The National Attorneys General Training & Research Institute
CEPI Newsletter February 2020
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.
NAGTRI Academy: The inaugural NAGTRI Academy will be held from March 2-4, 2020, in Washington, DC. This unique training will provide members of the government legal community with insights and real-world applications on topics including ethics—including through 14 CEPI-led sessions—civility, leadership, and communications. Assistant attorneys general; federal, state, and local government attorneys; and law students are eligible to attend. The NAGTRI Academy will include over 50 speakers, including attorneys general, judges, law professors, government attorneys, and bar counsel. By registering to attend, you will join over 150 people who have already signed up for this one-of-a-kind event.
Financial Investigations Seminar: The Money Laundering & Asset Recovery Section of the U.S. Department of Justice (MLARS) has openings for a small number of attorney general office prosecutors and investigators in an upcoming Financial Investigations Seminar in Charlotte, North Carolina from April 21-23, 2020. Space is limited, so please email Craig.Newell2@usdoj.gov, and cc email@example.com, as soon as possible to apply to this free and comprehensive training. (Please note that NAGTRI cannot pay for travel costs or per diem for these trainings but will offer scholarships for a Financial Investigation Seminar on which we will partner with MLARS later this year.)
Attorney Convictions in New York: An article in the New York Law Journal lists and briefly describes criminal convictions of New York lawyers from January 2015 through December 2019.
Attorney General Seeks Funds to Fight Corruption: Hawaii’s Attorney General has requested an additional $1 million from the state’s legislature to hire ten additional staffers for a new public corruption unit and to provide pay increases to existing staff.
Martin Shkreli Faces New Accusations Over High-Priced Drug: The New York Attorney General’s Office and the Federal Trade Commission have filed a civil suit against Martin Shkreli and his co-owner of Vyera Pharmaceuticals for what they describe as an “elaborate and anticompetitive scheme” to block generic drugs from entering the marketplace after they raised prices on a the only drug approved by the Federal Drug Administration to fight toxoplasmosis. Shkreli is serving a seven-year sentence in federal prison for defrauding his investors.
Indicted Cuyahoga County HR Chief Paid Off Debt at Heart of Corruption Case in Possible Act of Forgery, Prosecutors Say: The Ohio Attorney General’s Office alleges a decision by the indicted Cuyahoga County human resources chief to cut a cashier’s check in another person’s name to repay a debt might violate the law. Chief Talent Officer Douglas Dykes is alleged to have put the name of the county’s former IT official on a check for $10,362 that was apparently cut to repay the county for an improper “signing bonus” Dykes authorized for the IT official.
Movita Johnson-Harrell Sentenced to 3 Months in Jail for Public Corruption Crimes: In a case brought by the Pennsylvania Attorney General’s Office, former state representative Movita Johnson-Harrell was sentenced to three months in prison and nine months’ house arrest for corruption-related offenses. Prosecutors proved that she stole money from a nonprofit organization she founded to serve mentally ill and poor people who were fighting addiction. She was also charged with perjury and tampering with public records. Johnson-Harrell stole over $500,000 and spent it on, among other things, multiple fox coats, travel, a Porsche, and restitution for a prior conviction for not paying unemployment taxes.
Suspended Chester Co. Sheriff Indicted on New Public Corruption Allegations: Suspended Chester County, South Carolina Sheriff Alex Underwood—who is also facing federal charges—has been charged in state court with conspiracy, misconduct in office, using his office for financial gain, embezzlement, and forgery. The indictment alleges that Underwood and his staff spent time constructing improvements to Underwood’s barn and doing other work for Underwood’s benefit while on duty and being paid by the county. The indictment alleges other schemes, including that Underwood and his chief deputy used county funds to pay for their spouses’ travel expenses to a police conference in Nevada and altered receipts to hide the fact that expenses were for their wives. The South Carolina Attorney General’s Office is prosecuting the case.
Lawsuit Claims Epstein Trafficked Girls in Caribbean Until 2018: In a civil suit seeking forfeiture of two private islands owned by deceased and disgraced financier Jeffrey Epstein, the Virgin Islands Attorney General’s Office alleges that Epstein ran a decades-long sex trafficking scheme. The suit, which is filed against Epstein’s estate, alleges that Epstein used a ring of associates to rotate girls on and off his private islands, using fraudulent modeling visas to allow them to travel. It notes that in July 2018, Epstein refused to permit an investigator to come onto one of his islands for routine monitoring that was required because of his status as a registered sex offender.
Treasury Official Pleads Guilty to Leaking Financial Documents: Natalie Mayflower Sours Edwards, a former senior official at the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) admitted that she leaked suspicious activity reports (SARs) to journalists. The case is a reminder that SARs themselves are to be kept secret, even from discovery in criminal cases—although any Giglio or Brady information they contain must be summarized and provided to defense counsel in writing.
With One Crime, an Ex-Congressman Damaged 2 Families: Former congressman Chris Collins and his son Cameron have both pled guilty in New York to insider trading. The former congressman has been sentenced to 26 months in prison and his son to five years’ probation. Chris Collins learned that a pharmaceutical company on whose board he served would be publishing bad news about one of its experimental drugs and contacted his son and others to warn them to sell their stocks. Cameron Collins then contacted his future father-in-law, who had also bought stocks in that company, to share the news. Father and son also lied to the FBI.
Halkbank Hit with U.S. Demand for Millions in Contempt Fines: Federal prosecutors in New York have asked a judge to order Turkey’s Halkbank to pay millions of dollars in fines for failing to accept service of the indictment and to respond to U.S. sanctions-evasions charges that have been pending for several months. The multinational law firm Halkbank hired to represent it has appeared—sort of—in court to unsuccessfully argue that the U.S. does not have jurisdiction over Turkey’s state-owned bank. The bank is charged with helping Iran evade U.S. economic sanctions and access $20 billion in frozen oil revenue. The Second Circuit Court of Appeals has, however, stayed the district court’s earlier decision to apply the fugitive disentitlement doctrine to the bank and refuse to consider its motion to dismiss the indictment, which may suggest the request for fines will be unsuccessful.
Sheldon Silver’s Corruption Conviction Is Partly Overturned: The Second Circuit Court of Appeals has issued a decision on the appeal by former Speaker of the New York House of Representatives Sheldon Silver. The court affirmed Silver’s convictions in a real estate scheme and a separate money-laundering scheme, but reversed convictions associated with a scheme involving a cancer researcher who referred patients to a law firm that employed Silver. In the decision, Judge Richard C. Wesley concluded that McDonnell required prosecutors to prove that a government official agreed to be influenced on a particular question or matter—rather than to simply agree to make decisions that were generally beneficial to the briber. Silver’s case will be remanded to the district court for resentencing, although the judge will likely have the power to simply order the same seven years’ incarceration she imposed before the appeal.
At Supreme Court, Another Potential Loss for Prosecutors Fighting Public Corruption: At oral argument before the Supreme Court, the so-called “Bridgegate” prosecution faced some skepticism from the bench. In an echo of McDonnell, defense attorneys argued that the case risked “criminalizing politics,” while commentators feared that a reversal of the conviction would be yet another blow to prosecutors’ abilities to hold the corrupt accountable.
DOJ Warns Search Warrant Ruling Could 'Seriously Disrupt' Investigations: The U.S. Department of Justice has filed a motion for reconsideration in the Fourth Circuit, arguing that a three-judge panel’s decision to require a federal magistrate judge—rather than a filter or “taint” team of prosecutors—to review materials from a law firm for privilege incorrectly applied a framework appropriate for civil, rather than criminal, litigation. Given the relatively common use of such filter teams and the often-burdensome task of document review in complex white collar cases, if the original decision stands, commentators note that it may well reduce the likelihood of prosecutors taking on cases involving corrupt lawyers or others with arguable privilege claims.
Feds Seek to Jam Revolving Door in High-Profile Cases: In several recent high-profile cases, federal prosecutors have sought to disqualify as defense counsel former high-ranking U.S. Department of Justice officials. In the past year, a former U.S. Attorney in Ohio and former Deputy Attorney General James Cole have been removed from representing defendants; a motion remains pending against the former head of the enforcement division at the Commodity Futures Trading Commission.
New York Had a Law to Investigate Prosecutors. Why a Judge Just Tossed It: A New York state judge has ruled that a law creating New York’s Commission on Prosecutorial Conduct is unconstitutional. The judge concluded that the commission would have infringed on the Appellate Division courts’ constitutional mandate to discipline attorneys and that it unconstitutionally required the Appellate Division to create a new panel of four presiding judges to hear appeals of the commission’s decision. The District Attorneys Association of New York brought the case.
Where’s the Harm in Conflicts of Interest?: The FCPA Blog details the potential harms conflicts of interest may cause, including bad decision-making; a failure of third parties to take actions because they do not follow recommendations made by those they believe to have conflicts of interest; reputational harm to organizations; and a reduction in trust in “the system” as a whole.
May Federal Judges Be Members of the ABA or the Federalist Society? Draft Ethics Opinion Says Yes and No: The Committee on Codes of Conduct of the U.S. Judicial Conference has issued a draft advisory ethics opinion advising federal judges not to be members of the conservative Federalist Society or the liberal American Constitution Society because the affiliations might raise questions about their impartiality. The opinion also instructs the judges to “carefully monitor” activities by the American Bar Association, if they are members, to ensure that positions taken by the ABA do not require them to recuse themselves from a particular case or end their membership with the ABA.
Accused of Harassing Court Staff, Justice Matthew Rosenbaum Officially Resigns: Now-former Rochester, New York State Supreme Court Justice Matthew Rosenbaum has stepped down from the bench. The trial court judge was already suspended from duties as a result of a misconduct investigation, and, as part of his resignation, has agreed to never seek judicial office again. Rosenbaum was accused of making “improper and at times abusive personal demands of court staff” and implying or directly telling them that if those demands were not met, they would be fired.
State Commission Recommends Mount Vernon Judge Be Censured: The New York State Commission on Judicial Conduct has censured Mount Vernon City Judge William Edwards for appearing in family court as his daughter’s attorney several times and for “repeatedly and gratuitously identifying himself as a judge during the proceedings.”
Bill Calls for Requiring Judges to Give Reason for Recusal: A New York State Senator—and former federal prosecutor—has introduced legislation that would require judges to provide a reason when they recuse themselves. The need for the legislation, according to the senator, stems from the recusals of three state judges in quick succession from a case involving the town of Hempstead and a golf course. The senator said that such recusals could diminish public confidence in the judicial process because people might speculate about the reason for them.
'Incompetent' Filings in Hotel Dispute Draw NJ Court's Wrath: A New Jersey state appeals court has harshly criticized filings in the court below, expressing “strong disapproval” of the attorneys’ “ad hoc” approach to the litigation and the trial court’s failure to enforce “rudimentary procedural principles.” The court wrote that “[t]he wholesale departure from the rules governing the adjudication of civil disputes that permeated this case significantly impedes meaningful appellate review and undermines the transparency of the judicial process.”
Public Access is Critical for UBO Register Success: A commentator argues that Universal Beneficial Owners (“UBO”) registers should be open to the public—rather than provided only to the government—as that will lead to increased competitiveness and will build and maintain citizen trust.
Only the Guilty Have Anything to Fear from Whistleblowers: A writer at the FCPA Blog argues that every country should have strong whistleblower protections in place.
Uh Oh. Transparency Can Cause More Corporate Crime: While “transparency” is generally a positive thing, disclosure can counterintuitively lead to worse behavior. As a result, a writer postulates, “although transparency is a prerequisite for addressing unethical behavior, it is not sufficient in and of itself.” In somewhat the same vein, another commentator noted that several pro-transparency groups call for information and whistleblowers to use programs to contact them that are not particularly transparent themselves.
Transparency International Releases the CPI 2019: Transparency International has released the 2019 Corruption Perceptions Index (“CPI”), which it argues shows that few countries are showing improvement in tackling corruption. Elsewhere, a commentator pointed out that the ten “least corrupt” countries by TI’s standards are responsible for nearly one-third of the fines paid as a result of violations of the U.S.’s Foreign Corruption Practices Act.
‘Day of Enforcement’ Targets Global Tax Evaders and Money Launderers: A coordinated effort among tax enforcers from the United Kingdom, United States, Canada, Australia, and the Netherlands was undertaken in late January. The enforcement actions started with information obtained from a Central American bank that was believed to be facilitating tax evasion and money laundering.
How U.S. Firms Helped Africa’s Richest Woman Exploit Her Country’s Wealth: Isabel dos Santos, Africa’s richest woman and the daughter of José Eduardo dos Santos, former president of Angola, has been charged with committing crimes to enrich herself. The charges followed a lengthy piece by The New York Times about how western companies helped her move and use her money, much of which came from Angola’s government. In a companion editorial, the paper of record suggested that imposing reporting requirements like those that apply to banks on firms that provide financial, tax, and legal advice would be an important step forward to preventing U.S. firms from helping corrupt officials steal and launder money. A Portuguese hacker has claimed responsibility for the leaks that resulted in the article and the prosecution.
Harvard Chemistry Chairman Charged on Alleged Undisclosed Ties to China: Prof. Charles Lieber, who chairs Harvard University’s chemistry department, has been arrested on charges of lying about receiving millions of dollars in funding from China. While accepting foreign funding is not illegal, per se, people who apply for U.S. taxpayer-supported funds are required to disclose the receipt of funds from other countries.
Honduras Vows to Fight Corruption After Ending Anti-Graft Body's Mandate: Honduran President Juan Orlando Hernandez said he was committed to fighting corruption even after his government ended the internationally-praised Fight Against Corruption and Impunity in Honduras (MACCIH), a body that successfully investigated and charged scores of corrupt officials. During the trial of the president’s brother in a New York federal court, witnesses said the president tried to prevent his brother from being extradited and took bribes; other press coverage revealed that the president’s emails were the subject of search warrants obtained by the same investigative team.
The Mafia Capitale Trials Show Italian Municipalities’ Continued Vulnerability to Corruption by Organized Criminal Groups: In an article outlining corruption in Rome, Italy, several years ago, a commentator recommends several concrete changes to Italian law to reduce the opportunity for corruption-related crimes. Those recommendations include increasing controls over public procurement and increasing scrutiny of public appointments.
SFO Publishes New ‘Internal’ Guidance for Evaluating Compliance Programs: The United Kingdom’s Serious Fraud Office has published new guidance about how it assesses the effectiveness of companies’ compliance programs. The short document outlines that the SFO will consider the six principles in the UK’s Bribery Act guidance and will consider a company’s compliance at the time of the alleged offense; when a charging decision is made; and, in some cases, after the company has entered into a deferred prosecution that requires it to introduce and maintain an effective compliance program.
London: New Data Leak Exposes Owners of 400,000 Anonymous Companies: Millions of documents have been leaked from a corporate services firm in London. The data is from 2008-2018 and is detailed at the Organized Crime and Corruption Reporting Project.
It May Be the Biggest Tax Heist Ever. And Europe Wants Justice: In a lengthy piece, The New York Times details allegations that two former Merrill Lynch employees and their coconspirators “made off with a staggering $60 billion, all of it siphoned from the state coffers of European countries” by a complicated scheme to manufacture tax refunds. The author argues that these bankers did not try this five-year-long scheme in the United States for fear of regulators, but instead set up operations in London “and treated the rest of Europe as an anything-goes frontier.” The article suggests that the scheme was first discovered by a German clerk, who made inquiries when she saw a suspicious request for a refund and, after receiving a threatening letter from the requestor’s attorneys, reported the tax refund request and threats to prosecutors, who ultimately charged the Merrill Lynch employees.
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 firstname.lastname@example.org.