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The National Attorneys General Training & Research Institute The National Attorneys General Training & Research Institute

CEPI Newsletter February 2018

This monthly compendium of news reports about corruption and ethics issues is brought to you by the Center for Ethics and Public Integrity (CEPI). Neither the National Association of Attorneys General nor the National Attorneys General Training & Research Institute express a view as to the accuracy of news accounts or affirm any position taken by the authors of the hyperlinked articles.

Cases

State Cases

Alabama Lawyer Indicted on Felony Charge of Bribing a Juror: The Alabama Attorney General’s Office has indicted William J. “Billy” Underwood on a felony charge of bribing a juror. According to Underwood—who proclaims his innocence—the case involved a potential juror on a civil case.

Toms River Lawyer Guilty of Stealing $1.5M from Dead Clients, Child: After a six-week trial, trusts and estates lawyer Joseph J. Talafous Jr. was convicted of stealing around $1.5 million from five clients. Talafous, who was charged by the New Jersey Attorney General’s Office, victimized five clients. One client was a child whose father died in a workplace accident when he was an infant; Talafous stole about $461,000 from a trust for the boy. Talafous, whose law license was revoked by the New Jersey Supreme Court in 2015, will be sentenced on February 16. Talafous had also been charged with money laundering; a 2017 decision affirmed the trial’s court’s dismissal of that charge.

Grand Jury Indicts Former Head of New Mexico MLK Commission: The former head of the New Mexico Martin Luther King Jr. Commission and two others have been charged by the New Mexico Attorney General’s Office. Former MLK Commission executive director Kimberly Greene and former financial auditor Cheryl Yazzie are charged alongside Charles Countee, the head of Education, Research, Evaluation and Design Inc., a nonprofit that held and distributed funds for the MLK Commission. Greene is alleged to have submitted falsified purchase order requests that sought reimbursement for spending request; Yazzie of signing off on those requests; and Countee of facilitating the transfer of the funds.

Johnson Controls to Pay $341K Settlement over False Training Certificates: Global industrial and technology company Johnson Controls has paid $341,000 to settle claims it forged training certificates that were submitted in connection with bids for contracts in the Albany area. The settlement represents the disgorgement of nearly $300,00 in profits, and the payment of over $40,000 in penalties for violating the New York State False Claims Act. The company voluntarily disclosed its misconduct to New York Attorney General’s Office, which entered into the settlement.

Former Berkeley Schools CFO Given House Arrest on State Embezzlement Charges: Former Berkeley, South Carolina, Schools Finance Director Brantley Thomas has been charged with embezzlement by the South Carolina Attorney General’s Office. Thomas is alleged to have stolen more than $800,000 from the school district, which he used to buy land and finance his daughter’s education, among other things. As a condition of his pretrial release, Thomas is largely confined to the home he shares with his mother. About a month after his state charges were unsealed, Thomas pled guilty to similar federal charges; he is cooperating with the government in that case.

Federal Cases

Arkansas Senator Pleads Guilty To Several Federal Charges, Tells Gov. He Will Resign: Arkansas State Senator Jake Files has pled guilty to federal fraud and money laundering charges and agreed to step down from office. Files admitted that he used his office to obtain state funds that were supposed to be used for an improvement project but instead went into his own pocket, after being moved through a bank account in a coconspirator’s name in an effort to hide Files’s role.

Baltimore Gun Trace Task Force Officers Were 'Both Cops and Robbers' at Same Time, Prosecutors Say: A federal criminal trial against allegedly rouge police officers is ongoing in Baltimore. Evidence includes a cooperating witness, who testified that he and his fellow officers would pocket cash before recording seizures and enter home without warrants. This witness is one of four detectives who are cooperating in the criminal trial against Daniel Hersl and Marcus Taylor, officers who are alleged to have participated in a racketeering enterprise involving robbery, extortion, and the use of firearms to commit crimes of violence. While at least one defense attorney has conceded that his client breached his oath as an officer, the defense contends that the case was overcharged.

Former Jackson County Executive Mike Sanders Pleads Guilty to Conspiracy to Commit Wire Fraud: Former Jackson County, Missouri, Executive Mike Sanders pled guilty to wire fraud conspiracy in federal court, admitting that he misused his campaign donations. His former chief of staff, Calvin Williford, also pled guilty to the same charge. Among other things, the men used the money to take a trip to Las Vegas. Earlier in his career, Sanders was the Jackson County Prosecutor.

Judge Asks: Is HCC a Cesspool? Gives Trustee Who Accepted Bribes Six Years in Prison: Former Houston Community College (HCC) Trustee Chris Oliver was sentenced to nearly six years in federal prison after admitting he took nearly $250,000 in bribes to steer contracts to vendors. Oliver had been a trustee since 1995 and sat as the board’s chairman and on key committees during different periods of his tenure. Oliver was apparently undeterred by a previous investigation by a private law firm of Oliver and three other HCC trustees that uncovered “at least an appearance of impropriety” and resulted in a 2010 referral to the Harris County Attorney’s Office. While the local prosecutor did not bring charges, Oliver was publicly censured by other HCC trustees but permitted to remain on the HCC board. A later federal investigation revealed that, during the same period that Oliver was expressing contrition to his fellow trustees, he continued to accept tens of thousands of dollars in bribes.

Supreme Court Rules for Police Officers in D.C. House Party Case That Involved Mystery Hostess Called “Peaches”: In an opinion that provides a useful reminder that common sense is not checked at the door when making a probable cause analysis, the Supreme Court reversed a decision by the District of Columbia Circuit Court of Appeals. District of Columbia v. Wesby contains a useful recap of Supreme Court decisions holding that unprovoked flight, furtive movements, and untruthful and evasive answers to questioning are factors that can be considered in determining probable cause, and that an innocent explanation to a factor that could also be viewed darkly does not vitiate probable cause. The Court criticizes the D.C. Circuit’s “excessively technical” analysis while finding that there was probable cause for the arrest in question and that police officers were entitled to qualified immunity from suit.

McDonnell

Justice Department Dismisses Corruption Case Against Menendez: After a federal district judge granted a defense motion to dismiss seven of eighteen counts in the indictment charging Sen. Robert Menendez, finding that the evidence supporting those counts did not show Menendez made specific promises to induce bribes paid by his co-defendant, ophthalmologist Salmon Melgen, the Government dismissed the case. While the judge did not rely on McDonnell in dismissing the counts that ultimately led the Government to walk away from the retrial, reports from the first trial suggest that the jury may have struggled with the case because—at least in part—of the “official acts” definition required by the Supreme Court.

Supreme Court Opens Door to Sheldon Silver Corruption Retrial: The Supreme Court has denied a writ of certiori filed by former New York State Assembly Speaker Sheldon Silver, who argued that the Second Circuit Court of Appeals erred in holding there was sufficient evidence for a reasonable jury instructed with McDonnell-compliant language to convict him. Silver, whose conviction was reversed by the court of appeals because his jury was improperly instructed, faces a retrial in mid-April. He was previously sentenced to twelve years in federal prison.

Prosecutor: Allentown Mayor Ed Pawlowski 'Sold His Office' to Donors: Allentown, Pennsylvania, Mayor Ed Pawlowski is on trial in a federal corruption case, where prosecutors argue that he traded city contracts for cash to support his political ambitions. Pawlowski has been charged with fraud, bribery, attempted extortion, and lying to federal agents. The case will feature several cooperating witnesses, including the mayor’s political consultants. Not long after the McDonnell case was issued, Pawlowski’s attorney predicted that it would prevent federal authorities from charging his client.

Legislation

On Eve of Corruption Trials, Albany Quiet on Ethics Reforms: New York Governor Andrew Cuomo—whose former aide and campaign manager Joseph Percoco is on trial for monetizing his access to the governor—said in a speech that he knows that the state legislature “feels that we have done much on ethics reform, and they are right. I know they feel that whatever we do, it will never be enough in this political atmosphere and they may be right, but we must do more anyway.” Cuomo has proposed legislation to create term limits and ban outside income for legislators, as well as close loopholes that allow corporations to exceed limits on campaign donations.

Phil Murphy Executive Order Tightens Gift Rules for Governor: New Jersey Governor Phil Murphy started his first day in office by signing an executive order that places limits on the acceptance of gifts and requires himself to disclose gifts from people he did not know before early 2015. Murphy looked to federal law restricting gifts for guidance. Murphy’s predecessor, Chris Christie, signed a similar executive order in 2010; it was narrowed by the state’s then-acting attorney general who wrote in an opinion that the executive order applied only to “items received in return for performing some service, such as speaking at an event.”

In Nassau County, a Meaningful Step to Prevent Corruption: Nassau County Executive Laura Curran has signed an executive order barring her appointees from holding leadership positions in political parties or clubs and from donating to her campaigns. Perhaps not coincidentally, Curran’s predecessor, Edward Mangano, is facing federal corruption charges.

Ethics

Requested by Vance Amid Controversy, Report Suggests Campaign Finance Reforms for District Attorneys: Columbia Law School’s Center for the Advancement of Public Integrity has issued a report at the request of Manhattan District Attorney Cyrus Vance that suggests policies for him and other New York district attorneys to consider when handling campaign contributions. While the report, “Raising the Bar: Reducing Conflicts of Interest and Increasing Transparency in District Attorney Campaign Fundraising” addresses only district attorneys, some of the issues it describes may also apply to other government officials who enforce the law. Vance has adopted the report’s recommendations, while a New York State Assemblyman has criticized the report as not going far enough.

New Prosecutorial Misconduct Charge Leveled as Doctor's Federal Trial Looms in Roanoke: After rejecting an earlier defense motion alleging prosecutorial misconduct, a federal judge has agreed to consider a new motion that argues prosecutors improperly examined the lead defense attorney’s cellphone records.

Judge Punishes Lawyer for Using Hashtag #Killinnazis, Tosses $27.8M Xarelto Verdict on Other Grounds: A judge in Pennsylvania reversed a verdict against a pharmaceutical company that made a blood thinner that a plaintiff alleged caused her severe gastrointestinal bleeding. The judge considered, but rejected, another ground for a mistrial: one plaintiff counsel’s photograph of the courtroom, posted to his Instagram account with “#killinnazis”—a reference to the German origins of the pharmaceutical companies his client sued. The judge previously sanctioned that attorney, finding the killinnazis hashtag “beneath the dignity of the legal profession,” and stripping him of his pro hac vice status. Another plaintiff’s counsel was ordered to pay $2,500 and perform 25 hours of community service after she posted a courtroom photo of the judge on the bench to Instagram—which was later used in promotional materials for her law firm.

He Wanted To Be ‘More Successful’ In Biglaw—Why A Former Partner Tried To Sell Whistleblower Complaints: A law firm partner has pled guilty to obstruction of justice and transporting stolen goods across state lines. Jeffrey Wertkin, who had been a trial attorney in the Department of Justice’scivil fraud unit, stole copies of two sealed corporate fraud suits before he left the DOJ. After he joined Akin Gump, he tried to solicit clients by promising them access to the sealed documents and the names of whistleblowers who reported them to the DOJ. As part of his plea agreement, Wertkin has agreed to talk with DOJ officials about how he was able to access and take the sealed documents, which were from cases he had not handled himself. (For a refresher on one of the rules of professional conduct for current and former government officials, see ABA Model Rule 1.11.)

Investigative Journalism

Transportation Commissioner Billed Taxpayers for Trips While Advocating for Auto Industry: Texas Department of Transportation Commissioner Victor Vandergriff has come under scrutiny for using taxpayer funds to pay for trips he took to lobby for a private client before the Texas Senate. Vandergriff testified before the senate in an effort to assist Warren Buffett, who wanted to change laws that prevented insurance companies from owning body shops, which would have permitted Buffett—who owns Geico—to also purchase car dealerships that had side businesses in auto repair. Vandergriff, who was paid for his lobbying trips by Buffett’s company, also requested that the state of Texas reimburse him for his travel expenses, “blurring the lines between his role as a gubernatorial appointee and his paid consulting gigs.”

Tools

COGEL, the Council on Governmental Ethics Laws, has released its “Blue Books” on Campaign Finance, Enforcement Trends, Ethics, and Lobbying. The Blue Books include responses to surveys of COGEL members about their agencies’ missions, their enforcement priorities, and how they communicate information like campaign finance data to the public. The Blue Books also contain summaries of new legislation and cases from federal, state, and local enforcers.

Guest Post: Global Progress on Beneficial Ownership Transparency: A post at the Global Anticorruption Blog summarizes some of the regulations being considered and implemented to increase beneficial ownership transparency. For example, in the European Union, new regulations will require public registers of who controls companies. The writer notes that, while the U.S. Congress has had beneficial ownership legislation introduced in every session since 2008, no bill has made it out of committee. He opines that the Counter Terrorism and Illicit Finance Act, which would provide access to the information to financial institutions and law enforcement, may have the best chance of success.

International

Are There ‘Aggravating Circumstances’ in All FCPA Cases? The U.S. Department of Justice issued guidance about factors prosecutors will consider in assessing corporate punishment for violations of the Foreign Corrupt Practices Act (FCPA). An FCPA practitioner considers the DOJ’s presumption that it will decline to prosecute a company if it has voluntarily self-disclosed, fully cooperated, properly remediated, and disgorged its profits. Because the presumption contains a carve-out that suggests that the company will nonetheless be prosecuted if “aggravating circumstances” exist, the writer suggests that the presumption of declination is not a particularly strong one.

Upending Brazil’s Presidential Race, Court Upholds Ex-Leader’s Conviction: A court of appeals in Brazil has affirmed the corruption conviction of Luiz Inácio Lula da Silva, who was running to be elected to a third term as Brazil’s president. The appeals court also sentenced Da Silva to twelve years in prison. The ruling makes him ineligible to run for election, which has caused his party to call for supporters to take to the streets. In a statement to supporters, Da Silva—who also faces charges in six other corruption cases—compared himself to Nelson Mandela.

New Australian Measures to Combat Corporate Crime: Australian senators have introduced the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017. The proposal would make failing to prevent foreign bribery a strict liability crime and sets forth the framework for a deferred prosecution agreement scheme. A report about the bill by the country’s Senate Legal and Constitutional Affairs Legislation Committee is expected by April 20, 2018. Several law firms have published analyses of the bill.


Amie Ely is the Director of the Center for Ethics & Public Integrity and the Editor of the CEPI Newsletter and may be reached at 202-326-6041. The CEPI Newsletter is a publication of the National Association of Attorneys General. Any use and/or copies of this newsletter in whole or part must include the customary bibliographic citation. NAAG retains copyright and all other intellectual property rights in the material presented in this publication. For content submissions or to contact the editor directly, please e-mail aely@naag.org.

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