterprise”?
Holding  To establish liability under 1962(c), one must allege and prove the
existence of two distinct entities: (i) a person; and (ii) an
“enterprise” that is not simply the same “person” referred to by a
different name.
 Employee and the corporation for which the employee works are
different persons, even where the employee is the corporation‟s sole
owner.
 Corporate employee who conducts the organisation‟s affairs
through an unlawful Racketeer Influenced and Corrupt
Organisations Act (RICO) “pattern of activity” uses the corporation
as a vehicle, whether he is, or is not, its sole owner.
(ii) Pattern of Racketeering Activity
HJ Inc v Morthwestern Bell Tel. Co.
492 US 229 (1989)
Facts  Petitioner (customer of Northwestern Bell) alleged that
Northwestern Bell Telephone Co sought to influence members of
the MPUC (Minnesota Public Utilities Commission) in the
performance of their duties – and in fact caused them to approve
rates for the company in excess of a fair and reasonable amount –
by making cash payments to commissioners, negotiating with them
regarding future employment, and paying for parties and meals, for
tickets to sporting events and the like, and for airline tickets
 In violation of 1962(a), Northwestern Bell derived income from a
pattern of racketeering activity involving predicate acts of bribery
and used this income from a pattern of racketeering activity
involving predicate acts of bribery and used this income to engage
in its business as an interstate “enterprise”
 Claimed a violation of 1962(b), in that, through this same pattern of
racketeering activity, respondents acquired an interest in or control
of the MPUC, which was also an interstate “enterprise”
 Petitioner asserted that respondents participated in conduct and
affairs of the MPUC through this pattern of racketeering activity
Issue  What conduct meets RICO‟s pattern requirement.
Holding  The term „pattern‟ itself requires the showing of a relationship
between the predicates and of the threat of continuing activity. It is
this factor of continuity [A number of crimes that occurred within
a period of time, and can happen again] plus relationship which
combines to produce a pattern. RICO‟s legislative history reveals
Congress‟ intent that to prove a pattern of racketeering activity a
plaintiff or prosecutor must show that the racketeering predicates
are related, and that they amount to or pose a threat of continued
criminal activity.
 The threat of continuity may be established by showing that the
predicate acts or offences are part of an ongoing entity‟s regular
103
way of doing business. Thus, the threat of continuity is sufficient

established where the predicates can be attributed to a defendant
operating as part of a long-term association that exists for criminal
purposes. Such associations include, but extend well beyond, those
traditionally grouped under the phrase “organised crime”. The
continuity requirement is likewise satisfied where it is shown that
the predicates are a regular way of conducting D‟s ongoing
legitimate business (in the sense that it is not a business that exists
for criminal purposes), or of conducting or participating in an
ongoing and legitimate RICO “enterprise”
Notes  Open-ended scheme:
o Larger number of crimes over a longer period of time, with
some proof of planning of crimes into the future
 Close-ended scheme:
o Just a brief relationship where they commit a crime and go
their separate ways
 Predicate acts that occur within one year may be insufficient to
establish a close-ended scheme. If you have two years, the court
may accept it
(iii) Conduct of Enterprise’s Affairs
Reves v Ernst & Young
507 YS 170 (1993)
Facts  Enterprise – the co-opt of farmers
 Pattern of racketeering activity – Improper financial statements.
Lying to the Board of Directors [Minority opinion felt that the very
facts satisfy the operation and management test!]
Issue  Meaning of the phrase “to conduct or participate, directly or
indirectly, in the course of such enterprise‟s affairs”
Holding  “Conduct” requires an element of direction. Used as both a noun
and a verb – but this is ambiguous! How are we going to determine what it
means? The rule of lenity should have kicked in to absolve the accountants
of any responsibility
 “Participate” – Congress has taken a middle ground, suggesting “to
take part in”
 In order to “participate, directly or indirectly, in the conduct of such
enterprise‟s affairs”, one must have some part in directing those
affairs. Of course, the word “participate” makes clear that RICO
liability is not limited to those with primary responsibility for the
enterprise‟s affairs, just as the phrase “directly or indirectly” makes
clear that RICO liability is not limited to those with a formal
position in the enterprise, but some part in directing the enterprise‟s
affairs is required. The “operation or management” test expresses
this requirement in a formulation that is easy to apply.
(iv) RICO Conspiracy
United States v Elliott
571 F.2d 880 (5th Cir 1978)
Facts  Party A dealt with counterfeit titles for stolen cars
 Party B dealt with murders
 Party C dealt with arranging the purchase, concealment and
distribution of such commodities as meat, diary, etc
104
 Arguably there is a variance here! But if there is common interest

in the acts, you can possibly show that there is an enterprise.
Nevertheless, you would still need a pattern of racketeering
activity. Assuming prove of enterprise, you may agree to two or
more acts related to the stolen cars, and you may not agree to the
murder, courts can nevertheless lump all of these together [reminds
me of Pinkerton liability – even though I played no part in the
substantive crime, I can be found liable for simply being a member
of the conspiracy]
Holding  Through RICO, Congress intended to authorise the single
prosecution of a multi-faceted, diversified conspiracy by replacing
the inadequate “wheel” and “chain” rationales with a new statutory
concept: the enterprise
 The object of a RICO conspiracy is to violate a substantive RICO
provision – here, to conduct or participate in the affairs of an
enterprise through a pattern of racketeering activity – and not
merely to commit each of the predicate crimes necessary to
demonstrate a pattern of racketeering activity
 The gravamen of the conspiracy charge in this case is not that each
defendant agreed to commit arson, to steal goods from interstate
commerce, to obstruct justice, and to sell narcotics; rather, it is that
each agreed to participate, directly and indirectly, in the affairs of
the enterprise by committing two or more predicate crimes.
 Under the conspiracy provision, remote associates of an enterprise
may be convicted as conspirators on the basis of purely
circumstantial evidence
 To be convicted as a member of an enterprise conspiracy, an
individual, by his words or actions, must have objectively
manifested an agreement to participate, directly or indirectly, in the
affairs of an enterprise through the commission of two or more
predicate crimes
Salinas v United States
522 US 52 (1997)
Issue  Does the conspiracy prohibition contained in the RICO Act apply
only when the conspirator agrees to commit two of the predicate
acts RICO forbids?
Holding  He gets the pick-up truck, and he agrees to the other act – he may
be liable for RICO conspiracy
 A conspiracy may exist even if a conspirator does not agree to
commit or facilitate each and every part of the substantive offence.
The partners in the criminal plan must agree to pursue the same
criminal objective and may divide up the work, yet each is
responsible for the acts of each other
 The RICO conspiracy statute, 1962(d), broadened conspiracy
coverage by omitting the requirement of an overt act; it did not, at
the same time, work the radical change of requiring the Govt to
prove each conspirator agreed that he would be the one to commit
two predicate acts
 One can be a conspirator by agreeing to facilitate only some of the
acts leading to the substantive offence
105
Prosecutorial Powers and Policies

Charging and Evidentiary Considerations
 Advantageous for the prosecutors!
o Because the RICO offence is a separate crime, the statute of limitations
runs only from its completion; thus, every additional racketeering offence
committed in furtherance of the enterprise‟s affairs within ten years of a
previous one extends the statute of limitations for another five years for
prosecution of the entire pattern
o If a murder/narcotic case could be indicted and tried under RICO, all of
the evidence regarding D‟s activities could easily be presented in the same
trial. Since the govt would have to allege and prove a pattern of
racketeering activity, the murder and narcotics offence could be alleged as
elements of the same crime, violation of s 1962(c)
o Jurisdictional and venue problems would also disappear as well
Criminal Forfeiture
 Section 1962 dictates that Ds who violate 1962 “shall” forfeit “any interest in the
RICO enterprise, including a legitimate business, and any property constituting
or derived form the racketeering activity, including proceeds, direct or indirect,
which were generated by or connected to the racketeering activity”
 Even assets that are not tainted by use in connection with the racketeering
activity may be subject to forfeiture
DOJ Approval Requirements and Charging Directions

 In recognition of RICO‟s power and potential for abuse, DOJ requires approval
by the Department‟s Criminal Division prior to the initiation of any RICO
criminal information or indictment, or the filing of any civil complaint
106
WEEK 11
MONEY LAUNDERING
Federal White Collar Crime pp 753-842
Notes
 Money Laundering – Various Concepts:
o Process by which one conceals the existence, illegal source, or illegal
application of income, and disguises that income to make it appear
legitimate. Conceal the source, location or ownership of criminally tainted
money
o Using tainted and sometimes untainted funds to facilitate or promote
criminal activity
o Use of proceeds of criminal activity when one knows of the criminal
origins of those funds. This type of laundering is essentially a tainted
money-spending prohibition, not an effort to prevent the concealment of
past crimes or the promotion of future ones
Relevant Provisions §1956
(a)(1) Whoever, knowing that the property involved in a financial transaction
represents the proceeds of some form of unlawful activity, conducts or attempts to
conduct such a financial transaction which in fact involves the proceeds of specified
unlawful activity--
(A)(i) with the intent to promote the carrying on of specified unlawful activity; or
(ii) with intent to engage in conduct constituting a violation of section 7201 or 7206
of the Internal Revenue Code of 1986; or
(B) knowing that the transaction is designed in whole or in part--
(i) to conceal or disguise the nature, the location, the source, the ownership, or
the control of the proceeds of specified unlawful activity; or
(ii) to avoid a transaction reporting requirement under State or Federal law,
shall be sentenced to a fine of not more than $500,000 or twice the value of the
property involved in the transaction, whichever is greater, or imprisonment for not
more than twenty years, or both. For purposes of this paragraph, a financial
transaction shall be considered to be one involving the proceeds of specified
unlawful activity if it is part of a set of parallel or dependent transactions, any one of
which involves the proceeds of specified unlawful activity, and all of which are part
of a single plan or arrangement.
(2) Whoever transports, transmits, or transfers, or attempts to transport, transmit, or

transfer a monetary instrument or funds from a place in the United States to or
through a place outside the United States or to a place in the United States from or
through a place outside the United States--
(A) with the intent to promote the carrying on of specified unlawful activity; or
(B) knowing that the monetary instrument or funds involved in the transportation,
107
transmission, or transfer represent the proceeds of some form of unlawful activity

and knowing that such transportation, transmission, or transfer is designed in
whole or in part--
(i) to conceal or disguise the nature, the location, the source, the ownership, or
the control of the proceeds of specified unlawful activity; or
(ii) to avoid a transaction reporting requirement under State or Federal law,
shall be sentenced to a fine of not more than $500,000 or twice the value of the
monetary instrument or funds involved in the transportation, transmission, or
transfer whichever is greater, or imprisonment for not more than twenty years, or
both. For the purpose of the offense described in subparagraph (B), the defendant‟s
knowledge may be established by proof that a law enforcement officer represented
the matter specified in subparagraph (B) as true, and the defendant‟s subsequent
statements or actions indicate that the defendant believed such representations to be
true.
(3) Whoever, with the intent--
(A) to promote the carrying on of specified unlawful activity;
(B) to conceal or disguise the nature, location, source, ownership, or control of

property believed to be the proceeds of specified unlawful activity; or
(C) to avoid a transaction reporting requirement under State or Federal law,
conducts or attempts to conduct a financial transaction involving property

represented to be the proceeds of specified unlawful activity, or property used to
conduct or facilitate specified unlawful activity, shall be fined under this title or
imprisoned for not more than 20 years, or both. For purposes of this paragraph and
paragraph (2), the term “represented” means any representation made by a law
enforcement officer or by another person at the direction of, or with the approval of,
a Federal official authorized to investigate or prosecute violations of this section.
A. “TRANSACTION” OFFENCES UNDER 1956(a)(I) AND 1957
(I) “Concealment” Offence Under 1956(a)(1)(B)(i)
United States v Campbell
977 F. 2d 854 (4th Cir 1992)
Facts  Lawing (drug dealer) decided to buy a house on Lake Norman. He
obtained Campbell (real estate agent)‟s business card and arranged
an appointment to look at houses. He represented to her as the
owner of a legitimate business
 Lawing eventually settled upon a house listed for $191,000 and
owned by Edward & Nancy Guy Fortier. Lawing was unable to
secure a loan and decided to ask the Fortiers to accept $60,000
under the table in cash and to lower the contract price to $122,500.
Lawing contacted Campbell and informed her of the proposal.
Campbell relayed the proposal to Fox, who forwarded the offer to
Fortiers, Fortiers agreed.
Issue  Whether there was sufficient evidence for the jury to find that
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Campbell possessed the knowledge that (1) Lawing‟s funds were

the proceeds of illegal activity, and (2) the transaction was designed
to disguise the nature of those proceeds. Statute requires actual
subjective knowledge
Holding  Govt need not prove that D had the purpose of concealing the
proceeds of illegal activity. Instead, as the plain language of the
statute suggests, the Govt must only show that D possessed the
knowledge that the transaction was designed to conceal illegal
proceeds
 Under the terms of the statute, the relevant question is not
Campbell‟s purpose, but rather her knowledge of Lawing‟s
purpose
 Campbell had stated prior to the sale to Sara Fox (listing broker)
that the funds “may have been drug money”. Campbell had
“deliberately closed her eyes to what would otherwise have been
obvious to her”
NOTES
 To prove a transaction money laundering offence under 1956(a)(I), Govt must
show beyond a reasonable doubt that D:
o Conducted or attempted to conduct a financial transaction
o Knowing that the property involved in the transaction represented the
proceeds of unlawful activity
o Transaction in fact “involved” the proceeds of “specified unlawful
activity”
o D acted with the requisite knowledge or purpose
 In a “concealment” prosecution under either the “transaction” or the
“transportation” prongs, the govt must prove an intent to conceal – that is, that
the “animating purpose” of the transaction or transportation was to conceal the
nature, source, or location of illicit funds
 Actual nature of the proceeds; Issues that arise would include:
o Degree to which the govt may rely on circumstantial evidence to
demonstrate this “fact”
o Whether tracing is required when the transaction “involves” dollars from
an account where proceeds of specified unlawful activity have been
commingled with legitimate funds
 Campbell was also charged under §1957 – which carries lesser penalties, and is
much less frequently invoked, than §1956(a)(I). To secure the conviction, the govt
must prove beyond a reasonable doubt that D:
o Knowingly engaged or attempted to engage;
o In a monetary transaction; - unlike 1956, this definition requires that the
transaction involve a “financial institution”
o In criminally derived property with a value of more than $10,000;
o Knowing that the property was derived from unlawful activity; and
o The property was, in fact, derived from “specified unlawful activity”
 Scope under §1957: The section does not require the government to show that D
actually laundered the funds or intended to promote or conceal unlawful activity.
It does not require that D even know that others are engaging in the transaction
to promote or conceal unlawful activity
B. “TRANSPORTATION” OFFENCES UNDER 1956(a)(2)
109
(I) “Promotion” Offence under 1956(a)(2)(A)

United States v Piervinanzi
23 F.3d 670 (2d Cir. 1994)
Facts Defendants were convicted in the United States District Court of
conspiracy, wire fraud, attempted bank fraud, money laundering, and
attempted money laundering. Defendants appealed. The Court of
Appeals held that: (1) defendant was not guilty of money laundering
under statute governing engaging in monetary transactions in property
derived from specified unlawful activity; (2) defendants' unauthorized
attempted overseas transmissions of funds in bank wire transfers did
not merge with underlying bank fraud so as to preclude independent
liability of defendants under statute governing foreign money
laundering; and (3) district court's refusal to apply diminished capacity
sentencing guideline to defendant was proper.
Ruling Affirmed in part, vacated in part, and remanded for resentencing.
Holding §1957
 Piervinanzi argues that the language of the statute only
encompasses transactions in which D first obtains “criminally
derived property”, and then engages in a monetary transaction
with that property. Because the funds transferred from Morgan
Guaranty were not yet property derived from the wire fraud and
bank fraud scheme, Piervinanzi contends, his actions did not come
within the purview of 1957. The govt does not dispute this reading
of the statute, and joins Piervinanzi‟s request to vacate his
conviction on this count.
 The use of the language „obtained‟ and „property‟ demonstrates a
congressional intent that the proceeds of a crime be in D‟s
possession before he can attempt to transfer those proceeds in
violation of 1957 – Congress intended the provision to separately punish
D for monetary transactions that follow in time the underlying specified
unlawful activity that generated the criminally derived property in the
first place
§1956(a)(2)
 The statutory language at issue requires that there be a transmission
of funds “with the intent to promote the carrying on of specified
unlawful activity”. As previously noted, “specified unlawful
activity” includes bank fraud
 Piervinanzi contends that in this case, the overseas transmission of
funds “merges” with the underlying bank fraud, precluding
independent liability under 1956(a)(2). In our view, however, the
conduct at issue in this case falls within the prohibition of the
statute
 If the transportation, transmission or transfer was conducted with
the intent to promote the carrying on of specific unlawful activity,
the prosecutor need not show that the funds or monetary
instruments were actually derived from any criminal activity.
 The act of attempting to fraudulently transfer funds out of the
banks was analytically distinct from the attempted transmission of
those funds overseas, and was itself independently illegal
110
 The fact that Congress uses different language in defining

violations in a statute indicates that Congress intentionally sought
to create distinct offences
NOTES
 Elements of a 1956(a)(2) “transportation” money laundering offence – D must
have:
o Transported, transmitted, or transferred (or attempted to do so);
o Monetary instruments or funds;
o Across the border of the United States (the transborder element requires that
the funds or monetary instruments cross a US border – “either originating or
terminating in the United States”); and
o Acted with the requisite knowledge or purpose
Difference between transaction promotion case and transaction promotion case

 Difference 1: 1956(a)(2)(A) “contains no requirement that „proceeds‟ first be
generated by unlawful activity, followed by a financial transaction with those
proceeds”
 Difference 2: 1956(a)(2)(B)(i) does not expressly require that the property
involved in fact represents the proceeds of specific unlawful activity. It only state
that D must know that the monetary instrument or funds involved in the
transportation “represent” the proceeds of some form of unlawful activity.
 Transportation concealment cases: Subsection 1956(a)(2)(B)(i) obviously does
require that “proceeds” be laundered, providing as it does that the govt must
prove that D knew both that the transfer represents the “proceeds of some form
of unlawful activity” and that the transfer is designed in whole or in part to
conceal or disguise the nature, location, source or ownership of the “proceeds” of
specified unlawful activity.
111
112
WEEK 12
FIFTH AMENDMENT: TESTIMONY AND
IMMUNITY
 18 USC 6002-3
 Transactional immunity
 Use immunity
 Derivative use
 Kastigar hearings
 Proffer letter/Proffer
 Escape Valve / Rule 35
Federal White Collar Crime pp 887 - 929

Notes
 Fifth Amendment privilege: protects individuals from being compelled by the
government to make statements that would furnish a link in the chain of
evidence needed to criminally prosecute them absent a grant of immunity
coextensive with the scope of the privilege
 Transaction Immunity: A bar from prosecution relating to any offence that may
concerned the compelled testimony
o Illinois is a „transactional immunity‟ state
 Use Immunity: Prosecutors cannot use their testimony to prosecute the person
o Assuming that Connor was charged for arson, in the case-in-chief,
prosecution cannot use Connor‟s testimony at all. But if Connor gets up
and testify and said „I did not do it‟, you can use the testimony in rebuttal!
 Letter Immunity:
o Advantage: Can tailor it to the needs of the crime
 Derivative Use: In my testimony, I identified witnesses A+B+C. You now go out
and interview A+B+C, and they give damning testimony that I am guilty. Before
I gave the testimony, you did not know about A+B+C. Therefore, you may use of
my information to prosecute me!
o The statute says YOU CAN‟T DO THAT
o Difference: Use immunity focuses on just one person. Derivative use
would involve several people
 Prosecution has the burden to show that they did not violate the order – we have
the immunity! Our court should protect our client. We were forced to give up our Fifth
Amendment rights – therefore, they should have the onus that this is consistent with our
Fifth Amendment rights
o Create a Kastigar file about everything you knew before the testimony –
when the Judge says Kastigar, you had already anticipated it and knew
about witnesses A+B+C before the testimony!
o Congress testimony: You may say that you don‟t read anything about it,
don‟t talk to anyone about it, etc. Not realistic. Using the testimony to
refresh recollection is considered as a derivative use!
Formal Immunity Pursuant to 18 USC 6002-05
(I) Constitutional Standards
Kastigar v United States
406 US 441 (1972)
Facts  Petitioners were subpoenaed before the Grand Jury. Govt believed
113
that they were likely to assert their Fifth Amendment privilege, and
therefore applied to the District Court for an order directing
petitioners to answer questions and produce evidence before the
grand jury under a grant of immunity. Petitioner opposed issuance
of the order, contending primarily that the scope of the immunity
provided by the statute was not coextensive with the scope of the
privilege against self-incrimination, and therefore was not sufficient
to supplant the privilege and compel their testimony. District Court
had rejected this argument, and ordered petitioners to appear
before the grand jury and answer its questions under the grant of
immunity
Issue  Whether testimony may be compelled by granting immunity from
the use of compelled testimony and evidence derived therefrom
(“use and derivative use” immunity), or whether it is necessary to
grant immunity from prosecution for offences to which compelled
testimony relates (“transactional” immunity)
Holding  Though grant of immunity must afford protection commensurate
with that afforded by privilege against compulsory self-
incrimination, it need not be broader, and immunity from use and
derivative use is coextensive with scope of privilege and is
sufficient to compel testimony over claim of privilege; transactional
immunity is not required.
 In subsequent criminal prosecution of person who has been
compelled to testify under grant of immunity, prosecution has
burden of proving affirmatively that evidence proposed to be
used is derived from legitimate source wholly independent of
compelled testimony.
 Petitioner‟s argument: Fifth Amendment‟s privilege against
compulsory self-incrimination deprives Congress of power to enact
laws that compel self-incrimination, even if complete immunity
from prosecution is granted prior to the compulsion of the
incriminatory testimony
o Court found that there was no merit to this contention
 Petitioner‟s argument: The scope of immunity provided by the
federal witness immunity statute is not coextensive with the scope
of the Fifth Amendment privilege against compulsory self-
incrimination, and therefore is not sufficient to supplant the
privilege and compel testimony over a claim of the privilege
o Statute‟s explicit proscription of the use in any criminal case
of “testimony or other information compelled under the
order (or any information directly or indirectly derived from
such testimony or other information)” is consonant with the
Fifth Amendment standards. We hold that such immunity
from use and derivative use is coextensive with the scope of
the privilege against self-incrimination, and therefore is
sufficient to compel testimony over a claim of the privilege
o Transactional immunity: accords full immunity from
prosecution for the offence to which the compelled
testimony relates, affords the witness considerably broader
protection than does the Fifth Amendment privilege.
114
Immunity from the use of compelled testimony, as well as

evidence derived directly and indirectly therefrom, affords
protection – prohibiting prosecutorial authorities from using
the compelled testimony in any respect, and it therefore
insures that the testimony cannot lead to the infliction of
criminal penalties on the witness
o Total prohibition on use provides a comprehensive
safeguard, barring the use of compelled testimony as an
“investigatory lead”, and also barring the use of any
evidence obtained by focusing investigation on a witness as
a result of his compelled disclosures
o The burden of proof on the prosecution imposes on them the
affirmative duty to prove that the evidence it proposes to
use is derived from a legitimate source wholly
independent of the compelled testimony. This is a very
substantial protection
Notes  The fact that the statute provides only use and derivative use
immunity does not bar the government from granting a defendant
transactional immunity in a negotiated agreement.
 When the government proceeds to prosecute a previously
immunized witness, it has “the heavy burden of proving that all of
the evidence it proposes to use was derived from legitimate
independent sources”
 If the tainted evidence was presented to the grand jury, the
indictment will be dismissed; when tainted evidence is introduced
at trial, the defendant is entitled to a new trial
 Caselaw discusses two types of contested potential “uses” of
immunized testimony: “indirect evidentiary” use and
“nonevidentiary use”
o “Indirect evidentiary” use – use of immunized testimony “by
witnesses to refresh their memories, or otherwise to focus
their thoughts”. It was held that this is a clear instance of
using immunized testimony, and prosecution must make a
two-part showing to meet its Kastigar burden: (1)
independent source for the matters that the witness testifies;
(2) prosecutor must prove that any witness exposed to the
compelled statement has not shaped or altered her
testimony in any way, either directly or indirectly, as a
result of that exposure
o “Nonevidentiary use” – said to include use of immunized
testimony for “assistance in focusing the investigation,
deciding to initiate prosecution, refusing to plea bargain,
interpreting evidence, planning cross-examination and
otherwise generally planning trial strategy. At issue here is
whether the government must merely show an independent
basis for all its evidence, or whether it must go further and
demonstrate that government agents‟ thought processes
were unaffected – this may be an impossible standard!
Hon. Stephen S. Trott, Words of Warning for Prosecutors Using Criminals as
Witnesses
115
47 Hastings LJ 1381 (1996)

 Neither helpful to a prosecutor‟s case nor very comforting personally to have the
defence persuasively arguing to the court and jury, for example, that you, as a
colossal idiot, have given immunity to the real killer in order to prosecute an
innocent man
 Criminals are likely to say and do almost anything to get what they want,
especially when what they want is to get out of trouble with the law
 Ordinary decent people are predisposed to dislike, distrust and frequently
despise criminals who “sell out” and become prosecution witnesses. Jurors
suspect their motives from the moment they hear about them in a case, and they
frequently disregard their testimony altogether as highly untrustworthy and
unreliable, openly expressing disgust with the prosecution for making deals with
such “scum”
 Note that in the hands of a skilful defence tactician, all the liabilities and the
unseverable baggage that such a witness brings to your case, along with the
“confession” or the “identification”, become the elements of reasonable doubt the
defence is looking for and the brush with which the rest of the case is tarred
(II) Defence Witness Immunity
 Under existing case law, the defence has no right to compel witness immunity on
the basis of the Sixth Amendment right to compulsory process
 Traditionally, the Sixth Amendment‟s Compulsory Process Clause gives D the
right to bring his witness to court and have the witness‟s non-privileged
testimony heard, but does not carry with it the additional right to displace a
proper claim of privilege, including the privilege against self-incrimination
 Co-defendants could secure use immunity for each other, and each immunised
witness could exonerate his co-defendant at a separate trial by falsely accepting
sole responsibility for the crime, secure in the knowledge that his admission
could not e used at his own trial for the substantive offence
 United States v Straub: For a defendant to compel use immunity the defendant
must show that:
o D witness‟s testimony was relevant; and
o Either:
 The prosecution intentionally caused the defence witness to
invoke the Fifth Amendment right against self-incrimination with
the purpose of distorting the fact-finding process or
 The prosecution granted immunity to a govt witness in order to
obtain that witness‟s testimony, but denied immunity to a defence
witness whose testimony would have directly contradicted that of
the govt witness, with the effect of so distorting the fact-finding
process that D was denied his due process right ot a fundamental
fair trial
Proffers
 Proof + Offer = Proffer!
 I give you Mr Big, you give me just 24 months! But which comes first? You do it
in writing!
 What are the options:
o If he gave you Mr Big, you can dismiss the charges and put him in the
witness protection program
o If he did not give you Mr Big, but gave you someone who leads to Mr Big,
you can be more lenient. This is the Escape Valve (18 USC 35(e)) – if an
116
offence has a mandatory minimum, in the absence of the escape valve, a

judge cannot issue a sentence below the Escape Valve. A prosecutor can
make a downward departure to a lower level, communicating to the
judge the value of the proffer. The judge is not required to permit the
escape – but the judge has the authority!
o Rule 35 – the case is over! The prosecution makes a motion pursuant to
Rule 35 modify the order
o Prosecution may not make the Escape Valve motion – that seems unfair –
as they did not think that the information you provided was useful
(I) Rationale
 To evaluate both the value of the prospective immunised witness‟s testimony and
his worth as a witness, most prosecutors will insist upon an “offer of proof”,
oftentimes called a “proffer”, prior to concluding a deal
 At the outset of negotiations, counsel may make preliminary proffers on behalf of
D, attempting to persuade the govt of his client‟s worth to the prosecution of
others (“hypothetical” proffer) and to provide the government with sufficient
specific information and to attest to the client‟s value and veracity as a witness
(“subject matter” proffer)
 Stages of proffer sessions:
o Prosecutor wants to know D‟s version of his or her own role in the crime.
This will be measured against the information already available to the
investigators in an effort to determine whether the prospective witness
will tell the truth (or at least what the prosecutor then believes to be the
truth) about his or her own conduct
o Prosecutor will then ask about the conduct of the others involved the
crime
o Prosecutor will also determine what “baggage” a witness will bring to the
witness stand at trial
 Typical proffer agreement provided only limited protection to the prospective
witness if no plea agreement results from the sessions, and does not prohibit the
derivative use of D‟s statements to pursue further investigation
(II) Fed. R. Crim. P. II(e)(6) and Fed R.Evid. 410
 Fed.R.Crim.P. II(e)(6) and Fed.R.Evid.410 state that the content of D‟s statements
during such proffer session is inadmissible for most purposes against D
United States v Velez
354 F.3d 190 (2d Cir. 2004)
Facts  At the first proffer session, he claimed that he did not possess the
gun found on the ground where he had been standing. He signed a
waiver clause at the second proffer session – „The Government may
use statements made by D at the meeting to rebut any evidence or
arguments offered by or on behalf of D (including arguments made
or issues raised sua sponte by the District Court) at any stage of the
criminal prosecution (including bail, all phases of trial, and
sentencing) in any prosecution brought against D‟
 Accordingly, by signing the proffer agreement that included this
waiver provision, D authorised the Govt to introduce D‟s proffer
statements at trial if D introduced evidence or arguments that were
inconsistent with his proffer statements
 In the second proffer session, D recanted his claims of innocence at
the initial session and admitted facts pertaining to one element of
117
the charged offence – namely, that he owned and possessed the

firearm that the officers found on the ground near him
 At sentencing, in the context of offering mitigation to warrant a
sentence at the low end of the range, D stated that he had been
“trapped” into making his admissions at the second proffer session
Holding Challenge to the Waiver Provision in the Proffer Agreement
 Ordinarily, statements made by D during plea negotiations,
including proffer sessions, are inadmissible at trial. However, D can
waive the protection afforded by Rule 410 as long as there is no
“affirmative indication that the agreement [to waive] was entered
into unknowingly or involuntarily”
 Here, we face a more expansive waiver of Rule 410 because, in the
proffer agreement at issue, D waived his exclusionary privilege in
all circumstances in which the defence presents contradictory
testimony, evidence or arguments – whether or not D himself
testifies. We agree with the District Court‟s implicit decision that
the agreement is enforceable
 Gomez – If the proffer agreement is not enforced, a defendant will
have less incentive to be truthful, for he will know that his proffer
statements cannot be used against him at trial as long as he does not
testify, even if he presents inconsistent evidence or arguments
 Invaliding a waiver provision like the one before us would clearly
interfere with plea bargaining and cooperation efforts – in direct
contravention of the criminal justice system‟s legitimate goal of
encouraging plea bargaining in appropriate circumstances
 A defendant remains free to present evidence inconsistent with his
proffer statements, with the fair consequence that, if he does, “the
Government is then permitted to present D‟s own words in
rebuttal”. With this avenue open to him, a D who has consented to
a waiver provision like the one at issue here has not forfeited his
constitutional right to present a defence, to the effective assistance
of his counsel, or to a fair trial
Informal Immunity Agreements
 Informal Agreements: Provide for conditional use and derivative use immunity
or for what is essentially conditional transactional immunity as to specified
crimes, or for some combination of the two
 Informal immunity agreements provide both parties flexibility in furthering the
goal of securing D‟s cooperation in the investigation or prosecution of the others,
and may even secure both the govt and D significant advantages
 Disadvantages:
o Unlike formal statutory grant of immunity, where the Fifth Amendment
is necessarily implicated, informal immunity agreements are “bargained
for” immunity agreements in which the State agrees to limit its rights in
prosecuting the defendant in return for the defendant‟s cooperation or
testimony
o In contrast to statutory immunity, these informal agreements are
contractual in nature and do not as a general proposition, bind
prosecutorial authorities who are not a party to the agreement
 Note: When a defendant rejects an offer of immunity on the ground that he is
unaware of any wrongdoing about which he could testify, his action is probative
118
of a state of mind devoid of guilty knowledge: United States v Biaggi, 909 F.2d 662
(2d Cir. 1990)
 Among the terms that should be considered carefully in drafting these
agreements are:
o The scope of the agreement (i.e. does the agreement bar the govt from
providing the information obtained through cooperation to other state or
federal actors)
o Conditions that constitute a breach and the consequences that flow from
that breach (e.g. is the commission of any future crime a breach; does the
witness‟s lack of candor on any issue constitute a breach; what are the
crimes for which the defendant may be prosecuted in the event of a
breach; can any and all information and statements provided by the
immunised witness be used in the event of a breach)
Entering into non-Prosecution Agreements in Return for Cooperation
Stages:
 If time permits, the person may be charged, tried and convicted before his/her
cooperation is sought in the investigation or prosecution of others. Having
already been convicted himself/herself, the person ordinarily will no longer have
a valid privilege to refuse to testify and will have a strong incentive to reveal the
truth in order to induce the sentencing judge to impose a lesser sentence than
that which otherwise might be found appropriate.
 The person may be willing to cooperate if the charges or potential charge against
him/her are reduced in number or degree in return for his/her cooperation and
his/her entry of a guilty plea to the remaining charges.
 The third method for securing the cooperation of a potential defendant is by
means of a court order. Under the so-called “use immunity” provisions of those
statutes, the court may order the person to testify or provide other information,
but neither his/her testimony nor the information he/she provides may be used
against him/her, directly or indirectly, in any criminal case except a prosecution
for perjury or other failure to comply with the order.
Considerations to be Weighed for Entering into Non-Prosecution Agreements in
Return for Cooperation
Relative factors in determining public interest:
 The importance of the investigation or prosecution to an effective program of law
enforcement
 The value of the person‟s cooperation to the investigation or prosecution; and
 The person‟s relative culpability in connection with the offence or offences being
investigated or prosecuted and his/her history with respect to criminal activity
Entering into Non-Prosecution Agreements in Return for Cooperation – Limiting
the Scope of Commitment
In entering into a non-prosecution agreement, the attorney for the government should, if
practicable, explicitly limit the scope of the government‟s commitment to:
 Non-prosecution based directly or indirectly on the testimony or other
information provided; or
 Non-prosecution within his/her district with respect to a pending charge or to a
specific offence then known to have been committed by the person
119
120
WEEK 12
FIFTH AMENDMENT: DOCUMENTS &
TANGIBLE OBJECTS
 Document production
 Collective entity rule
 Constructive production immunity
 5th Amendment Self-Incrimination Privilege
Federal White Collar Crime pp 931 – 968

Notes
 Not normal for companies to have their documents subpoenaed by grand juries
o Letting those documents leave the company premises would affect
business operations
o Court had consistently held that it is too bad!
o In today‟s 21st century world, it is less onerous as most documents are
stored in electronic forms
o Even social networking media of the employees are subjected to grand
juries
 The Fifth Amendment privilege against self-incrimination protects:
o Natural persons (sole proprietorships) from being
o Compelled
o To make a testimonial communication (and when the testimonial
communication is a fact implicitly communicated by an “act of
production”, that fact is not a foregone conclusion) that
o Is incriminating
o Absent a grant of governmental immunity
(A) Natural Persons (And Sole Proprietorships)
 Hale v Henkel: Custodian of a company was assured of immunity from criminal
prosecution. He tried to assert Fifth Amendment rights of a third-party, i.e. the
corporation – but the court refused. The court reasoned that “the amendment is
limited to a person who shall be compelled in any criminal case to be a witness
against himself; and if he cannot set up the privilege of a third person, he
certainly cannot set up the privilege of a corporation”
(B) What constitutes “compulsion”
 Boyd v United States – The Fourth Amendment applies to court orders in the
nature of subpoenas duces tecum in the same manner that it applies to search
warrants; both are subject to the requirement that “seizures” (whether effected by
physical seizure or by subpoena) must be “reasonable”
o Still good law
Fisher v United States
425 US 391 (1976)
In the context of looking at the character of the document to look if it is invading
into my privacy.
Facts  Internal Revenue agent visited the taxpayer or taxpayers and
interviewed them in connection with possible civil or criminal
liability. Shortly after the interviews, taxpayers obtained from their
respective accountants certain documents relating to the
preparation by the accountants of their tax returns
121
 Taxpayers then transferred the documents to their lawyers.

Lawyers declined to comply with the summons directing
production of the documents, and enforcement actions were
commenced by the Govt
Issue  Whether a summons directing an attorney to produce documents
delivered to him by his client in connection with the attorney-client
relationship is enforceable over claims that the documents were
constitutionally immune from summons in the hands of the client
and retained that immunity in the hands of the attorney.
Ruling  Taxpayer‟s privilege under this Amendment is not violated by
enforcement of the summonses involved in these cases because
enforcement against a taxpayer‟s lawyer would not “compel” the
taxpayer to do anything and certainly would not compel him to be
a “witness” against himself
Holding  Taxpayer‟s Fifth Amendment privilege is not violated by
enforcement of the summonses directed towards their attorneys.
o Personal compulsion against the accused is lacking
o The fact that the attorneys are agents of the taxpayers does
not change this result – The Amendment is limited to a person
who shall be compelled in any criminal case to be a witness against
himself
 Personal Privacy: It is true that the Court has often stated that one
of the several purposes served by the constitutional privilege
against compelled testimonial self-incrimination is that of
protecting personal privacy. But the Court has never suggested
that every invasion of privacy violates the privilege. Within the
limits imposed by the language of Fifth Amendment, the privilege
truly serves privacy interests; but the Court has never on any
ground, personal privacy included, applied the Fifth Amendment
to prevent the otherwise proper acquisition or use of evidence
which, in the Court‟s view, did not involve compelled testimonial
self-incrimination of some sort
o Framers of the Constitution had already struck the balance –
such that when the State‟s reason to believe
incriminating evidence will be found becomes
sufficiently great, the invasion of privacy becomes
justified and a warrant to search and seize will issue.
They did not seek in still another Amendment – Fifth – to
achieve a greater protection of privacy but to deal with the
more specific issue of compelled self-incrimination
 Attorney-Client Privilege: Taxpayers have erroneously relied on
the Fifth Amendment without urging the attorney-client privilege
in so many words. They have nevertheless invoked the relevant law
and policies that govern the attorney-client privilege
o Purpose of privilege: Encourage clients to make full disclosure
to their attorneys
o Pre-existing documents which could have been obtained by
court process from the client when he was in possession
may also be obtained from the attorney by similar process
following transfer by the client in order to obtain more
122
informed legal advice

o Pre-existing documents obtainable from the client are not
appreciably easier to obtain from the attorney after transfer
to him. Thus, even absent the attorney-client privilege,
clients will not be discouraged from disclosing the
documents to the attorney, and their ability to obtain
informed legal advice will remain unfettered. It is otherwise
if the documents are not obtainable by subpoena duces tecum
or summons while in the exclusive possession of the client,
for the client will then be reluctant to transfer possession to
the lawyer unless the documents are also privileged in the
latter‟s hands
 Fifth Amendment does not independently proscribe the compelled
production of every sort of incriminating evidence but applies only
when the accused is compelled to make a testimonial
communication that is incriminating
o A subpoena serve on a taxpayer requiring him to produce
an accountant‟s workpapers in his possession without doubt
involves substantial compulsion. But it does not compel oral
testimony; nor would it ordinarily compel the taxpayer to
restate, repeat or affirm the truth of the contents of the
documents sought
o The Fifth Amendment would not be violated by the fact
alone that the papers on their face might incriminate the
taxpayer, for the privilege protects a person only against
being incriminated by his own compelled testimonial
communications. The accountant‟s workpapers are not the
taxpayer‟s
o It is doubtful that implicitly admitting the existence and
possession of the papers rises to the level of testimony
within the protection of the Fifth Amendment. The papers
belong to the accountant, were prepared by him, and are the
kind usually prepared by an accountant working on the tax
returns of his client. Surely the Government is in no way
relying on the “truth-telling” of the taxpayer to prove the
existence of or his access to the documents
Holding Seemingly disagreeing that the tax papers are not “private papers”:
by Mr  The Court pays lip service to the bedrock premise of privacy in the
Justice statement that “within the limits imposed by the language of the
Brennan Fifth Amendment, which we necessarily observe, the privilege truly
serves privacy interests”. But this only makes explicit what
elsewhere highlights the opinion, namely, the view that protection
of personal privacy is merely a by product and not, as our
precedents and history teach, a factor controlling in part the
determination of the scope of the privilege”
 History and principle teach that the privacy protected by the Fifth
Amendment extends not just to the individual‟s immediate
declarations, oral or written, but also to his testimonial materials in
the form of books and papers
Notes  Fisher stands for the proposition that the contents of any pre-
123
existing documents, that is, documents the government did

not force one to write, are not “compelled” within the
meaning of the Fifth Amendment and thus the contents of the
documents are not relevant to the Fifth Amendment analysis
regardless of how “testimonial” or “incriminating they may be”
 Testimonial: Any link that provides!
 The government is not forcing one to record the contents of the
records when it serves a subpoena, but it is compelling the subject
to do something: it is forcing the subpoena‟s subject to make an “act
of production” of the required documents or other physical
evidence called for in the subpoena. But to be protected, that
“compelled” act must be deemed “testimonial”
(C) The Continuing Viability of the Collective Entity Doctrine After Fisher
 Search warrant
o In the past, they would have done search warrant for a document in the
company
o Is it more ethical to use grand juries?
 Split in the circuits on the question of when a corporate employee leaves his job
or is fired after a grand jury investigation has commenced and seeking to protect
himself, takes with him corporate records that might incriminate him, may he be
compelled to turn over the records under Braswell:
o Second Circuit – an ex-employee may assert his personal privilege in such
circumstances because “once the agency relationship terminates, the
former employee is no longer an agent of the corporation and is not a
custodian of the corporate records”
o Eleventh Circuit – the “immutable character of the records as corporate
which requires their production and which dictates that they are held in a
representative capacity”
 Braswell analysis applies where a govt employee seeks to claim an “act of
production” privilege for the production of govt records. DC Circuit has held
that, in a grand jury investigation of federal officials, a former official could not
assert his Fifth Amendment right against self-incrimination with respect to his act
of production of govt records
 Contention that the records subpoenaed are personal, not business or govt
records, and thus that an individual custodian cannot be required to produce
them in her representative capacity. In In Re Sealed Case (Governmental Records),
the District of Columbia Circuit held that the district court was required to
review documents about which the parties had a dispute regarding the
appropriate characterisation of the documents:
o In determining whether a document belongs in the corporate or the
personal category, courts employ a functional test
o “Mixed” document may qualify as a corporate record
o To determine whether a document is a govt record, inquiry into the
nature, purpose, and use of the document is in order, and the
precedent set in the context of corporate records should analogously
apply
o It transcends the „compelled‟ communication when the government says
„give it to me‟!
Braswell v United States
487 US 99 (1988)
124
Facts  A federal grand jury issued a subpoena duces tecum to petitioner

Braswell as the president of two corporations, Worldwide
Machinery Inc and Worldwide Purchasing. While both corporations
had three directors, petitioner, his wife and his mother, only
petitioner had authority over the business affairs of the
corporations
 Petitioner moved to quash the subpoena, arguing that the act of
producing the documents has independent testimonial significance,
which would incriminate him individually, and that the Fifth
Amendment prohibits Government compulsion of that act.
Issue  Whether the custodian of corporate records may resist a subpoena
for such records on the ground that the act of production would
incriminate him in violation of the Fifth Amendment.
Ruling  He may not.
Holding  United States v Doe: Context of a claim by a sole proprietor. By
producing the records, respondent would admit that the records
existed, were in his possession and were authentic. On the facts,
had petitioner conducted his business as a sole proprietorship, Doe
would require that he be provided the opportunity to show that his
act of production would entail testimonial self-incrimination. But
petitioner has operated his business through the corporate form,
and we have long recognised that, for purposes of Fifth
Amendment, corporations and other collective entities are treated
differently from individuals. This doctrine – known as the
collective entity rule – has a lengthy and distinguished pedigree.
 Hale v Henkel: The corporation “is a creature of the State”, with
powers limited by the State. As such, the State may, in the exercise
of its right to oversee the corporation, demand the production of
corporate records
 Petitioner‟s argument: The collective entity decisions were concerned
with the contents of the documents subpoenaed, however, and not
with the act of production. In Fisher and Doe, the Court moved
away from the privacy-based collective entity rule, replacing it with
a compelled-testimony standard under which the contents of
business documents are never privileged but the act of producing
the documents may be. Under this new regime, the act of
production privilege is available without regard to the entity whose
records are being sought.
 Court rejected the argument. The agency rationale
undergirding the collective entity decisions, in which
custodians asserted that production of entity records would
incriminate them personally, survives
 The Court has consistently recognised that the custodian of
corporate or entity records holds those documents in a
representative rather than a personal capacity. Artificial
entities such as corporations may act only through their
agents, and a custodian‟s assumption of his representative
capacity leads to certain obligations, including the duty to
produce corporate records on proper demand by the
Government
125
CONSTRUCTIVE PRODUCTION IMMUNITY

 Because the custodian acts as a representative, the act is
deemed one of the corporation and not the individual.
Therefore, the Government concedes, as it must, that it may make
no evidentiary use of the “individual act” against the individual.
o But the Government has the right to use the corporation‟s
act of production against the custodian. The Govt may offer
testimony – for example, from the process server who
delivered the subpoena and from the individual who
received the records – establishing that the corporation
produced the records subpoenaed. The jury may then draw
form the corporation‟s act of production the conclusion that
the records in question are authentic corporate records,
which the corporation possessed, and which it produced in
response to the subpoena
Notes  Constructive Use Immunity: Agents‟ acts are still protected.
 What are we trying to prove: Existence, possession, authenticity,
responsiveness – and apparently after Hubbell, location of the
records requested
(D) What Constitutes a “Testimonial Communication”
Doe v United States
487 US 201 (1988)
Facts  John Doe appeared before the federal grand jury pursuant to a
subpoena that directed him to produce records of transactions in
accounts at three named banks in the Cayman Islands and
Bermuda. Doe produced some bank records and testified that no
additional records were in his possession or control
 When questioned about the existence or location of additional
records, Doe invoked the Fifth Amendment privilege against self-
incrimination. Banks were also served with subpoenas
commanding them to produce Doe‟s records of accounts. Banks
refused – citing bank-secrecy laws.
 At issue here is a proposed consent directive form – purporting to
consent to the disclosure of specified bank records. The form
purported to apply to any and all accounts over which Doe had a
right of withdrawal, without acknowledging the existence of any
such account.
 The execution of the consent directive at issue in this case obviously
would be compelled, and we may assume that its execution would
have an incriminating effect. The question on which this case turns
is whether the act of executing the form is a “testimonial
communication”
Issue  Whether a court order compelling a target of a grand jury
investigation to authorise foreign banks to disclose records of his
accounts, without identifying those documents or acknowledging
their existence, violates the target‟s Fifth Amendment privilege
against self-incrimination
Holding THE CONSENT DIRECTIVE IS NOT TESTIMONIAL IN NATURE:
 Court agreed with the Govt‟s view – that a compelled statement is
126
not testimonial for purposes of the privilege, unless it implicitly or

explicitly relates to a factual assertion or otherwise conveys
information to the Govt. It argues that, under this view, the consent
directive is not testimonial because neither the directive nor Doe‟s
execution of the form discloses or communicates factors or
information
o The act of production could constitute protected testimonial
communication because it might entail implicit statements
of fact: by producing documents in compliance with a
subpoena, the witness would admit that the papers existed,
were in his possession or control, and were authentic. Thus,
the Court made clear that the Fifth Amendment privilege
against self-incrimination applies to acts that imply
assertions of fact
o In order to be testimonial, an accused‟s communication
must itself, explicitly or implicitly, relate a factual
assertion or disclose information. Only then is a person
compelled to be a “witness” against himself
 Privilege is not implicated in these cases, because the suspect was
not required to “disclose any knowledge he might have”, or “to
speak his guilt”. It is the “extortion of information from the
accused”, the attempt to force him “to disclose the contents of his
own mind”, that implicates the Self-Incrimination Clause
o Furnishing a blood sample
o Providing a handwriting exemplar or voice exemplar
o Stand in a line-up
o Wear particular clothings
 On the facts:
o Consent form carefully drafted not to make reference to a
specific account, but only to speak in the hypothetical
o Although the executed form allows the Govt access to a
potential source of evidence, the directive itself does not
point the Govt towards hidden accounts or otherwise
provide information that will assist the prosecution in
uncovering evidence. The Govt must still locate that
evidence “by the independent labour of its officers”
o Doe makes no statement, explicit or implicit, regarding the
existence of a foreign bank account or his control over any
such account. His execution of the form does not admit the
authenticity of the records produced by the bank
o The form does “direct” the bank to disclose account
information and release any record that “may” exist and for
which Doe “may” be a relevant principal. But directing the
recipient of a communication to do something is not an
assertion of fact or a disclosure of information. In its
testimonial significance, the execution of such a directive is
analogous to the production of a handwriting sample or
voice exemplar: it is a nontestimonial act.
Dissent A DEFENDANT CANNOT BE COMPELLED TO USE HIS MIND
TO ASSIST THE PROSECUTION IN CONVICTING HIM OF A
127
CRIME
 The directive itself may not betray any knowledge petitioner may
have about the circumstances of the offences being investigated by
the grand jury, but it nevertheless purports to evidence a reasoned
decision by Doe to authorise action by others
(E) How “Incriminating” Must the Communication Be?
Hoffman v United States
341 US 479 (1951)
Facts  Samuel Hoffman was convicted in the United States District Court
for the Eastern District of Pennsylvania, of criminal contempt for
refusing to obey a federal court order requiring him to answer
certain questions asked in a grand jury investigation [regarding
suspects that cannot be found], and defendant appealed.
 NOTE: Is he a SUBJECT, WITNESS OR TARGET?
Holding  Privilege afforded by the Fifth Amendment not only extends to
answers that would in themselves support a conviction under a
federal criminal statute but likewise embraces those which would
furnish a link in the chain of evidence needed to prosecute the
claimant for a federal crime
 It is for the court to say whether his silence is justified and to
require him to answer if “it clearly appears to the court that he is
mistaken”
o File a motion for a camera in review by judges to make a finding of
the documents!
 All of the questions asked could easily have required answers that
would forge links in a chain of facts imperiling petitioner with
conviction of a federal crime. If answered affirmatively, it would
establish contacts between petitioner and Weisberg during the
crucial period when the latter was eluding the grand jury; and in
the context of these inquiries the last question might well have
called for disclosure that Weisberg was hiding away on petitioner‟s
premises or with his assistance. Petitioner could reasonably have
sensed the peril of prosecution for federal offences ranging from
obstruction to conspiracy.
o Prosecution can try to argue that the questions were innocuous
Note  This privilege is a form of use immunity – The federal government
does not believe in transactional immunity
(F) “Act of Production” Immunity
United States v Hubbell
530 US 27 (2000)
Facts  Respondent had promised in the plea agreement to provide the
Independent Counsel with “full, complete, accurate and truthful
information” about matters relating to the Whitewater investigation
(Conditional guilty – Still can be guilty but reserve the right to
appeal). While respondent was incarcerated, the Independent
Counsel served him with a subpoena duces tecum calling for the
production of 11 categories of documents before a grand jury sitting
in Little Rock, Arkansas. Respondent appeared before the grand
jury to invoke his Fifth Amendment Privilege against Self-
Incrimination
128
 Prosecution then produced an order, directing him to respond to

the subpoena and granting him immunity “to the extent allowed by
law”. Respondent then produced 13,120 pages of documents and
records and responded to a series of questions that established that
those were all of the documents in his custody or control that were
responsive to the commands in the subpoena, with the exception of
a few documents he claimed were shielded by the attorney-client
and attorney work-product privileges. The content gave the
Independent Counsel these information, and led to this prosecution
Issues  Whether the Fifth Amendment privilege protects a witness from
being compelled to disclose the existence of incriminating
documents that the Government is unable to describe with
reasonable particularity
 The “compelled testimony” that is relevant in this case is not to be
found in the contents of the documents produced in response to this
subpoena. It is, rather, the testimony inherent in the act of
producing those documents. The disagreement between the
parties focuses entirely on the significance of that testimonial
aspect.
Holding  The question is not whether the response to the subpoena may be
introduced into evidence at his criminal trial. That would surely be
a prohibited “use” of the immunized act of production. But the fact
that the Government intends no such use of the act of production
leaves open the separate question whether it has already made
“derivative use” of the testimonial aspect of that act in obtaining
the indictment against respondent and in preparing its case for trial.
It clearly has.
 Entirely apart from the contents of the 13,120 pages of materials that
respondent produced in this case, it is undeniable that providing a
catalog of existing documents fitting within any of the 11 broadly
worded subpoena categories could provide a prosecutor with a
“lead to incriminating evidence”, or “a link in the chain of
evidence needed to prosecute”
 Kastigar: Court held that it is possibly valid, if the Government can
prove that the evidence it used in obtaining the indictment and
proposed to use at trial was derived from legitimate sources
“wholly independent” of the testimonial aspect of respondent‟s
immunized conduct in assembling and producing the documents
described in the subpoena
Justice  Application of the act-of-production doctrine – provides that
Thomas, persons compelled to turn over incriminating papers or other
with physical evidence pursuant to a subpoena duces tecum or a
whom summons may invoke the Fifth Amendment privilege against self-
Justice incrimination as a bar to production only where the act of
Scalia producing the evidence would contain “testimonial features”
joins,  Disagreed with the scope of the doctrine with the Self-Incrimination
concurring Clause – a substantial body of evidence suggests that the Fifth
Amendment privilege protects against the compelled production not just of
incriminating testimony, but of any incriminating evidence
Notes
129
 If the act of production is not sufficiently “testimonial” because the facts of

existence, possession, authenticity or responsiveness are “foregone conclusions”
due to the government‟s knowledge of those facts, there is no valid claim of
privilege
 “Reasonable particularity” standard to test the “foregone conclusion” doctrine: To
establish the existence of the documents sought and Doe‟s possession of them
with „reasonable particularity‟ before the existence and possession of the
documents could be considered a foregone conclusion and production therefore
would not be testimonial
130
WEEK 13
ATTORNEY-CLIENT PRIVILEGE AND WORK
PRODUCT
 Attorney-Client Privilege
 Work product Doctrine
 Waiver
o Implied
o Partial
o Selective
o Compelled
 Crime/Fraud Exception
 Government Action + AC/WP

Notes
 Attorney-client privilege applies only if:
o The asserted holder of the privilege is or sought to become a member;
o The person to whom the communication was made
 Is a member of the bar of a court, or his subordinate and
 In connection with this communication is acting as a lawyer
o The communication relates to a fact of which the attorney was informed
 By his client
 Without the presence of strangers
 For the purpose of securing primarily either
 An opinion on law or
 Legal services or
 Assistance in some legal proceeding, and not
 For the purpose of committing a crime or tort
o The privilege has been
 Claimed and
 Not waived by the client.
o There is no attorney-client privilege when a prosecutor talks to an
individual being investigated for a crime
o As long as he is a potential client, that is enough! He does not actually
need to have paid you for the attorney-client privilege to be exerted
 Note, there may be overlap with the work product doctrine – the latter is distinct
from and broader than the attorney-client privilege:
o Not restricted to “communications” between client and counsel
o Encompassing material “obtained or prepared by an adversary‟s counsel”
in the course of his legal work
o Provide that the work was done “with an eye towards litigation”
o Not automatically waived by any disclosure to a third party
o Only the client may assert the attorney-client privilege while both the
attorney and the client may invoke the work product doctrine
o If prosecutors can access their materials, it will be a potential roadmap for
liabilities! We want to protect their good works
A. QUALIFYING FOR PROTECTION
131
Upjohn Co. v United States

449 US 383 (1981)
Facts  Independent auditors found that one of Upjohn Co (a manufacturer
and seller of pharmaceuticals)‟s foreign subsidiaries made
payments to or for the benefit of foreign govt officials in order to
secure govt business
 Accountants so informed petitioner, Gerard Thomas, Upjohn‟s VP,
Secretary and General Counsel. Thomas then decided that the
company would conduct an internal investigation of what were
termed “questionable payments”
 Attorneys prepared a letter containing questionnaire which was
sent to “All Foreign General and Area Managers” over the
Chairman‟s signature. Managers were instructed to treat it as highly
confidential, and not to discuss it with anyone – responses were
sent to merely Thomas
o What should have been done? Have the President to write the
memo, and that memo is going to go to all officers and employees.
We are going to have an internal investigation regarding the
ACME line of explosives, as we have been accused of xxx. General
Counsel Thomas is going to contact you, you are only to speak to
him, your communications with him are to be full and truthful,
and maintain confidentiality. The purpose of this investigation is
to anticipate potential lawsuits that may arise
o Upjohn Warning: Apply Upjohn warning when conducting
interviews with people. His client is the company but not the
individual employee, and the company has the ability to waive
any privilege between the company‟s witnesses and its employees
 Company then voluntarily submitted a preliminary report to SEC
and Internal Revenue Service disclosing questionable payments.
IRS then issued a summon for the records of the written
questionnaires sent to the managers of its affiliates, and
memorandums/notes of the interviews conducted in the US and
abroad with officers and employees of the Upjohn Company and its
subsidiaries
 District Court found waiver of the attorney-client privilege, thus
privilege does not apply and applied the “control group” test for A-
C; found that work product doctrine does not apply. COA rejected
this argument, but found that the privilege does apply – arguing
that the claim for a broader application of the privilege would
encourage upper-echelon management to ignore unpleasant facts
and create too broad a “zone of silence”
Holding Who is the CLIENT?
 COA found that the client was “the senior management, guiding
and integrating the several operations, can be said to possess an
identity analogous to the corporation as a whole”; applied the
control group test: If the employee making the communication, of
whatever rank he may be, is in a position to control or even to take a
substantial part in a decision about any action which the corporation may
take upon the advice of the attorney, then, in effect, he is (or personifies)
the corporation when he makes his disclosure to the lawyer and the
privilege would apply
132
 Supreme Court REJECTED this argument. Such a view overlooks

the fact that the privilege exists to protect not only the giving of
professional advice to those who can act on it but also the giving
of information to the lawyer to enable him to give sound and
informed advice.
o In a corporate context, officers and agents responsible for
directing the company‟s actions in response to legal advice
will be the ones who possess the information needed by the
corporation‟s lawyers! Information, not necessarily available
from upper-echelon management, was needed to supply a basis for
legal advice concerning compliance with securities and tax law,
foreign laws, currency regulations, duties to shareholders &
potential litigation
o Control group test frustrates the purpose of the privilege by
discouraging the communication of relevant information by
employees of the client to attorneys seeking to render legal
advice to the client corporation. Makes it more difficult to
convey full & frank legal advice to the employees who will
put into effect the client corporation‟s policy
o A lawyer would want the control group to be large – and be
able to protect as many people and gather as much
information as possible
Work Product Doctrine

 Summons had gone further for Thomas‟s notes and memoranda of
interview, which had gone beyond recording responses to his
questions
 Hickman v Taylor: Court noted that it is essential that a lawyer works
with a certain degree of privacy and reasoned that if discovery of
the material sought were permitted, much of what is now put down
in writing would remain unwritten.
o BUT, where relevant and nonprivileged facts remain hidden
in an attorney‟s file and were production of those facts is
essential to the preparation of one‟s case, production may be
justified where the witnesses are no longer available or can
be reached only with difficulty
 Forcing an attorney to disclose notes and memoranda of witnesses‟
oral statements is particularly disfavoured because it tends to
reveal the attorney‟s mental processes
 Rule 26 accords such protection – permitting disclosure of docs and
tangible things constituting attorney work product upon a showing
of substantial need and inability to obtain the equivalent without
undue hardship
 The Magistrate had applied the “substantial need” and “without
undue hardship” standard articulated in Rule 26(b)(3). The notes
and memoranda sought are work product based on oral statements.
If they reveal communications, they are protected by the attorney-
client privilege. To the extent that they do not reveal
communications, they reveal the attorneys‟ mental processes in
evaluating the communications.
Notes  What happens if shareholders of a corporation sue the
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corporation and seek attorney-client privileged materials? Who is

the client?
o Garner v Wolfinbarger: Protection of those interests as well as
those of the corporation and of the public require that the
availability of the privilege be subject to the right of the
stockholders to show cause why it should not be invoked in
a particular instance
 What showing, if any, will be sufficient to force disclosure of
“opinion” work product – that is, “the mental impressions,
conclusions, opinions or legal theories…of [a party or its
representative] concerning the litigation”?
o CIRCUITS SPLIT.
 Invocation of the attorney-client privilege and work product
doctrine must be founded on the provision of legal services
o In In Re Grand Jury Subpoenas Date Mar 9 2001, the court held
that lawyers representing Marc Rich in connection with his
presidential pardon application could not rely on the work
product doctrine or attorney-client privilege to withhold
testimony or documentary evidence. Once Rich and Green
decided to seek presidential pardons, the lawyers had
ceased providing legal services in an adversarial context
 When in doubt, have an in camera review by the judge – to
determine whether a document is indeed protected
 To be protected by the attorney-client privilege and work product
doctrine, internal corporate investigations of the type employed in
Upjohn must be pursued for the purpose of securing legal advice
(attorney-client) or done in anticipation of litigation (work product)
o Materials obtained in the ordinary course of business or for
other non-litigation purposes do not qualify for work
product protection
o Prospect of litigation must be REAL AND SPECIFIC,
RATHER THAN SPECULATIVE
o Problem arises when legal and business considerations mix
and become inextricably intertwined!
o Does it extend to counsel‟s consultations with expert third parties,
such as accountants or investment bankers, in the course of an
internal corporate investigation of past wrongdoing or as part of
counsels evaluation of proposed business activities or
transactions? Yes, if it is necessary to make an informed
advice
 Kovel’s Privilege: What is vital to the privilege is that the
communication be made in confidence for the purpose of
obtaining legal advice from the lawyer. If what is sought is not
legal advice, but only accounting service or if the advice sought is
the accountant‟s, rather than the lawyer‟s, no privilege exists
o A communication between an attorney and a 3P does not
become shielded by the attorney-client privilege solely
because the communication proves impt to the attorney‟s
ability to represent the client. It is only protected if counsel
can demonstrate that 3P expert assistance was needed to
permit counsel to communicate effectively wither client
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o What happens if attorney seeks outsider‟s help? Have they

waived the privilege?
 NO. That would frustrate the intent of the privilege
 By interpreting the data, you are in a way preparing
for litigation – this is cobbling! Seeking outsider‟s
help for purposes of internal investigation.
 But if it were for a business decision, there would not
be protection.
 Work product doctrine may protect the product of communications
with 3P even when assertions of attorney-client privilege fail
o Adlman II (Second Circuit) court rejected the standard
adopted by some courts that requires that litigation had to
be “the primary motivating purpose behind the creation of
the doc”. Under this standard, the document generally must
be prepared to AID in litigation to warrant work product
protection
o Adlman II adopted instead what appears to be the majority
rule, which asks whether the documents were prepared
“BECAUSE OF” existing or expected litigation. Thus, it
does not lose protection under this formulation because it is
created in order to assist with a biz decision…but it does not
necessarily protect documents that are prepared in the
ordinary coruse of biz or that would have been created in
essentially similar form irrespective of the litigation
B. LOSING THE PRIVILEGE: WAIVER
 NCAA Investigation – NCAA assumes that the coaches have violated the NCAA
rules, and corporate counsel tells the university presidents to kick the students
out and fire the coaches. Corporate counsel has become an arm of the
prosecution! Why would you offer the defendant diversion (i.e. it‟s okay, let‟s not indict
the firm, or just fine) and turn over all the documents – to just waive the attorney-client
privilege and give the internal memo?
o This is predictable – US attorneys under DOJ policies would go to
corporations and say that we are going to compel you to waive the A-C
and Work Product Doctrines, or else we are going to prosecute you to the
full extent of the law. This is a downside for the companies – but
corporate interests are different from personal interests
 Cases concerning asserted “inadvertent” waivers, in which “unintended” or
mistaken disclosures were made of privileged communications or work product
and the privilege-holders sought either to reclaim the privileged materials or to
restrict the scope of any implied waiver;
o An opposing counsel that gave you something that was in confidence
 Case concerning asserted “partial” waivers, in which the privilege-holders
contended that they waived only a portion of privileged communications or
work product by intentionally using or disclosing the portion and that the
balance of the communication or work product should be protected; and
 Cases concerning asserted “selective” waivers, in which the privilege-holders
asserted that they could intentionally disclose the privileged communications or
work product to some persons but not to others
(I) Who May Waive?
 Solvent Companies: Corporation‟s management and is Commodity Futures
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normally exercised by its officers and directors Trading Commission v

 New Management: Authority to assert and waive the Weintraub
corporation‟s attorney-client privilege passes as well. 471 US 343 (1985) –
Displaced managers may not assert the privilege over the US Supreme Court
wishes of current managers, even as to statements that
the former might have made to counsel concerning
matters within the scope of their corporate duties
What Constitutes Implied Waiver? In re Grand Jury
 Doe court: use a “fairness” approach to determine Proceedings (United
whether the disclosure of privileged communications by States v Doe)
a corporate actor should be imputed to the corporations
as an implied waiver
o Information used in post-petition hearing would
be an implied waiver
 A party cannot partially disclose privileged
communications or affirmatively rely on privileged
communications to support its claim or defence and then
shield the underlying communications from scrutiny by
the opposing party. The quintessential example is D who
asserts an advice-of-counsel defence and is thereby
deemed to have waived his privilege with respect to the
advice that he received
o In Bilzerian, D who intended to testify as to his
“good faith” reliance on legal advice could not
prevent the govt from cross-examining him on
advice received from counsel!
o US v White: Mere denial of MR through an
averment that lawyers have looked into a matter
does not imply an intent to reveal the substance of
the lawyers‟ advice
 Scope of waiver has been limited where “the disclosure
occurred early in the proceedings, was made to opposing
counsel rather than to the court, and was not
demonstrably prejudicial to the other party”
 Clearly, when the corporation as an entity makes the
strategic decision to disclose some privileged
information, the courts may find implied waiver, as they
do in cases involving individuals
 In Doe‟s case, the court considered the following:
o A corporation that has not deliberately disclosed
any privileged material to the govt or to other
parties, but whose officer, in contravention of the
corporation‟s instructions, has arguably waived
the privilege in his grand jury testimony
o Corporate agent was subpoenaed individually
o Second Circuit thought it significant that the
corporate officer “was compelled to appear and to
testify before the grand jury. Because the
corporation does not enjoy the protection of the
Fifth Amendment, Witness could not assert the
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Fifth Amendment on its behalf”

(II) Federal Rule of Evidence 502
 Rule 502 was introduced to respond to the widespread complaint that litigation
costs necessary to protect against waivers “have been come prohibitive due to the
concern that any disclosure (however innocent or minimal) will operate as a
subject matter waiver of all protected communication or information”
 The rule governs only credit waivers by disclosure. Other common-law waiver
doctrines may result in a finding of waiver even where there is no disclosure of
privileged information o work product
 Federalism Issues:
o Subdivision (c)
 Difficult problems arise when:
 A disclosure of a communication or information protected
by the attorney-client privilege or as work product is made
in a state proceeding
 The communication or information is offered in a
subsequent federal proceeding on the ground that the
disclosure waived the privilege or protection
 The state and federal laws are in conflict on the question of
waiver
 Proper solution: Choose the law that is more protective of
privilege and work product – can be either state or federal!
o Subdivision (f)
 The protection against waiver provided by Rule 502 must be
applicable when protected communications or information
disclosed in federal proceedings are subsequently offered in state
proceedings
(III) Inadvertent Waiver
 When waiver occurs as a result of inadvertent document disclosure, courts have
limited the scope of that waiver based on the circumstances involved and overall
fairness
 Should the prosecutor be able to keep the other attorney‟s confidential memo?
o It is a challenge between your duty as zealous advocacy on behalf of your client
to the best interest, and your duty to recognise when something is a mistake. Do
not take advantage of what was obvious an inadvertent waiver – it is a tough call
 Rule 502 Subsection (b) – The rule opts for a middle ground: inadvertent
disclosure of protected communications or information in connection with a
federal proceeding or to a federal office or agency does not constitute a waiver if
the holder took reasonable steps to prevent disclosure and also promptly took
reasonable steps to rectify the error
(IV) Partial Waiver
 Corporations may wish to disclose some or all of the results of internal
investigation, and at times the underlying documentation, to selected govt
officials in the hope that such disclosure will secure for the corporation a
declination of official action or at least sentencing consideration. Corporations
may also feel pressured to share the results of their internal investigation with 3P
who, for business reasons, want to see them
o Redact the memo
o FRE 106: Completeness rule – to fully understand the concept, you cannot just
pick a part of it, I have a right to ALL of it
137
o Ultimate rule: what is fair

 In considering whether to disclose part or all of an internal investigation,
corporations must consider the possibility of a waiver of otherwise applicable
privileges. In particular, they must consider:
o Whether disclosing selected parts of a report or its underlying
documentation waives the privilege as to the entirety of the report and
documentation or whether courts will accept an assertion of “partial”
waiver; and
o Whether courts will accept a “selective” waiver agreement that disclosure
of the report to a govt agency, prosecutor or grand jury does not waive
the privilege or work product doctrine when other parties (e.g. other govt
entities or private plaintiffs) seek to secure the same materials
 Generally, the issue in “partial” waiver cases is not whether the protections
attaching to the material actually disclosed have been waived – that much is clear
 The important question in these cases is the scope of any additional waiver, that
is, whether the privilege-holder may argue for a finding of a “partial” waiver of
only the material disclosed
 Rule 502: A subject matter waiver (of either privilege or work product) is
reserved for those unusual situations in which fairness requires a further
disclosure of related, protected information, in order to prevent a selective and
misleading presentation of evidence to the disadvantages of the adversary.
Thus, subject matter waiver is limited to situations in which a party
intentionally puts protected information into the litigation in a selective,
misleading and unfair manner
(V) Selective Waiver
 Issue: Whether the waiver found may be limited to the party to whom disclosure
was made or whether the waiver as to one person waives the protection of the
attorney-client privilege or work product doctrine as to all other persons
o ATTORNEY-CLIENT PRIVILEGE
 Courts may employ a variety of analyses – but the result is often
the same: a refusal to permit a “selective waiver”
 All the Circuits (except the 8th) have rejected a “selective” waiver
theory. They have ruled that where otherwise privileged
materials are shown to 3P – either in an attempt to head off
regulatory or criminal action against the corporation, in the
conduct of the corporation‟s business, or in the conduct of
litigation – the protection of the attorney-client privilege are
waived AS TO ANY OTHER PERSON”
o WORK PRODUCT DOCTRINE

 Exposure of protected materials to 3P does not automatically
waive the doctrine‟s protection
 ADVERSE AND FRIENDLY: A party who discloses documents
protected by the work-product doctrine may continue to assert the
doctrine‟s protection only when the disclosure furthers the
doctrine‟s underlying goals. Generally, this inquiry turns on
whether the disclosure was made to one deemed an “adversary”,
in which case work product protection is lost, or whether it is
turned over to one with a “common interest” under circumstances
that include a legitimate expectation of continued confidentiality,
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in which case the work product protection will be sustained

 Disclosure of work product to one adversary is sufficient to waive
the doctrine as to all adversaries
(VI) Court Order and Confidentiality Agreements
 Can I turn everything order and agree not to waive A-C/W-P privileges prior to
even a lawsuit?
o Pre-production protective order that reserves the right to A-C/W-P
would promote greater efficiency, rather than having to create a log of
whatever content there is
 Under Rule 502(d), a federal court may order that disclosure of privileged or
protected information “in connection with” a federal proceeding does not result
in waiver. But subdivision (d) does not allow the federal court to enter an order
determining the waiver effects of a separate disclosure of the same information in
other proceedings, state or federal
o This subdivision does not provide a basis for a court to enable parties to
agree to a selective waiver of the privilege, such as to a federal agency
conducting an investigation, while preserving the privilege as against
other parties seeking the information
o This subdivision is designed to enable a court to enter an order, whether
on motion of one or more parties or on its own motion, that will allow the
parties to conduct and respond to discovery expeditiously, without the
need for exhaustive pre-production privilege reviews, while still
preserving each party‟s right to assert the privilege to preclude use in
litigation of information disclosed in such discovery
 Subdivision (e) codifies the well-established proposition that parties can enter an
agreement to limit the effect of waiver by disclosure between or among them
o This subdivision simply makes clear that while parties to a case may
agree among themselves regarding the effect of disclosure between each
other in a federal proceeding, it is not binding on others unless it is
incorporated into a court order
 A state court finding no waiver in connection with a disclosure made in a state
court proceeding is enforceable under existing law in subsequent federal
proceedings
(VII) Individuals’ Attempts to Claim the Corporate Privilege
 Recognising that entities can act only through agents, United States v
courts have held that any privilege that attaches to International
communications on corporate matters between corporate brotherhood of
employees and corporate counsel belongs to the Teamsters
corporation, not to the individual employee, and that 119 F.3d 210 (2d Cir.
employees generally may not prevent a corporation from 1997)
waiving the attorney-client privilege arising from such
communications
To ensure that the individual is able to assert a personal The Matter of Bevill
privilege: 805 F.2d at 123
 The employee must show they approached counsel for
the purpose of seeking legal advice
 They must demonstrate that when they approached
counsel they made it clear that they were seeking legal
advice in their individual rather than in their
representative capacities
139
 They must demonstrate that the counsel saw fit to

communicate with them in their individual capacities,
knowing that a possible conflict could arise
 They must prove that their conversations with counsel
were confidential
 They must show that the substance of their conversations
with counsel did not concern matters within the company
or the general affairs of the company
(VIII) Upjohn Warning
Widespread belief among white-collar practitioners that corporate counsel, before
interviewing corporate employees, must give what is commonly referred to as an
“Upjohn Warning”:
1. Counsel represents the company – not the employee – and is interviewing the
employee to gather information in order to provide legal advice to the company
2. The interview is confidential and covered by the attorney-client privilege
3. The privilege belongs to and is controlled by the company
4. Because the company – not the employee – owns the privilege, the company, but
not the employee, may elect in future to waive any privilege and provide
information derived form the interview to 3P, including prosecutors or regulators
Given to preclude an employee from claiming to have believed that the attorney
represented the employee during the interview, so as to claim control of the attorney-
client privilege and prevent the company from disclosing the employee‟s statements
to others.
C. DOJ‟S “COMPELLED-VOLUNTARY” WAIVER POLICY
 Holder/Thompson policy: Allows prosecutors to weigh in assessing the adequacy
of a corporation‟s cooperation via the completeness of its disclosure including, if
necessary, a waiver of the attorney-client and work product protections, both
with respect to its internal investigation and with respect to communications
between specific officers, directors, employees and counsel.
o On its face – it does not “require” privilege waivers as a condition for cooperation
credit. The defence bar asserts, however, that prosecutors have used the
language of the standard to request waivers in virtually every corporate
investigation. They object that a policy that requires, in essence, regular
waivers will thwart the rationales underlying the attorney-client privilege and
work product doctrine, resulting in fewer internal investigations into corporate
wrong-doing, less able investigations in cases where some inquiry is
undertaken, and a likelihood that corporate employees will be less willing to
share what they know with investigators
 Philip Memo:
o Privilege waivers are not (and assertedly have never been) a prerequisite
for cooperation credit or for declination of criminal charges
o A corporation may freely waive its privileges if it wishes
o BUT that waiver may not be considered when a prosecutor decides
whether to give a corporation credit for tis cooperation in charging
o Rather, the critical determinant is whether the entity has provided
prosecutors with the facts necessary for them to investigate the matter
fairly and responsibly
 Sullivan‟s Last Straw Article – collective entities, such as corporations, cannot
claim the Fifth Amendment right against self-incrimination. The attorney-client
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privilege and the work product doctrine are critical, not because they encourage
self-correction or candid communication between corporate client and counsel,
but rather because they serve as a substitute for the Fifth Amendment in criminal
investigation
 Corporations regularly threaten to fire employees if they refuse to cooperate with
the govt investigation – that is, if they assert their Fifth Amendment Rights – thus
threatening the corporation‟s chances of a declination from the govt
D. LOSING THE PRIVILEGE: CRIME/FRAUD EXCEPTION
In Re Sealed Case
107 F.3d 46 (D.C.Cir 1997)
Facts  Company refused to produce two subpoenaed documents, for
which it was held in contempt. One of the documents is a
memorandum from a Company VP to the P, with a copy to the
Company‟s general counsel. District Court examined both
documents below in camera, but did not decide whether they were
covered by the privilege or the work product doctrine
 The memorandum reflects a conversation between the P and the
Company‟s general counsel about campaign finance laws. The
Company withheld it on the basis of the attorney-client privilege.
o Background: Company‟s political action committee had contributed
the maximum amount permitted by law to a former candidate for
federal office who was seeking to retire his campaign debt. VP
wrote his memorandum, had discussion with general counsel.
o Later in the same month, VP called two people who did biz with
the coy, asked them to contribute to former candidate. They did.
After several weeks had passed, VP authorised checks to be drawn
from his dept‟s budget to reimburse these individuals not only for
the amount of their contributions, but also to make up for the
additional taxes they would incur from reporting the
reimbursement as income. VP‟s solicitation may have been
permissible, but according to govt, the use of the corporate funds
was illegal
o In grand jury, VP invoked attorney-client privilege on behalf of
the Company. District court ruled that the crime-fraud exception
applied and ordered him to testify about the late Aug 1994
meeting
 The other document is a memorandum written by the general
counsel, apparently at the request of outside counsel. The Company
with held it on the basis of the attorney-client privilege
o A year later, the internal counsel wrote a memo at the request of
outside counsel regarding the incident
Holding  Attorney-Client privilege is subject to crime-fraud
exception. Two conditions must be met:
o Client must have made or received the otherwise
privileged communication with the intent to further
an unlawful or fraudulent act.
o Client must have carried out the crime or fraud
 The privilege is the client‟s, and it is the client‟s fraudulent or
criminal intent that matters. A 3P‟s bad intent cannot remove the
protection of the privilege
 The person asserting the privilege must prove the privilege
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Memorandum reflecting a conversation between P and the

Company‟s General Counsel:
 Burden on Govt to prove its case:
o Level of proof: Is it a “prima facie” (accepted in the Second Circuit),
preponderance of the evidence, clear and convincing evidence, or
something else? The answer lies in In re Sealed Case, “the
government satisfies its burden of proof if it offers evidence that
if believed by the trier of fact (jury) would establish the
elements of an ongoing or imminent crime or fraud”. If the jury
believes, their verdict would be supported.
o Critical consideration: the govt‟s presentation had to be aimed at the
INTENT AND ACTION OF THE CLIENT. It was not enough for
the govt to show that the VP committed a crime after he wrote his
memo and attended the late Aug meeting with Company counsel.
The holder of the privilege is the CLIENT and, in this case, the
client was the COMPANY, NOT THE VP. Unless the govt made
some showing that the Company intended to further and did
commit a crime, the govt could not invoke the crime-fraud
exception to the privilege.
Late August Meeting

 Govt evidence reveals that participants discussed campaign finance
laws. That is not enough! One cannot reasonably infer from the
meeting that the Company was consulting its general counsel with
the intention of committing a crime, or even that the VP was then
doing so
 True enough, within weeks of the meeting about campaign finance
law, the VP violated the law. But the govt had to demonstrate that
the Company sought the legal advice with the intent to further its
illegal conduct. Showing temporal proximity between the
communication and a crime is not enough
 No way to find out if the VP was on a frolic of its own, against the
advice of Company counsel, when he reimbursed the donors with
corporate funds
 There are circumstances under which corporations are responsible
for the crimes of their agents. But neither in this court nor in this
district court did the govt offer anything in terms of evidence or law
to support the idea that the Company bore criminal responsibility
for the act of this officer. The govt thus did not sustain its burden
Memorandum by the Company‟s general counsel, written to the file

and relating to matters that occurred one year after the VP‟s illegal
action:
 This document is covered by work product immunity rather than
the attorney-client privilege. The protection for attorney work
product is broader than the attorney-client privilege, but less
absolute
 Work product immunity covers not only confidential
communications between the attorney and client. It also attaches to
other materials prepared by attorneys (and their agents) in
anticipation of litigation. Like the attorney-client privilege, work
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product immunity promotes the rendering of effective legal services

 Crime-fraud exception calls for a somewhat different inquiry here:
Focus is not on the client‟s intent regarding a particular
communication, but on the client‟s intent in consulting the lawyer
or in using the materials the lawyer prepared. The question is: Did
the client consult the lawyer or use the material for the purpose of
committing a crime or fraud?
 As in apparent from the nature of the inquiry, the crime-fraud
exception for work product immunity cannot apply if the attorney
prepared the material after his client‟s wrongdoing ended
Note  Split opinion: Regarding the first prong of the crime-fraud exception,
the Second Circuit rejected the need for it to actually take place,
stating that “it need only have been the objective of the client‟s
communication. The client need not have succeeded in his criminal
or fraudulent scheme for the exception to apply. If a fraudulent
plan were ineffective, the client‟s communications would not
thereby be protected from disclosure”
 Split opinion: Regarding the second prong, courts vary in how they
express the degree of relatedness required between the criminal or
fraudulent intent of the client and the communications sought to be
revealed
o Can be “reasonably relate”, “close relationship”, “potential
relationship”
o Why require a demonstrated nexus between the intended crime
and the communications at issue? “Seal of secrecy” between
lawyer and client does not extend to communications from
the lawyer to the client made by the lawyer for the purpose
of giving advice for the communication of a fraud or crime.
The seal is broken when the lawyer‟s communication is
meant to facilitate future wrongdoing by the client. Where
the client commits a fraud or crime for reasons completely
independent of legitimate advice committed by the lawyer,
the seal is not broken, for the advice is, logicians explain, non
causa pro causa
E. PRIVILEGES OF GOVERNMENTAL ACTORS
In Re Grand Jury Investigation
399 F.3d 527 (2d Cir. 2005)
Facts  Federal grand jury subpoenaed the testimony of Anne George,
former chief legal counsel to the Office of the Governor of
Connecticut. US Attorney Office was investigating whether
Governor Rowland and members of his staff had received gifts in
return for public favours, including the favourable negotiation and
awarding of state contracts. Anne George declined to submit herself
to voluntary interview, as she believed that the info was protected
by attorney-client privilege
 Eventually, she testified before the grand jury that all conversations
were in confidence and conducted for the purpose of providing
legal advice. Governor Office was of the view that they were
protected by the A-C privilege, which it declined to waive
 The district court sought to distinguish between govt attorney-
143
client privilege from private attorney-client privilege, explaining

that “unlike a private lawyer‟s duty of loyalty to an individual
client, a government lawyer‟s duty does not lie solely with his or
her client agency”, but also with the public
Holding  PUBLIC INTEREST: We cannot accept the Govt‟s unequivocal
assumption as to where the public interest lies. To be sure, it is in
the public interest for the grand jury to collect all the relevant
evidence it can. However, it is also in the public interest for high
state officials to receive and act upon the best possible legal advice.
 It is crucial that govt officials, who are expected to uphold and
execute the law and who may face criminal prosecution for failing
to do so, be encouraged to seek out and receive fully informed legal
advice. Upholding the privilege furthers a culture in which
consultation with govt lawyers is accepted as a normal, desirable
and even indispensable part of conducting public business
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WEEK 13
REPRESENTATION ISSUES
 Representation
 6th Amendment Right to Counsel
o Counsel of choice
o Conflict free
o Ineffective assistance
 Thompson Memo / Stein attorney fees
 Joint Defence Agreement

Notes
 What Gideon tells us is that a person who can go to jail based on a charge has the
right to have an attorney.
o Sixth Amendment also tells us that he has a right to retain a counsel of his
choice.
o The government cannot prevent that unless they have a very good reason.
o At trial, that counsel must not be ineffective. The attorney must do or
must not do what a reasonable attorney would do or would not do!
Something must be different as a result of that act or inaction
 At the inception of the investigation, one lawyer‟s or firm‟s representation of the
corporation AND the individuals involved (usually termed “multiple” or “joint”
representation) may have many advantages:
o Counsel can maintain greater control over the matter
o Track the investigation more efficiently and inexpensively
o Present a common, united defence to possible prosecution
 This type of multiple representation may – as the investigation progresses or
after indictment and at trial – raise a number of ethical, legal and practical
difficulties
 Subject or targets of a white-collar investigation often hire separate counsel, but
form what is known as a JOINT DEFENCE.
o Pursuant to a joint defence agreement, counsel for each client may work
together and pool information without fear that such sharing will expose
their communications or work product to examination by 3P, such as the
grand jury or litigants in collateral civil cases.
 Strickland:
1. Performance (reasonable)
2. Prejudice (prejudice is presumed if counsel has an actual conflict of
interests)
ETHICAL RULES
 Ethics: Counsel has a duty of loyalty. He has a duty to be a zealous advocate. If
there appears to be a conflict of interest, it undermines the integrity of justice. We
should avoid such appearances.
 No constitutional duty placed on judges to ensure that there are no conflict cases
and inquire about it
o Federal Court R 44 – if a judge sees a lawyer with two defendants, he will
ask him
o Situation typically arises when a prosecutor makes a motion to disqualify
the defence counsel. I-don‟t-want-to-travel-this-road-twice! If I let this court
145
goes forward when I see a conflict of interests, it is very likely that at some time,
when this case is going to come back to me and I have to do it anything
o Prosecutors are in a better position to assess whether there is a conflict of
interests:
 They have a broader view of the case and have access to various
materials and evidence.
 A particularly good lawyer, if I can get him off the case that would
be great!
 Most important provisions – ABA Model Rules of Professional Conduct Rules
1.7, 1.13(e) and 1.8:
o 1.7 – A lawyer shall not represent a client if the representation of the client
will be directly adverse to another client – The potential for conflict of
interest in representing multiple Ds in a criminal case is so grave that ordinarily
a lawyer should decline to represent more than one co-defendant
o 1.13(e) – a lawyer representing an organisation may also represent any of
its directors, officers, employees, members, shareholders or other
constituents, subject to the provisions of Rule 1.7
o 1.8(g) – A lawyer who represents two or more clients shall not participate
in a criminal case an aggregated agreement as to guilty or nolo contendere
pleas, unless each client consents after consultation, including disclosure
of the existence and nature of all the claims or pleas involved and of the
participation of each person in the settlement
MULTIPLE OR JOINT REPRESENTATION
(I) Constitutional Issues
 Holloway v Arkansas: Appointing one lawyer to represent at trial three
codefendants was unconstitutional in a case where counsel had informed the trial
court of a conflict among his clients but the court failed to take adequate steps to
ascertain whether the risk of conflict was likely or remote. Recognises that
effective assistance of counsel guaranteed by the Sixth Amendment includes a
right to conflict-free counsel
Wheat v United States
486 US 153 (1988)
Facts  Mark Wheat, with numerous codefendants, was charged with
participating in a complex drug distribution scheme. Also charged
in the conspiracy were Juvenal Gomez-Barajas and Javier Bravo,
who were represented by attorney, Eugene Iredale
 Gomez-Barajas was tried first and acquitted on drug charges
overlapping with those lodged against Wheat. To avoid a second
trial on other charges, however, Gomez-Barajas offered to plead to
certain counts. As of the commencement of petitioner‟s trial, District
Court had not accepted Gomez-Barajas‟s plea. Bravo, a lesser
player, pleaded guilty to one count of transporting marijuana
 Govt objected to Wheat‟s request to allow Iredale to represent him.
The govt felt that it would create a serious conflict of interest arising
from:
o If the District Court rejected Gomez-Barajas‟s proposed plea
and Gomez-Barajas then elected to proceed to trial,
petitioner was in the govt view‟s likely to be called as a
witness for the govt AND
o The govt had asked that Bravo be made available as a
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witness to testify against petitioner in exchange for

sentencing considerations.
Issue  Extent to which a criminal defendant‟s right under the Sixth
Amendment to his chosen attorney is qualified by the fact that the
attorney has represented other defendants charged in the same
criminal conspiracy. Can he waive his right to a conflict-free
counsel in favour of a counsel of choice?
Holding  Petitioner insists that the provision of waivers by all affected
defendants cures any problems created by the multiple
representation. But no such flat rule can be deduced from the Sixth
Amendment presumption in favour of counsel of choice. Federal
courts have an independent interest in ensuring that criminal trials
are conducted within the ethical standards of the profession and
that legal proceedings appear fair to all who observe them.
 If a district court agrees to the multiple representation, and the
advocacy of counsel is thereafter impaired as a result, D may well
claim that he did not receive effective assistance. A waiver by D
does not necessarily solve the problem!
 District court must be allowed substantial latitude in refusing
waivers of conflicts of interest not only in those rare cases where an
actual conflict may be demonstrated before trial, but in the more
common cases where a potential for conflict exists which may or
may not burgeon into an actual conflict as the trial progresses
 Iredale and Bravo: The Govt intended to call Bravo as a witness for
the prosecution at petitioner‟s trial. The Govt might readily have
tied certain deliveries of marijuana by Bravo to petitioner,
necessitating vigorous cross-examination of Bravo by petitioner‟s
counsel. Ireland, because of his prior representation of Bravo,
would have been unable ethically to provide the cross-examination
 Ireland and Gomez-Barajas: District Court had not yet accepted the
plea agreement. If the agreement were rejected, petitioner‟s
probable testimony at the resulting trial of Gomez-Barajas would
create an ethical dilemma for Ireland form which one or the other of
his clients would likely suffer
Dissenting  The potential for a conflict of interest in this case did not overcome
by Justice the petitioner‟s right to choose his own counsel
Marshall  The propriety of the District Court‟s order thus depends on whether
and Justice the Govt showed that the particular facts and circumstances of the
Brennan multiple representation proposed in this case were such as to
overcome the presumption in favour of petitioner‟s choice of
counsel. I believe it is clear that the Govt failed to make this
showing. Neither Eugene Iredale‟s representation of Juvenal
Gomez-Barajas nor Iredale‟s representation of Javier Bravo posed
any threat of causing a conflict of interest
 Gomez-Barajas: He was not scheduled to appear as a witness at
petitioner‟s trial; thus, Iredale‟s conduct of that trial would not
require him to question his former client. The only possible conflict
this Court can divine from Iredale‟s representation of both
petitioner and Gomez-Barajas rests on the premise that the trial
court would reject the negotiated plea agreement and that Gomez-
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Barajas then would decide to go to trial…but the Court offered no

reason why the plea agreement would be rejected! And even if
Gomez-Barajas had gone to trial, petitioner probably would not
have testified – as there was no indication that petitioner had any
involvement or information about crimes for which Gomez-Barajas
might yet have stood trial
 Bravo: Contrary to the Court‟s inference, Bravo could not have
testified about petitioner‟s involvement in the alleged marijuana
distribution scheme. As all parties were aware at the time, Bravo
did not know and could not identify petitioner; indeed, prior to the
commencement of legal proceedings, the two men never had heard
of each other. Even if it necessitated vigorous cross-examination,
petitioner‟s motion requested that Iredale either be substituted for
petitioner‟s current counsel or be added to petitioner‟s defence
team. Had the District Court allowed the addition of Iredale and
then ordered that he take no part in the cross-examination of Bravo,
any possibility of conflict of interests would have been removed
Notes  This was a pretext to get rid of the bad lawyer! Look at the facts!
 Ineffective Assistance of Counsel Claim; D must meet two-part
burden:
o Demonstrate counsel‟s ineffective (i.e. that counsel‟s
representation fell below an objective standard of
reasonableness under prevailing professional norms)
o D must establish prejudice, defined to mean a reasonable
probability that, but for counsel‟s unprofessional errors, the
result of the proceeding would have been difficult
 But in Strickland v Washington, the court noted that the
usual showing is not required when the ineffective
assistance of counsel claim is grounded in an actual
conflict of interest
 Where counsel was burdened by an actual conflict of
interest, a defendant, to prevail on an ineffective
assistance of counsel claim, need only show that the
conflict “adversely affected his lawyer‟s performance”,
not that “but for counsel‟s unprofessional errors, the
result of the proceeding would have been different”
(II) Multiple Representation Decisions in the Corporate Context
 If those summoned in the investigation work for an entity, the entity may retain
counsel to represent itself and its employees and officers. If the investigation
comes to naught this works out well; if the investigation culminates in indictment
of some of those jointly represented, hindsight often – perhaps almost invariably
– indicates that separate representation from the outset would have been
advisable
 How does an entity and those associated with it avoid the heartbreak of
hindsight? Three principal factors must be carefully weighed: ethical rules,
tactical considerations and prosecutorial responses
 Ethical Rules:
o At the outset there may be no apparent differing interests between
company and employees, their alignments can easily become adverse as
the investigation progresses. In that case, by representing employees
whose interests have become adverse to the corporation – i.e. an actual
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conflict of interest – the company counsel risks disqualification of its

outside counsel in the event of an indictment and trial, if not earlier. The
result is that the company may find itself without knowledgeable
counsel just when it needs him or her the most and incurs the
additional cost of hiring and educating new counsel
o If the company‟s inside counsel had done his risk management properly
and decided that joint representation is okay, he should make certain that
both company and other employees fully understand the risks of multiple
representation and obtain their consent in writing. The minimum
elements of the written waiver include:
 An explanation of the existence and focus of the grand jury
investigation
 An expression that neither party is aware of any wrongdoing by
the employee AND
 A warning that if additional facts come to light suggesting that the
employee was involved in wrongdoing, the employee will have to
retain separate counsel and will not object to continued
representation by joint counsel of the company
 Prosecutorial Response:
o Prosecutors do not like multiple representations at the grand jury stage
any better than at trial and typically threaten disqualification when
presented with such representations. In their view, multiple
representation raises obstruction-of-justice concerns and reduces the
likelihood of obtaining cooperation of the company employees
o Prosecutors raise potential conflict of interest by suggesting that, absent
multiple representation, the employee would be under consideration for
immunity. Once such a suggestion is made, however, the company
counsel will have to reconsider whether the employee should have his
own counsel even if the employee continues to insist that he has no
information damaging to the company
 Tactical Consideration When Considering Multiple Representation:
o Coordinated strategy in pooling information to the benefit of all
witnesses, which likely will be more complete (and certainly more
efficient) than exchanges of information among multiple defence counsel
pursuant to joint defence agreements
o Maintenance of morale of lower-level company employees, whoa re less
likely to believe that they are being abandoned by their company
o At the senior level, a clear signal to the prosecutors that the company does
not believe that its senior executives have engaged in wrongdoing
o Cost savings
PRE-INDICTMENT SIXTH AMENDMENT PROTECTION?
UNITED STATES V STEIN
 Few cases have addressed the scope of any right to counsel in pre-charge
proceedings. A couple of courts have recognised a grand jury witness‟s “a right
to consult with an attorney outside the grand jury room and has a general due
process right to legal assistance”. And some courts have been willing to entertain
govt disqualification motions based upon a lawyer‟s potential conflict of interest
in representing a number of persons, including investigatory targets, at the grand
jury stage, but those motions are not generally successful in absence of some
evidence of a strong potential or an actual conflict of interest.
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United States v Stein

541 F.3d 130 (2d Cir. 2008)
Facts  Judge Kaplan (US District Court for the Southern District of NY)
found that, absent pressure from the govt, KPMG would have paid
D‟s legal fees and expenses without regard to cost. Based on this
and other findings of fact, Judge Kaplan ruled that the govt
deprived D of their right to counsel under the Sixth Amendment by
causing KPMG to impose conditions on the advancement of legal
fees to Ds, to cap the fees and ultimately to end payment
o Capped at $40,000 per employee;
o Conditioned on the employee‟s cooperation with the govt;
o Terminated when an employee was indicted
 Judge Kaplan ruled that the govt deprived D of their right to
substantive due process under the Fifth Amendment [to fairness in
the criminal process, including the ability to get and deploy in defence all
“resources lawfully available to him or her, free of knowing or reckless
govt interference” and that the govt‟s reasons for infringing that right in
this case could not withstand strict scrutiny]. This court ultimately held
that the govt unjustifiably interfered with D‟s relationship with
counsel and their ability to mount a defence, in violation of the
Sixth Amendment, and that the govt did not cure the violation.
Holding Private action v ambit of the Sixth Amendment:
 Actions of a private entity are attributable to the State if “there is a

sufficiently close nexus between the State and the challenged
action of the entity so that the action of the latter may be fairly
treated as that of the State itself”
 Such responsibility is normally found when the State “has
exercised coercive power or has provided such significant
encouragement, either overt or covert, that the choice must in law
be deemed to be that of the State”
 A nexus of state action exists between a private entity and the
state when the state exercises coercive power, is entwined in the
management or control of the private actor, or provides the
private actor with SIGNIFICANT ENCOURAGEMENT, either
overt or covert, or when the private actor operates as a WILLFUL
PARTICIPANT IN JOINT ACTIVITY with the State or its agents,
is controlled by an agency of the State, has been delegated a
public function by the state, or is ENTWINED WITH GOVT
POLICY”
 KPMG “operated as a willful participant in joint activity” with the
govt, and because the USAO “significantly encouraged” KPMG to
withhold legal fees from Ds upon indictment
 Since D counsel‟s objective in a criminal investigation will virtually
always be to protect the client, KPMG‟s risk was that fees for
defence counsel would be advanced to someone the govt
considered culpable. So the only safe course was to allow the govt
to become (in effect) paymaster
Pre-Indictment:
 The Supreme Court has “pegged commencement [of the Sixth
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Amendment right] of a prosecution to the initiation of adversary

judicial criminal proceedings – whether by way of formal charge,
preliminary hearing, indictment, information or arraignment”. The
rule is when the govt has committed itself to prosecute
 When the govt acts prior to indictment so as to impair the
suspect‟s relationship with counsel post-indictment, the pre-
indictment actions ripen into cognizable Sixth Amendment
deprivations upon indictment
 If, as alleged, the govt coerced the employer into halting fee
advances on Ds‟ behalf and the govt did so for the purpose of
undermining Ds‟ relationship with counsel once the indictment
issued, the govt violated Ds‟ right to expend their own resources
towards counsel once the right attached
What the Sixth Amendment right guarantees

 The Sixth Amendment imposes on the State an affirmative
obligation to respect and preserve the accused‟s choice to seek the
assistance of counsel
 The govt violates the Sixth Amendment when it intrudes on the
attorney-client relationship, preventing defence counsel from
“participating fully and fairly in the adversary fact-finding
process”
 Govt argues: D has no Sixth Amendment right to spend another
person‟s money for services rendered by an attorney, even if those
funds are the only way that D will be able to retain the attorney of
his own choice
 Court rejects this: It is easy to distinguish the case of an employee
who reasonably expects to receive attorney‟s fees as a benefit or
prerequisite of employment, whether or not the expectation arises
from a legal entitlement. As has been found here as a matter of fact,
these Ds would have received fees from KPMG but for the govt‟s
interference. Although “there is no Sixth Amendment right for D to
obtain counsel using tainted funds, D still possesses a qualified
Sixth Amendment right to use WHOLLY LEGITIMATE FUNDS
to hire the attorney of his choice”
Notes  The govt are using the Thompson Memo to coerce KPMG to deprive
people of their choice of counsel and effective assistance of counsel
 Can the govt consistent with the Sixth Amendment right see that
the defendants had money, and that they could use that money to
hire their monies, but we have this strategy that is going to forfeit
the money? We are afraid, that at the end of the case, the money
would be good. As a collateral effect of that action, the defendants
had no money to hire attorneys. Prosecutors would then claim that
it is a good tactic, as we are fighting crimes.
JOINT DEFENCES
 Subjects/targets/Ds may each hire individual counsel and form a joint defence
 Pursuant to a joint defence, subjects/targets/Ds may share information which:
o May permit each to better evaluate his position and to craft an individual
defence;
o May allow the group more effectively to track the direction and status of
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the govt‟s investigative efforts;

o May make possible the formulation of a common, coherent defence
theory and strategy;
o Facilitate the division and efficient allocation of investigative or trial
preparation responsibilities;
o Govt and other potential adversaries may not access the share materials,
which are treated by the courts as maintaining their attorney-client
privilege or work product status despite being shared among joint
defence participants;
o Avoid conflict of interest and other problems
 Join defence arrangements have two significant problems:
o Allow its members to shape testimony and perhaps even coordinate
perjury
o Effectively keep innocent or less culpable subordinates in line with a
„stonewall‟ defence
 Most often govt challenges are lodged when one member of the joint defence
turns government witness, creating a real possibility that counsel for the
remaining members of the joint defence will be required to cross-examine the
cooperating witness. In such circumstances, the govt argues that “trial counsel
who is possession of privileged joint defence communications from prospective
witness must be disqualified”
 If, as many courts appear to believe, the joint defence privilege “is an extension of
the attorney-client privilege” pursuant to which “an implied attorney-client
relationship” develops between all the participants and all the lawyers in the
joint defence, the govt‟s efforts may yield fruit. Conceptualised in this way, the
same considerations that would potentially disqualify counsel in multiple
representation situation may apply in the joint defence context as well
Joint Defence Doctrine

 Not necessary for actual litigation to be pending for the doctrine to apply
 Protects both communications between attorneys for joint defence participants
and communications between a participant and attorneys for other participants
 Although the doctrine protects communications “made in the course of an
ongoing common enterprise and intended to further the enterprise”, the
participants‟ interests must only be “common”, not “identical”
 A written agreement is not legally necessary to assert the privilege and, at
common law, the privilege could be waived to permit disclosure of joint defence
communications only with the unanimous consent of all the parties
 Difference between joint defence and attorney-client privilege: A-C privilege founded
on the principle that protecting the confidentiality of discussions between a client
and an attorney is essential to insuring free and candid disclosure of information.
By contrast, the J-D doctrine is not intended to promote the free flow of
information between client and attorney, but to further the efficient
representation of a client by allowing similarly situated persons – typically
represented by different lawyers or proceeding pro se – to exchange information
without running the risk that the information will be revealed to the parties of
adverse interest
 Note that potential conflict of interest may arise – in United States v Anderson, it
was held that “an attorney who acquires information from a potential witness
pursuant to a joint defence agreement is in no different position than would be an
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attorney who acquires such information from a prior or jointly represented

client”
 Implication of the Anderson court: A J-D agreement creates an A-C relationship
between every attorney and every participant in the joint defence. An attorney‟s
obligation to zealously defend the attorney‟s original client by impeaching a
cooperating witness conflicts with the lawyer‟s Canon 4 obligations to preserve
the confidences of a former client and to avoid taking an adverse position to a
former client in a substantially related matter
 Given several ethical issues involved, a prudent practitioner embarking on a joint
defence should create a written joint defence agreement and insure that all
participants and their counsel signed
 The Committee had believed that it is not unethical or inappropriate for
participants expressly to agree in advance that:
o No new attorney-client relationships are created by the J-D
o No conflict of interest exists merely because an attorney may not be able
to use certain info obtained in the JD in the future
o A participant will not seek disqualification of any attorney in the J-D
based on that attorney‟s cross-examination or attempted impeachment of
the participants
 The Committee also does not believe it is unethical for lawyers to enter into a J-D
agreement in which participants agree in advance that confidential
communications can be used to cross-examine or impeach a withdrawn
participant
In Re Grand Jury Subpoena et al.
274 F.3d 563 (1st Cir. 2001)
Facts  Under the plea agreement‟s terms, Oldco pled guilty to charges of
conspiracy to defraud the Internal Revenue Service and agreed to
cooperate with the govt‟s ongoing investigation of certain present
and former officers, employees and customers.
 As part of this cooperation, Oldco expressly waived applicable
attorney-client and work product privileges. Soon after, a federal
grand jury issued a subpoena duces tecum to Oldco‟s parent
corporation, Newparent Inc, demanding the production of
documents relating to its “rebate program” – a program under
which, according to the govt, Oldco would charge certain complicit
customers more than the going rate for its products, but would then
refund the difference by payments made directly to principals of
these customers
 During the earlier period prior to Oldco‟s acquisition, Oldco was
owned by a number of members of a single family; one family
member (Richard) served as its board member & CEO, and another
(Morris) served on the board and as executive VP for sales and
marketing. Nameless Lawyer served as its principal outside
counsel. These three individuals filed a motion to quash the
subpoena
 Lawyer claimed to have represented Oldco, Roe and Moe in various
individual matters. He claims to have conducted this simultaneous
representation of corporate and individual clients under a
longstanding J-D agreement. According to Lawyer, this agreement,
although never committed to writing, provided that communications
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among the three clients were jointly privileged and could not be
released without unanimous consent. Despite the absence of any
reference to this agreement in the corporate records – there was no
resolution or other vote of the board of directors authorising Oldco
to participate in such an agreement – the intervenors assert that
Roe, as CEO, had the authority to commit the corporation to it
 Lawyer further claimed that he represented Oldco and its officers in
connection with the grand jury investigation from and after Oct 97.
He says that the oral joint defence agreement applies to the
multiple-party representation and that he told the govt that he
represented Oldco and “all of its executives”
Ruling  An individual privilege may exist in these circumstances only to the
extent that communications made in a corporate officer‟s personal
capacity are separable from those made in his corporate capacity.
Because the intervenors do not allege that any of the subpoenaed
documents are solely privileged to them but rest instead on the
theory that all the documents are jointly privileged, their claim, as a
matter of law, does not survive the subsidiary‟s waiver.
 The joint defence agreement does not demand a different result:
privileges are created, and their contours defined, by operation of
law, and private agreements cannot enlarge their scope. Moreover,
this particular JD agreement is unenforceable
Holding Privilege Claims
 Attorney-client privilege, in the context of a grand jury, applies only
to the extent necessary to achieve its underlying goal of ensuring
effective representation through open communication between
lawyer and client
 Roe & Moe can mount a claim of attorney-client privilege only if,
and to the extent that, Lawyer represented them individually. If the
only attorney-client privilege at stake is that of their corporate
employer, then Oldco‟s waiver defeats the claim of privilege. After
all, the law is settled that a corporation‟s attorney-client privilege
may be waived by current management
 To determine when the presumption burst (of when an employee
seeks a counsel in his personal capacity), most courts adopt the test
explicated in In re Bevill, Bresler & Schulman Asset Mgmt. Corp. The
test enumerates five benchmarks that corporate employees seeking
to assert a personal claim of A-C privilege must meet:
1. They must show that they approach counsel for the purpose of
seeking legal advice
2. They must demonstrate that when they approached counsel
they made it CLEAR that they were seeking legal advice in their
individual rather than in their representative capacities
3. They must demonstrate that the counsel saw fit to communicate
with them in their individual capacities, knowing that a possible
conflict could arise
4. They must prove that their conversations with counsel were
confidential
5. They must show that the substance of their conversations with
counsel did not concern matters within the company or the
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general affairs of the company

o Govt contended that all of Roe‟s and Moe‟s communications
were within the orbit of Oldco‟s general affairs, and therefore
could not be individually privileged. In govt‟s view, Bevill
precludes a finding of individual representation with respect
to matters – such as the grand jury investigation into the
rebate program – that involve the corporation. Court rejected
this argument
o The fifth prong, properly interpreted, only precludes an
officer from asserting an individual attorney client
privilege when the communication concerns the
corporation‟s rights and responsibilities. However, if the
communication between a corporate officer and
corporate counsel specifically focuses upon the
individual officer‟s personal rights and liabilities, then
the fifth prong can be satisfied even though the general
subject matter of the conversation pertains to matters
within the general affairs of the company
o Theoretically, Lawyer could have represented Roe &
Moe individually with respect to the grand jury
investigation. Still, this would only extend to those
communications which involved Roe‟s and Moe‟s
individual rights and responsibilities arising out of their
actions as officers of the corporation.
 Corporation‟s Right to Waive the A-C privilege
o Major difficulty: Individuals‟ allegedly protected
communications with Lawyer do not appear to be
distinguishable from discussions between the same parties
in their capacities as corporate officers and corporate
counsel, respectively, anent matters of corporate concern
o Joint communications with a single attorney are privileged
with respect to the outside world because clients must be
entitled to the full benefit of joint representation undiluted
by fear of waiving the attorney-client privilege.
Nevertheless, the privilege does not apply in subsequent
litigation between the joint clients, in that sort of situation,
one client‟s interest in the privilege is counterbalanced by
the other‟s interest in being able to waive it
o A corporation may unilaterally waive the attorney-client
privilege with respect to any communications made by a
corporate officer in his corporate capacity, notwithstanding
the existence of an individual attorney-client relationship
between him and the corporation‟s counsel
o In this regard, we think it significant that the fifth prong of
the Bevill test is stated in the negative: communications may
be individually privileged only when they “do not concern
matters within the company or the general affairs of the
company”, rather than when they do concern an
individual‟s rights
o Here, neither Roe or Moe have even attempted to make any
showing of segregability
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 Work Product Privilege

o At issue here is at least two categories of files contemplated
by the subpoena: Lawyer‟s interviews of employees during
Oldco‟s internal investigation into the rebate program, and
his notes and mental impressions of the investigation
o Roe, Moe, Lawyer may invoke the work product privilege as
to work done exclusively for Roe and Moe as individuals.
But because they effectively conceded that the work was
performed, at least in part, for the corporation, Oldco‟s
waiver of all privileges negates their potential claim of
privilege
o Joint defence agreement: Although a valid defence agreement
may protect work product, one party to such an agreement
may not preclude disclosure of work product by another
party won whose behalf the work originally was performed.
Nor can the parties, by agreement, broaden the scope of the
privilege that the law allows. Such an agreement would
contravene public policy (and hence would be
unenforceable). In any case, on the facts, it would be invalid.
Lawyer claimed that they entered into an oral joint defence
agreement in 1990, at which time there was no particular
litigation or investigation in prospect!
Fed.R.Civ.P 45(d)(2)
 The rule had consistently held that a party resisting disclosure must
produce a document index or privilege log. Although most of the
reported cases arise in the context of a claim of A-C privilege, the
“specify or waive” rule applies equally in the context of claims of
work product privilege
 Intervenors suggested that they were hampered in their ability to
present such list by the district court‟s refusal to hold an evidentiary
hearing. This suggestion does not withstand scrutiny. After all, the
intervenors were not without knowledge of the communications to
which the subpoena pertained. Lawyer originally had possession of
them and turned them over to Smith & Jones only when Newparent
decided to change counsel. Despite this knowledge, the intervenors
made no effort to prepare a privilege log. That omissions is fatal
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WEEK 14
PLEA BARGAINING AND COOPERATION
AGREEMENTS
 x

Notes
Various forms of pleas available:
 Alford plea:
o Where evidence of actual guilt provided a strong factual basis for the plea, court
did not err in accepting representing D‟s guilty plea despite D‟s claim of
innocence
 Plea of nolo contendere:
o A judgment of conviction but cannot be used against D as an admission in
subsequent criminal or civil cases.
o Only entered with the consent of the court after the court has considered the
views of the parties and the public interest
 Conditional plea of guilty or nolo contendere:
o Normally a D entered a guilty plea waives all nonjurisdictional objections to the
prosecution. Thus, D who loses potentially dispositive pre-trial motions – such as
motions to suppress – may go to trial solely to preserve these pre-trial issues for
appellate review.
o To avoid drain on prosecutorial and judicial resources, the federal rules permit D,
with the consent of the govt and the court to enter a conditional plea, reserving
the right to appeal the adverse pre-trial ruling and, if successful on appeal, to
withdraw the guilty or nolo-contendere plea
 Fed R. Crim. P. II: Parties may bargain in a number of currencies in addition to
cooperation, including particular charges, sentences or sentencing ranges, or the
application of guidelines policies, factors, or provisions
PLEA BARGAINING: CONSTITUTIONAL STANDARDS
 “Wired” or “package deal” plea: Several confederates plead together and the
govt gives them a “volume discount – a better deal than each could have gotten
separately”
o Problem: Additional risk of coercion. Pose greater danger of inducing a
false guilty plea by skewing the assessment of the risks a D must consider
 CIRCUIT SPLIT: regarding whether the govt must first establish D‟s breach of
an agreement by a preponderance of the evidence before repudiating its own
promises under a plea agreement, or whether D seeking enforcement of a plea
agreement bears the burden of first establishing by a preponderance of evidence
that he had fulfilled his obligations under the agreement
 CONTROVERSIES: Which clause to enforce in the plea agreement:
o Ricketts: Court enforced against D a provision that was found “equivalent
to an agreement waiving a double jeopardy clause”
o Brady waiver: “discovery may not have been completed in this case, and that
there may be additional discovery to which he would have access if he elected to
proceed to trial. D agrees to waive his right to receive additional discovery which
may include, among other things, evidence tending to impeach the credibility of
potential witnesses”
o Sentencing appeal waivers: The government appears to provide some
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sentencing concessions more frequently to defendants who sign waivers than to

defendants who do not, including agreement to „C‟ pleas (binding sentencing
terms), downward departures, safety-valve credits, and a variety of stipulation
 Some 11 circuits accept that waivers of appeal are generally permissible
and enforceable
 Others have held that it will „undermine the error correcting function of
the courts of appeals in sentencing; it will create a sentencing regime
where court of appeals will never have the opportunity to review an
illegal or unconstitutional sentence, or a sentence that has no basis in fact‟
 Some circuits have indicated that certain challenges to sentencing decisions other
than ineffective assistance claims will be entertained despite an otherwise valid
waiver, and the list of permissible challenges seem to be getting longer:
o Sentence was imposed in excess of max penalty provided by law
o Sentence was based on a constitutionally impermissible factor such as race
o Where the sentence violates a material term of the plea agreement
o A sentence was predicated on subsequently overruled circuit law
o Some circuits have opted for a more general “miscarriage of justice standard”.
Among the factors to be considered – “clarity of error, gravity, character (whether
it concerns a fact issue, sentencing guideline or stat max), impact of error on D,
impact of correcting the error on govt & extent to which D acquiesced
 Some plea agreements define the “cooperation” required by the agreement as
including D‟s agreement not only affirmatively to aid the govt in its efforts to
prosecute others, but also to refrain from certain activity and waive certain rights
(e.g. attorney-client privilege)
Benefits Detriments
 System would be overwhelmed with  Coerces D into waiving fundamental
trials and all would suffer as the justice rights or permits sentencing courts to
system grounds to a halt penalise those who exercise their rights
 Even if the practice were overtly banned, by going to trial
it would through necessity be resurrected  Prosecutors may offer D such stark
in clanedestine dealing choices between a lenient plea offer and a
 Provides parties flexibility not otherwise threat of harsh charges if he plea offer is
available were the case to go to trial, and rejected that risk adverse but innocent Ds
obviates putting victims and others will be coerced into a guilty plea
through the burdens of litigation  Short circuits formal fact-finding and
adjudication mechanisms; in some cases,
it may be that the negotiated result does
not comport with the actual facts that
would be found had trial-type
procedural safeguards been employed
 Undermines the goals of criminal
punishment because it permits sentences
that are unduly lenient given the conduct
at issue
 Bargained-for and presumptively lenient
sentences undermine public confidence
in the criminal justice system
 To the extent that some Ds are receiving
charges or sentencing “breaks” while
others are not, plea bargaining increases
irrational disparities and discrimination
Brady v United States
397 US 742 (1970)
Facts  Upon learning that his codefendant would plead guilty and testify
158
against him, petitioner suddenly changed from “not guilty” to

“guilty”.
Issue  Brady now claims that it was not voluntarily given because the
charge operated to coerce him (if he did not plea guilty, he would
face death penalty instead of life imprisonment)
Holding  Waiver of constitutional rights not only must be voluntary but must
be knowing, intelligent acts done with sufficient awareness of the
relevant circumstances and likely consequences. On neither score
was Brady‟s plea of guilty invalid.
 We decline to hold that a guilty plea is compelled and invalid under
the Fifth Amendment whenever motivated by D‟s desire to accept
the certainty or probability of a lesser penalty rather than face a
wider range of possibilities extending from acquittal to conviction
and a higher penalty authorised by law for the crime charged.
 Standard as to voluntariness of guilty plea: A plea of guilty entered
by one fully aware of the direct consequences, including the actual
value of any commitments made to him by the court, prosecutor, or
his own counsel, must stand unless induced by threats (or promises
to discontinue improper harassment), misrepresentation (including
unfulfilled or unfulfillable promises), or perhaps by promises that
are by their nature improper as having no proper relationship to the
prosecutor‟s business (e.g. bribes) [none of these were found here]
Borkdenkircher v Hayes
434 US 357 (1978)
Facts  Hayes & his retained counsel met with the prosecutor who offered
to recommend a sentence of 5 yrs if he would plead guilty. If he
doesn‟t, prosecutor would seek an indictment under the Kentucky
Habitual Criminal Act, which would subject Hayes to a mandatory
sentence of life imprisonment by reason of his two prior felony
convictions. He chose not to plead guilty, prosecutor chose to
obtain such a conviction
 Kentucky COA rejected the constitutional objection; COA for Sixth
Circuit reversed on the ground that prosecutor‟s conduct violated
the principles of Blackledge v Perry, which “protects D from the
vindictive exercise of prosecutor‟s discretion”
Holding  To punish a person because he has done what the law plainly
allows him to do is a due process violation of the most basic sort,
and for an agent of the State to pursue a course of action whose
objective is to penalize a person‟s reliance on his legal rights is
“patently unconstitutional”. But in the “give-and-take” of plea
bargaining, there is no such element of punishment or retaliation so
long as the accused is free to accept or reject the prosecution‟s offer.
 Plea bargaining flows from “the mutuality of advantage” to
defendants and prosecutors
 Constitutional limits alluded to in Bordenkircher:
o Due process prohibitions against prosecutorial
vindictiveness
o Equal protection safeguards against selectivity in
enforcement on the basis of “an unjustified standard such as
race, religion or other arbitrary classification”
159
 Test enunciated in United States v Armstrong: In order to

dispel the presumption that a prosecutor had not violated
equal protection, a criminal D must present „clear
evidence to the contrary‟
 C must demonstrate that the federal prosecutorial policy
“had a discriminatory effect and that it was motivated by
discriminatory purpose”. To establish a discriminatory
effect in a race case, C must show that similarly situated
individual of a different race was not prosecuted
Ricketts v Adamson
483 US I (1987)
Facts  Both parties bargained for and received substantial benefits. State
obtained respondent‟s guilty plea and his promise to testify against
his accomplices in exchange for an incarceration time of 20 yrs 2
mths. The terms of the agreement: in the event of respondent‟s breach
occasioned by a refusal to testify, the parties would be returned to the
status quo ante, in which case respondent would have no double jeopardy
defence to waive.
 He did testify against the others. But upon reversal of those
convictions and remand, D refused to testify again on the ground
that his obligation had terminated. Adamson was then charged
with first-degree murder and sentenced to death
Holding  Approach taken by COA would render the agreement meaningless:
first-degree murder charges could not be reinstated against
respondent if he categorically refused to testify after sentencing
even if the agreement specifically provided that he would so testify,
because he never waived his double jeopardy protection
 Respondent knew that if he breached the agreement he could be
retried, and it is incredible to believe that he did not anticipate that
the extent of his obligation would be decided by a court.
FED. R. CRIM. P. II AND GUIDELINE BARGAINING
(I) Fed. R. Crim. P. II
 Should D elect to plead guilty, the district court will hold a plea hearing (Rule II
proceeding)
 Details the requisites for a valid plea. Judge will normally enquire of D:
o Whether circumstances exist that may undermine the “knowing” character of the
plea (e.g. drugs or intoxication)
o Inform D of, and determine that D understands, the constitutional rights he is
giving up by pleading (e.g. right to jury trial, to be represented by counsel at trial,
to confront and cross-examine witnesses, to call witnesses in his own behalf and
the like)
o Make sure that D understands the charge to which he is pleading, including
max/min sentences and other potentially applicable penalties or obligations
o Entitled to rely on counsel‟s representation that he or she has advised D of the
nature of the charges and the elements of the crime to which he is pleading guilty
 If D does not object and seeks a reversal of his conviction on the ground that the
district court committed plain error under Rule II in connection with advice or
warnings omitted, D must show a reasonable probability that he would not have
pleaded guilty but for the error
 During the course of a plea allocution under Rule II(b)(3), the court “must
determine that there is a factual basis for the plea”. This may entail D personally
acknowledging guilt. Court may choose to put D under oath, and must warn D
160
of the govt‟s right to use against D any statement he makes in a prosecution for
perjury or false statements
 If govt agrees to give D some consideration in return for a plea, this should be
reflected in a written plea agreement. Rule II provides the basic parameters:
o II(c)(I)(A): A “charge” bargain
o II(c)(I)(B): A “recommended sentence” bargain
o II(c)(I)(C): A “specific sentence” bargain
o If a judge rejects the plea agreement for the charge bargain or specific
sentence bargain, the defendant can elect to withdraw his plea under Fed.
R. Crim. P. II(c)(5)(B). But D may not withdraw a plea entered pursuant to a
recommended sentence bargain even if the court ultimately rejects the sentencing
recommendation or request; accordingly, the court must advise D of this fact at
the get-go
 A judge may be concerned that the bargain constrains her sentencing discretion
in ways she suspect she will not like once the Probation Department has done an
investigation and come up with the Pre-Sentence Report. Then, the judge may
accept the guilty plea but defer acceptance until after the PSR
 US v Hyde: Where D has entered into guilty plea and the court has decided to
reserve its decision on whether to accept the plea agreement pending preparation
of the PSR, D may not change his mind and as of right withdraw his plea at any
time prior to the judge‟s decision on the plea agreement
o Federal Rule of Criminal Procedure 32(e): D may only withdraw his guilty plea
pending judicial acceptance of the plea bargain “if D shows any fair and
just reason”
(II) Guidelines Bargaining
 Booker may introduce some degree of uncertainty into sentencing:
o Parties can no longer be confident that the judge will follow the
Guidelines and accordingly will be bargaining in the face of greater
uncertainty regarding the sentencing result that would follow after any
trial
o Judges‟ sentencing choices will no longer be as transparent as they were
under the Guidelines. That is, it may be difficult to know just what factors
the judge will consider important – and what quantum of evidence the
judge will rely upon in finding those factors – in imposing sentencing in a
case
o Gall v US; Kimbrough v US: “reasonableness” standard of appellate review
truly meant “abuse of discretion”, and that the Court contemplates
substantial appellate deference to district courts‟ exercises of sentencing
discretion
 These circumstances may dampen plea rates over time as Ds decide that there is
insufficient certainty regarding whether they will in fact receive bargained-for
sentencing dispensations. One could also argue, that judges‟ ability to be more
flexible in sentencing may benefit Ds who plead guilty
(A) Acceptance of Responsibility
 Guidelines provide an incentive to plead guilty, but state that the incentive
should be the same for all Ds: the approximately 35% reduction in sentence that
can be achieved through the combination of a two-level credit for “acceptance of
responsibility” and the imposition of a sentence at the lowest portion of the
resultant Guidelines range
 Guilty plea rate appeared to be roughly constant from the pre-Guidelines
161
practice through the mandatory Guidelines era and now to the post-Booker era. If
one accepts that prosecutors were manipulating the mandatory Guidelines to
provide additional discount in only a minority of cases, this statistic indicates
that the mandatory Guidelines‟ plea discount was normally sufficient to allow
prosecutors to secure a satisfactory conviction rate, allocate resources rationally
given local needs and pursue independent goals (i.e. induce cooperation)
 Through substitution of a uniform concession for bargaining, the mandatory
Guidelines removed a potential source of disuniformity but apparently not at an
undue cost, in the usual case, to executive prerogatives
(B) Charge Bargaining: Fed. R. Crim. P. II(C)(I)(A)
 Where the choice of charge could affect sentence under the mandatory
Guidelines, prosecutors sometimes sought to bargain away counts – either
forgoing them (pre-indictment) or agreeing to drop them (post-indictment) – in
return for a plea or an agreement to cooperate
 If the Commission had embraced a pure real-offence system, presumably charge-
bargaining would have been fairly useless. However, the mandatory Guidelines
continued to contain “charge” elements and thus charge bargaining was still
possible
 Mandatory min/max manipulation: Because the statutory max/min trump the
Guidelines, a prosecutor who, given the evidence, could bring a count containing
a mandatory min sentence could bargain away that count if D was willing to
plead to a lesser count that did not carry a mandatory min
 Manipulation of charging with respect to nonaggregable offences: Nonaggregable
offences are not subject to the Guidelines‟ relevant conduct provisions. Thus, a
prosecutor could induce pleas by agreeing to forgo or drop certain
nonaggregable counts
 Manipulation where Guidelines results differ depending upon the statute charged: In
certain cases, one statutory charge could yield a large sentence than another
under the mandatory Guidelines (e.g. a D who was charged with money
laundering often was, under the mandatory Guidelines, subject to greater
offences than generated the money laundered. Thus, a prosecutor could bargain
away a money laundering count in return, for example, for pleas to the wire
fraud that gave rise to the tainted cash). Booker has made statutory maxima the
most important constraint on sentences; accordingly, Booker makes prosecutorial
charging choices – and charge bargaining – exceedingly important
 Disposition of a case by negotiated plea:
o DOJ requires prosecutors to charge the most serious, readily provable
offence or offences consistent with D‟s conduct
o DOJ still defines the “most serious” offence as “generally that which
yields the highest range under the sentencing guidelines”
o In considering whether to agree to a disposition of a case by negotiated
plea, the prosecutor must assess not only sentencing-related factors, but
also such criteria as D‟s willingness to cooperate against others, D‟s
criminal record, the nature and seriousness of the offence, D‟s remorse or
contrition, the desirability of a prompt and certain disposition of the case,
the likelihood of obtaining a conviction at trial, the probable effect on
witnesses, the public interest in having a trial as opposed to a plea, the
expense of trial and appeal, the need to avoid delay in the disposition of
other pending cases, and the effect on the victim‟s right to restitution
o Limited exceptions to the “basic policy that charges are not to be
162
bargained away or dropped, unless the prosecutor has a good faith doubt
as to the govt‟s ability to readily prove a charge for legal or evidentiary
reasons”
 Dropping the charges will not affect the sentencing calculus; or
 Upon the approval of the US attorney or a designated supervisor
where extraordinary considerations exist – e.g. the US Attorney‟s
Office is particularly over-burdened, the case would be time-
consuming to try, and proceeding to trial would significantly
reduce the total number of cases disposed of by the office
(C) Guidelines “Fact” or “Factor” Bargaining
 In those cases in which the “real” circumstances of the offence drive sentence,
prosecutors in some cases sought to bargain away aggravating “real” facts or
Guideline factors in order to induce a plea. This is commonly known as
Guidelines “fact” or “factor” bargaining and is still reflected in Fed R Crim P
II(c)(I)(B) and (C)
o Under the mandatory Guidelines, prosecutors might agree that a certain
amount of the loss potentially chargeable should not be used (“fact”
bargaining) or they might stipulate that an otherwise appropriate Chapter
Three adjustment should not be assessed in a given case (“factor”
bargaining)
 Note that prosecutors are constrained in “fact” or “factor” bargaining – a
prosecutor who misrepresents the true scope of D‟s relevant conduct or the
factual or legal applicability of other aggravating factors in order to affect the
applicable Guidelines range or departure analysis risks professional and ethical
censure. To get around this, prosecutors would label the bargained-away “facts”
or “factors” as “not readily provable” – an assertion that is not susceptible to
ready second-guessing by the probation dept, courts or the Sentencing
Commission
(D) Sentencing Bargaining
 Fed R Crim P II(c)(I)(B) and (C) permit the parties to agree to a recommended or
specific sentence. DOJ note that specific or recommended sentence bargains come
in two basic types: those in which prosecutors bargain for a sentence that is
within the Guidelines range, and those in which prosecutors bargain in
departures from the applicable Guidelines range. The latter type of bargain
involves a prosecutor agreeing to stipulate to, or at least not to oppose, a given
departure
 Under the mandatory Guidelines, the ultimate decision to make a departure, and
if a departure was made, the extent of the departure, were matters within the
district judge‟s sole discretion. Accordingly, as a practical matter the parties in
the pre-Booker period generally found it to be a less appealing bargaining tool
than those noted above because it did not involve a certain and calculable
sentencing concession. Parties sometimes attempted to ensure that the departure
was “done deal” by hiding in a charge bargain or a stipulation to facts that were
not true. DOJ was unusually emphatic in forbidding this practice!
(E) Enforcement
 Where both parties agree to a bargain that contravenes Guidelines principles or
DOJ policy, how can such subversion of uniformity goals be prevented:
o Probation Dept is charged with independently investigating the facts of
the offence in preparing its pre-sentence report. If the prosecutor
stipulates to a lesser amount of loss than the facts would support, the
163
probation dept in theory will bring this to the sentencing judge‟s attention
o Courts are supposed to police the parties‟ attempts to subvert the
Guidelines through their power under Fed. R. Crim. P. II and
Guidelines Chapter Six to approve plea agreements
COOPERATION AGREEMENT
 D agrees to plead guilty to specified charges and to cooperate with the govt. In
return, the govt often undertakes to dismiss or forgo other possible counts
and/or to ask a judge to consider D‟s cooperation in sentencing
(I) Policy Discussion: United States v Singleton
 US v Singleton: Created a frontal assault on the practice of bargained-for
testimony, as the panel held that the testimony of a co-defendant should have
been suppressed because the prosecuting attorney violated the federal gratuities
statute, 18 USC 201(c)(2), in offering the co-defendant leniency (“something of
value”) in return for his truthful testimony.
 This decision was quickly reversed by the Tenth Circuit sitting en banc (Singleton
II) – holding that s 201(c)(2) does not apply to the US or an Assistant US Attorney
functioning within the official scope of the office
 Focus was on “whoever” within the meaning of the gratuities statute: Most
courts decided to rely on Nardone v US, which held that a statute should not be
read to apply to the govt when doing so would (1) deprive the sovereign of a
recognised or established prerogative, or (2) lead to absurd results
o Seventh Circuit took a different path, holding that “a promise not to
prosecute a witness (or to secure a lower sentence for the witness) is not a
„thing of value‟ under 201(c)(2)”
o Doubted Singleton II, holding that if “whoever” does not include federal
prosecutors, it would permit prosecutors to pay cash for favourable
testimony, a practice that lacks the statutory and historical support of
immunity and sentence reduction
 Since Singleton II, a number of Ds have argued that the admission of co-
conspirator‟s testimony induced through govt promises of leniency violates their
due process rights because s 201(c)(2) precludes them from “similarly making
enticing offers in exchange for testimony, thus generating an unfair procedural
imbalance whereby the prosecutors may obtain and present testimony in a
manner unavailable to D”. Thus far, courts have rejected such claims, relying on
“the myriad procedural safeguards to which a defendant is entitled when the
govt plans to introduce testimony obtained through offers of value” and the fact
that “the role of assessing witness credibility belongs to the jury”
(II) USSG 5KI.I
 Prior to Booker, prosecutors contemplating entering into a cooperation agreement
would offer D the potential for a motion made pursuant to Federal Sentencing
Guidelines 5KI.I – which provides that “upon motion of the govt stating that D
has provided substantial assistance in the investigation or prosecution of another
person who has committed an offence, the court may depart from the guidelines”
 Section 5KI.I significantly increased the incentives for cooperation. For D against
whom the govt had a strong case, a 5KI.I constituted their only chance to
substantially reduce or eliminate the possibility of jail time. Section 5KI.I was
controversial for two reasons:
o Dramatically increase the risk of perjury that always exists whenever the
govt rewards witnesses for testimony
o Sentencing departures for cooperation could only be triggered by govt
164
motion. Courts generally held that they could not, in the absence of a govt
motion, base a downward departure for a D‟s substantial assistance to
federal prosecutors on other provisions of the Guidelines, including the
general departure provision, s 5K2.0. Judicial review of the govt‟s refusal
to file a 5KI.I motion was extremely limited
o Booker has done what Congress did not do – because the Guidelines are
now advisory, it appears that the govt motion requirement no longer
binds courts seeking to reward Ds – over govt opposition – for
cooperation with govt investigators
(IV) Corporate Cooperation & Pleas: “DP” Agreements
 Filip Memo had introduced the possibility that corporate cases may be resolved
through deferred prosecution (DPA) and non-prosecution agreements (NPA)
rather than through indictment or outright declination
 Deferred Prosecution Agreements:
o Allows prosecutors and companies to work together in creative and
flexible ways to remedy past problems and set the corporation on the
road of good corporate citizenship
o With their broad range of reform tools, permit remedies beyond the scope
of what a court could achieve after a criminal conviction (e.g. court-
imposed fines or restitution)
o Importance of an independent monitor: Wide authority to oversee
compliance with the deferred prosecution agreement and strengthen its
ongoing remediation efforts
 Difference between DPA and NPA:
o Whether a charging instrument was ever filed. In a DPA, the DOJ files a
criminal complaint but defers prosecution of the case by contract with D;
if D fulfils the terms of the DPA, the govt will dismiss the complaint
o With an NPA, no charging instrument is filed; the investigation remains
open pending D‟s satisfaction of the terms of the NAP
165

(S) White Collar Crime Compiled Notes

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LAW638 White Collar Crime

Elements of significant white-collar crime cases: White collar violations…involve

B. WHITE COLLAR TRIAL PROCESS

conspirator statements were made in furtherance of the conspiracy. It became so

uncertain, how should courts respond?)

 Notwithstanding modern blurring of civil and criminal law, criminal law

(2) Overcriminalisation; Federalisation; Judicial Role; Prosecutorial Function

 Saving grace: US Sentencing Guidelines.

Federal Criminal Law

criminal statutes. In these respects, prosecutors are allied with

E. PRACTICE: SELECTING “PROCEDURAL” TOPICS RELEVANT TO

 Complexity, Scope and Magnitude:

some sort of cooperation or immunity deal

(1) Prosecutorial Role

(A) Federal Prosecutors‟ Duty to “Do Justice”

 The US Attorney is the representative not of an ordinary party to a controversy,

(B) Applicable Ethical Standards

 McDade Amendment – problematic, as an attorney for the Govt shall be subject

(c) Case Study – David Luban, The Conscience of a Prosecutor

in Greenville, Texas. They had even exhibited an option for its

in part and and abettor. There is no evidence to establish that he could

 Where dispensing with MR would require D to have knowledge

Dissenting  If negligent violation were a misdemeanour, why would Congress

 In order to establish a “wilful” violation of a statute, “the

 MR means the particular mental state required to be proved by the statutory

(2) GOOD FAITH DEFENCE

(3) GOOD FAITH RELIANCE ON COUNSEL DEFENCE

 Reliance on counsel defence applies to “specific intent” crimes

(4) “WILLFUL BLINDNESS”, “CONSCIOUS AVOIDANCE” OR “OSTRICH”

A. REAL-VERSUS CHARGE-OFFENSE SENTENCING

at the expense of practical administrability

 “Third factor”: defined by reference to the Guidelines‟ “grouping”

Stevens – the law makes essential to his punishment. That right is

 In significant part, it is the weakening of this real-

 Corporate Criminal Liability

 In the past, corporate offences were often spoken of as

Michigan. The indictment was returned against the company, its

encouragement of upper management, pursuant to corporate policies or

an association to attract conventions to their city. To finance the

punitive damages context, an employer may not be vicariously

employees within a large corporate hierarchy. Thus, were the principle to be

expanded to include multiple transactions which aggregate more

culture of the indicted corporation and the behaviour of its employees

Work Product Protection by Corporations Contrary to This Policy

54 Am. U. L. Rev. 579, 632-637 (2005)

who had inadequately supervised Meredeith

o Where it is “readily ascertainable that the organisation cannot and is not

Corporate Internal Investigations

Managerial Liability: “Responsible Corporate Officer” Doctrine

responsible corporate agents could be subjected to the liability

held criminally liable, would not have to “wilfully or negligently”

proof of knowledge, i.e. requires scienter.

Federal White Collar Crime p 283 – 360

o Mens rea: Both statutes require proof that D made

asked and arguably misleading by negative implication.

the course of the investigation of a criminal matter. As such, it opens up

1. Uttering falsehood or concealing facts (duty to disclose) by trick: D either made

o Judicial function should not be confused with the administrative

 Legislative Function Exception： Submittals to Congress are a form of advocacy

need not be made directly to the federal agency to sustain a

 Criminal False Claims:

o Differences between Criminal False Claims and False Statements:

overarching power to prosecute and to control litigation are seen