The National Attorneys General Training & Research Institute
CEPI Newsletter July 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.
CEPI is pleased to partner with NAAG’s Center for Supreme Court Advocacy to bring a Hot Topics webinar this Friday, July 17, from 2:00-3:00 PM Eastern. “The Supreme Court’s Presidential Tax Cases: Lessons from Trump v. Vance and Trump v. Mazars” will feature University of Texas Law Professor Stephen Vladeck and Virginia Office of the Attorney General Deputy Solicitor Martine Ciccone, and may be attended only by government attorneys and law enforcement officials. Registration is open.
The National Computer Forensics Institute (NCFI)—a federally funded training center that provides free training (including travel) to state and local prosecutors, judges, and law enforcement—is accepting applications for fall and winter 2020 trainings at its Alabama campus. The deadline to apply is July 17, 2020. Note that NCFI is not affiliated with CEPI, NAGTRI, or NAAG.
Arizona Official Brought Women to the US to Give Birth and Charged Families to Adopt the Babies: Former Maricopa County, Arizona Assessor Paul Peterson has pled guilty to running an adoption fraud scheme in which he brought pregnant women from the Marshall Islands to the United States to give birth. The women would be housed in residences he controlled, and he received fees from adoptive parents who took the babies after they were born. Peterson defrauded the state out of more than $814,000 for the women’s medical care. He also overcharged the adoptive families for at least some expenses. The case was charged by the Arizona Attorney General’s Office.
Injured Workers Pharmacy Will Pay $11M to Settle Complaint by Mass. AG’s Office: The Massachusetts Attorney General’s Office has settled a case against a mail-order pharmacy it alleged improperly dispensed opioids to injured workers. The Injured Workers Pharmacy agreed to pay $11 million and to change its business model, including by bringing on a full-time compliance officer and ceasing unlawful referral payments.
On Duty NJ Trooper Charged with Stalking Woman: Attorney General: New Jersey State Trooper Michael Patterson has been charged by the New Jersey Attorney General’s Office after he allegedly stopped a female driver solely to make unwanted sexual advances. Prosecutors alleged Patterson disabled his recording device to conceal his actions, and then followed the woman to her home after she spurned his advances. He faces charges including deprivation of civil rights, stalking, and tampering with public records.
N.J. Corruption Scheme Involving Pay-to-Play Contracts Leads to Charges Against Law Firm Partner: The New Jersey Attorney General’s Office has continued its investigation into a pay-to-play scheme involving political contributions paid to secure municipal contracts. The most recent arrest is that of lawyer Elizabeth Valandingham, who is accused of lying about providing campaign contributions to candidates in two towns where her firm was hoping to provide legal services.
New Charges and Audit Results Reveal Widespread Laxness and Corruption in the Houston Narcotics Division That Killed an Innocent Couple: Nearly a year after a middle-aged couple was killed by Houston, Texas Police Officers during the execution of a no-knock warrant, an officer who allegedly lied in the warrant affidavit was arrested on federal civil rights charges. Gerald Goines cited a heroin purchase that did not happen in requesting authorization for the no-knock warrant. Goines and five of his former colleagues have also been charged by local prosecutors who are reviewing at least 164 convictions in cases where Goines played a role. The district attorney noted that the investigation revealed that “supervisors signed records stating they witnessed street-level officers pay money to confidential informants for buying drugs, when the evidence reveals the supervisors were not actually there, and therefore could not have witnessed what they claimed to have witnessed.”
Fundraiser Pleads Guilty in L.A. City Hall Corruption Case: A political operative who assisted a real estate developer who bribed a Los Angeles City Council member for assistance with a major development project has pled guilty. Justin Jangwoo Kim admitted that he helped negotiate and carry out a $500,000 payment to the city council member, Jose Huizar, who then assisted in convincing a labor group that objected to the project to stand down. Huizar was also recently charged in the case, which also includes another councilman, Mitchell Englander; a former aide to Huizar, George Esparza; and a real estate consultant, George Chiang. Englander, Esparza, and Chiang have either pled or agreed to plead guilty.
Second Public Official, Plus 2 Others, Newly Charged: San Francisco Fix-It Director and Director of the Mayor’s Office of Neighborhood Services Sandra Zuniga has been charged with money laundering conspiracy in an alleged scheme to assist former Director of the Department of Public Works Mohammed Nuru, who was arrested on similar charges earlier this year. The federal investigation has been described as “an ever-widening scandal that includes lavish vacations, hundreds of thousands of dollars in home upgrades, and gifts that include a $40,000 Rolex watch.”
Former Judge Ryan Kamada Pleads Guilty to Interfering with Cocaine Ring Bust in Northern Colorado: Former Colorado state district court judge Ryan Kamada has pled guilty to obstructing a federal investigation. Kamada learned about that investigation when a task force officer sought a search warrant from him. The officer noted that the judge appeared to be linked to the target of the warrant on social media, and the judge then recused himself. The next day, Kamada called a friend who also knew the target, and warned his friend to stay away from the target because law enforcement was “watching” the target’s house, car, and phone. That friend then informed the target of the investigation and destroyed records of that communication. Kamada resigned from the bench when the investigation into him became public.
Caught on Bodycam: FBI Agent Chasing Florida Corruption Complaint Ends Up Locked In Patrol Car: In a strange situation in Florida, a Federal Bureau of Investigation Special Agent spent about six minutes handcuffed in the back of a patrol car after local police did not believe he was who he claimed to be. Special Agent Alexis Hatten had scheduled an interview with Franklin County Deputy Sheriff Rolf Gordon to discuss a traffic citation that had been issued to a prominent businesswoman but then rescinded. At some point during the conversation, Gordon began to doubt Hatten’s claim of being an agent and ran his driver’s license and license plate. Unsatisfied with what he learned, Gordon handcuffed Hatten and placed him in the back of his patrol car. This event occurred in December 2019, but received recent media coverage after a public records request obtained body camera footage, police reports, and other documents.
Harvard Professor Indicted for Allegedly Making False Statements About Secret Work in Wuhan: Chair of Harvard University’s Chemistry and Chemical Biology Department Charles Lieber has been charged with making false statements to federal authorities about work he was doing at the Wuhan University of Technology in China. Lieber accepted hundreds of thousands of dollars from China while receiving more than $15 million in grants from the National Institutes of Health and U.S. Department of Defense. Those U.S. grants required him to disclose certain information, including any foreign collaboration and any potential financial conflicts of interest. Because he did not disclose information about the funds from the Wuhan University, Lieber is alleged to have lied to the U.S. government.
Ex-Assistant DA, Her Ex-Boyfriend Charged with Extortion: Former Washington County, Tennessee, Assistant District Attorney Erin Dougherty McArdle is facing extortion and other charges in connection with an alleged scheme to accept bribes to dismiss cases. McArdle and her boyfriend, Tommy Tylee Henry allegedly accepted $50,000 from one person. McArdle’s former fellow Washington County Assistant District Attorney William McManus is facing separate state charges associated with him accepting bribes from a prostitute.
Court: Thwarting Congressional Ethics Office Not a Crime: The D.C. Circuit has concluded that statutes making it a crime to obstruct justice before Congress do not apply obstructive behavior towards the House’s Office of Congressional Ethics (OCE). The court reasoned the result was required by a Supreme Court decision that found that false statements to congressional committees were not covered by statutes forbidding lying to federal agencies. Observing that Congress responded to that Supreme Court decision by amending statutory language to criminalize lying to congressional committees, the circuit court noted that the legislature could amend the obstruction statute to make it a crime to obstruct OCE’s work. The court affirmed the convictions on other counts against Defendant David Bowser, the former chief of staff to Rep. Paul Broun, in connection with his unlawful scheme to use taxpayer money to pay a consultant who assisted with the campaign.
Cutting Off the Stream? How United States v. Silver Affects “Stream of Benefits” Or “Retainer” Bribery: An article by a former federal prosecutor and two others in his firm examines the Second Circuit’s decision in in U.S. v. Silver in an effort to determine the scope of “as opportunities arise,” “stream of benefits,” and “retainer” bribery theories.
“Bridgegate” Further Cabins Public Corruption Prosecutions: Another piece written by a former federal prosecutor and a colleague looks at the Supreme Court’s decision in Kelly v. U.S., concluding that it was “simply the latest in a 20-year line of decisions … that have, in sum, drastically narrowed prosecutors' ability to use previously flexible public corruption statutes as tools to curtail putative public corruption by government officials.”
Bridgegate: Open Questions After Supreme Court Narrows Fraud Statutes: Yet another former-federal-prosecutor-and-friend article queues up several pending appeals that may be impacted by the Kelly decision.
United States Attorneys Available to Receive Election Complaints: In advance of New York City’s primary election, two U.S. Attorneys’ offices provided telephone numbers for complaints, noting that federal law protects citizens against intimidation and bribes, buying and selling votes, and other threats to a free and fair election.
Special Report: Thousands of U.S. Judges Who Broke Laws, Oaths Remained on the Bench: A comprehensive survey of state and local judicial misconduct by Reuters examines over 1,500 cases between 2008-2019 in which judges were publicly disciplined, and another over 3,600 “in which states disciplined wayward judges but kept hidden from the public key details of their offenses – including the identities of the judges themselves.” The investigation concluded that 90% of the judges who were sanctioned were allowed to return to the bench.
Prosecutor Gail Hardy Receives 'Unprecedented' Discipline from Criminal Justice Commission: Hartford, Connecticut state’s attorney Gail Hardy has been disciplined for not resolving five police use of force investigations—including four that were at least seven years old. Hardy was suspended for four days without pay, and later withdrew from reappointment as the state’s attorney.
Lawyer Gets Suspended for Pursuing Lawsuit of More Than $67M Over Lost Pants: The District of Columbia Court of Appeals has issued a 90-day suspension for a former administrative law judge who claimed in a lawsuit that his dry cleaners owed him more than $67 million for losing his pants. Roy Pearson Jr. claimed that Custom Cleaners lost his pants in 2005. After an opening claim for $30,000 for the lost pants, Pearson escalated his argument for losses, and did not agree to the cleaner’s settlement offer of over $12,000. Pearson represented himself in both the lawsuit against the cleaners and the ethics case, where he “chose to litigate the charges with the same type of tactics that he used in the lost-pants case.”
Lawyer Suspended After State Bar Alleges He Creates 'Massive Waste of Judicial Resources': The Florida Supreme Court has suspended a lawyer it found “sits at the head of a vast campaign of unprofessional, unethical and fraudulent conduct,” by filing multiple lawsuits against insurers for separate losses under the same policy. Scot Strems of the Strems Law Firm and his staff would then engage in a pattern of delay and failure to engage in discovery or attend depositions, often resulting in the dismissal of cases and “a massive waste of judicial resources and defense costs.”
‘Disturbingly Inappropriate’ Emails Bring Suspension for Former Judge and Lawyer: In Maryland, Former Board of Veterans’ Appeals Judge James Markey and an attorney advisor who assisted him, Charles Hancock, have both been suspended indefinitely from the practice of law for a series of “disturbingly inappropriate and offensive statements” they exchanged during business hours using their government email addresses. Markey was fired and Hancock retired.
Federal Prosecutors Discussed 'Burying' Evidence in Troubled New York Case: Federal prosecutors in New York are facing scrutiny in a case they elected to drop after repeated discovery and disclosure issues. A federal judge demanded more information after the government dismissed charges against Ali Sadr Hashemi Nejad, who was convicted in a spring 2020 trial. Data the government disclosed after that order included an email from a prosecutor who mused about “bury[ing]” a document that the prosecution team realized had not been turned over to the defense by providing it the next day along with other documents.
Lawyer Disbarred for Secretly Referring His Law Firm's Clients to Outside Lawyers: A lawyer in Pennsylvania has been disbarred for defrauding his firm out of millions of dollars by secretly referring its clients to outside lawyers, who provided him with kickbacks.
Study Provides New Insights About Internal Whistleblowing: A recent study has concluded that a greater number of internal reports by whistleblowers is linked to fewer later external problems, like lawsuits and fines from regulators. As one of the study’s authors put it, “more reports are a sign of an open feedback culture where companies are actively soliciting employees to provide insight.… The findings call into question the base assumption many have—that more reports in a system indicate there are more problems at a company. Companies getting fewer whistleblower reports don’t have fewer problems, management is just less aware of the problems.”
Barring Corrupt Officials from Entering the United States: A Guide to the Process: Since 2004, the U.S. has had a policy of denying entry to corrupt foreign officials and their immediate families. A spreadsheet compiling the State Department data that reflects who has been barred, which is hosted by Human Rights First, includes the son of Russia’s Prosecutor General.
42 Attorneys General Urge Senate to Pass Law to Fight Shell Companies: Forty-two attorneys general signed a letter urging the passage of S. 2563, the Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings (ILLICIT CASH) Act.
Separating Corruption from Culture with the CROOK Act: The FCPA Blog describes the Countering Russian and Other Overseas Kleptocracy Act (CROOK) Act, a bill that, among other things, would support and help fund overseas anticorruption initiatives.
Why Western Accounting and Consulting Firms Are Facilitating Global Corruption, and How to Stop Them: A writer argues that western accounting and consulting firms have facilitated or been passively complicit in the theft of large amounts of money from developing countries, and proposes regulatory and other changes to address the problem.
Canadian Legislation to Permit Use of Stolen Assets for Humanitarian Relief: Proposed legislation in Canada would give courts authority to liquidate assets “associated with a foreign national who is responsible for or complicit in” corruption or human rights violations, and then distribute the funds to any person, organization, or foreign country for a ”just and appropriate” purpose.
Improving Brazil’s Whistleblower Regime: A former Brazilian prosecutor summarizes recent laws that encourage potential whistleblowers in Brazil to come forward and suggests some potential improvements.
Honduras’ New Penal Code Lightens Sentences for Corruption: Lawmakers in Honduras—a number of whom are under investigation for alleged corruption—have passed a new penal code that shortens sentences for some corruption-related crimes.
North Macedonia: Former Top Prosecutor Jailed for Corruption: The former top anticorruption prosecutor in North Macedonia has been convicted of accepting bribes and luxury gifts as part of an extortion scheme. Katica Janeva was sentenced to seven years in prison.
Top South African Police Officers Arrested in Graft Crackdown: Police in South Africa have arrested 15 people, including six senior police officers, who face charges of fraud, corruption, theft, and money laundering. The charges related to procurement and management of the police vehicle fleet while the country was under President Jacob Zuma, who is also scheduled to be tried on corruption charges.
Financial Asset Recovery Conditions: The IMF’s New Anticorruption Playbook: The International Monetary Fund has required the Ukraine to pass legislation on land and banking reform to access its $5 billion financial assistance program.
The Justice Department, Department of Health and Human Services, and the Federal Trade Commission Partner to Alert Public of Contact Tracing COVID-19 Fraud Schemes: Federal authorities are highlighting emerging threats to steal money and sensitive information through contact tracing schemes. Scams may seek money, or data like Social Security numbers or bank account numbers. Legitimate contact tracing does not require any of this information.
Special Prosecutor Appointed to Lead Criminal Investigation into Judge Bill Gravell: Texas County Judge Bill Gravell is being investigated by a special prosecutor after being spotted at a family member’s birthday party during a county-wide lockdown—a lockdown that he imposed just a day earlier. The county’s elected district attorney has recused himself, as he is a potential witness, and the case has been referred to a district attorney in another county. Gravell’s attendance at the party came to light when a “very annoyed neighbor” of the party-giver provided photos to someone else, who tweeted them. Those photos showed Gravell getting out of a deputy sheriff’s car and wearing “a fireman’s bunker gear and breathing equipment.” It was later learned that the deputy drove the judge to the county’s fire department, where the fire chief let him borrow the gear, and then drove him to the birthday party.
Nearly 3,800 Fraudulent Oklahoma Unemployment Claims Stopped by Dept. Of Labor: The Oklahoma Attorney General’s Office, federal prosecutors, and the U.S. Department of Labor successfully stopped payment on nearly 3,800 fraudulent unemployment claims. Their efforts prevented the payment of nearly $16 million in fraudulent claims.
COVID Crimes: Feds Set to Boost White Collar Crisis Cases: The U.S. Department of Justice (USDOJ), Securities Exchange Commission, and other enforcers are seeking out COVID-19 related crimes, including efforts to unlawfully obtain funds from various stimulus programs; market manipulation and insider trading; and fraud related to COVID-19 testing, including overcharging of the government or the provision of bogus tests to the public. The head of USDOJ’s Hoarding and Price Gouging Task Force and the assistant deputy attorney general tasked with overseeing USDOJ’s response to criminal conduct related to COVID-19 recently testified before Congress about the schemes they were seeing.
Auto Executive Charged with Covid-19, Other Fraud Schemes: Geoffrey M. Palermo, the owner of GMP Cars, was charged with fraudulently obtaining over $8 million from the Paycheck Protection Program (PPP) and other sources. Palermo allegedly orchestrated several schemes, including obtaining over $1.5 million in kickbacks when he was as a manager at a California Hilton, and an effort to defraud the Small Business Association in 2019 by lying on his application for a $5 million loan. Prosecutors allege that Palermo’s fraudulent requests for funds from the federal government caused some of his employees to be ineligible for other forms of relief.
Evanston Businessman Is First in Chicago to Face Federal COVID-19 Fraud Charges: Illinois businessman Rahul Shah has been charged with bank fraud and making false statements to authorities in connection with his effort to obtain over $440,000 in loans from the PPP.
‘Reprehensible’: Winchester Man Charged with Trying to Fraudulently Obtain $13M In Coronavirus Relief: In Massachusetts, the president of an information technology services company has been accused of filing fraudulent applications seeking over $13 million from the PPP. Elijah Majak Buoi allegedly lied on four separate loan applications seeking the funds, including about the primary residence for his employees. Authorities seized nearly $2 million from his business bank accounts.
Man Exploited COVID-19 Loans In 'Disgraceful' Fraud Scheme, Federal Prosecutors Say: Benjamin Hayford has been charged by federal authorities in Oklahoma with violating the PPP. Hayford allegedly created a sham business in an effort to support the application just days before requesting funds and submitted fraudulent payroll documentation. Hayford requested over $8 million.
Houston Funeral Director Charged with PPP Fraud: A Texas funeral home director, Jase DePaul Gautreaux, a/k/a “Jase Dixon,” is facing federal charges for allegedly attempting to fraudulently obtain more than $13 million in PPP loans. Gautreaux is alleged to have used a false name, applied for businesses that did not exist, and lied about the number of employees and payroll expenses. He received $1.6 million from the program.
Owner of North Texas Wedding Planning Company Charged with Coronavirus-Relief Fraud: Texas wedding planner Fahad Shah submitted allegedly fraudulent paperwork in an effort to obtain over $3 million in PPP loans. Shah claimed he had more than 120 employees, but authorities report that he employed no one at the time the paperwork was filed.
Compliance in Focus: Defending Remote Witness Interviews in White Collar and SEC Investigations – Lessons Learned and Emerging Best Practices: Private-sector attorneys discuss some of the challenges of representing witnesses who are being interviewed remotely, outlining several areas that prosecutors may wish to consider in advance of conducting remote depositions or witness interviews. The accompanying longer piece details issues like logistics of sharing documents and exhibits with witnesses; how counsel can advise a client during his testimony; and challenges with “reading the room” when communicating over videoconferencing platforms. It advises counsel for witnesses not to communicate surreptitiously with their clients during an interview or deposition, citing a New Jersey case, and to instruct their clients not to write on documents or consult any notes (as opposing counsel can request copies of both).
Why Behavioral Risk Skyrockets When Employees Work from Home: A compliance officer summarizes three behavioral risks related to working from home that can increase the danger workers do not comply with institutional guidelines. She describes them as “out of sight, out of mind”; “the value of social influences”; and “a shift of social identities.”
The Zoom Boom: How Videoconferencing Tools Are Changing the Legal Profession: The ABA Journal details some of the potential dangers to using Zoom and other videoconferencing tools, including decreased internet security in homes, challenges with maintaining confidentiality outside of a dedicated office space, and compliance with ethics rules requiring supervisors to ensure lawyers adhere to the rules of professional responsibility.
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 email@example.com.