White Collar Crime Prof Blog

What's the Evidence in the Bonds Case?

The prosecution of homerun king Barry Bonds for four counts of perjury requires prosecutors to establish that he lied and not just made misleading statements.  The testimony recounted in the indictment shows Bonds clearly denying any knowing use of steroids, and placing his inadvertent use of "the cream" in and around the 2003 season.  A "literal truth" defense (see earlier post here) will be difficult to mount when the testimony is explicit and a clear denial.  To prove Bonds lied, prosecutors will need to produce evidence that he did in fact use steroids at various times, and that it was done at least with his knowledge of a strong possibility that what he ingested or administered into his body was steroids.  While the indictment identifies the alleged lies, it says almost nothing about the government's proof to show the statements were in fact false, and Bonds' knowledge of their falsity.

One avenue of evidence involves documents seized from Balco (Bay Area Laboratory Cooperative), which was the source of the steroids Bonds allegedly used.  There is a reference in the indictment to an exchange in the grand jury in which the prosecutor shows Bonds a Balco document with a date for possible steroid use and the notation "BB" next to it, but Bonds disclaims any use at that time.  The purported creator of the document is former Bonds trainer Greg Anderson, who refused to testify before the grand jury and his attorney recently vowed in an interview (see MSNBC story here) that he will not testify at trial.  Anderson would be key to identifying whether BB is Bonds, and he can authenticate the documents for admission in to evidence.  While there is a chance prosecutors will call Anderson at trial to at least get the documents into evidence, I doubt they will go down that road.  There may be other means to have the document admitted.  Moreover, Anderson has shown no willingness to provide any information that could harm Bonds, and if he were to testify prosecutors would have no idea what he would say.  He could even "fall on his sword" and testify as a means to exculpate Bonds.  While that would subject Anderson to the risk of a perjury prosecution, it would be little comfort to prosecutors if Bonds were found not guilty based on reasonable doubt raised by Anderson's testimony.  If he refuses to testify at trial, Anderson could be charged with criminal contempt, but that doesn't help prosecutors much in the Bonds case and gives at least the appearance of vindictiveness against Anderson, who has made his position clear.

Other sources of evidence speculated about in the press (see AP story here) include a former long-time friend and business partner of Bonds and a former mistress, but each carries significant baggage and would not be particularly strong witnesses, or at least not the type of witness on which one centers a case.  A likely source of information may be documents and testimony from the staff of the San Francisco Giants, Bonds' former employer for fifteen years.  In July 2006, prosecutors allowed the term of an earlier grand jury investigating Bonds to expire because the government had just received Bonds' team medical records pursuant to a subpoena.  Those documents, and perhaps testimony from medical personnel with the Giants, could be used to establish his likely usage of steroids, thus bolstering the testimony of any witnesses who might recount statements made by Bonds about his steroids use.  In the credibility battle like to unfold at trial, the documents can be the government's best evidence because they don't hold a grudge or have deals with prosecutors.

As a final note, one criticism of the indictment from the media and even Bonds' lawyers was the delay in seeking the charges, that the government had all its evidence back in 2005.  The problem with this criticism is that it's not yet clear what evidence the prosecutors plan to use, and whether they obtained any in the past year or so.  For example, the medical records were not delivered until July 21, 2006, and that was over the objection of Bonds, who tried to quash the subpoena to the Giants (see San Francisco Chronicle story here).  Anderson spent over a year in jail for civil contempt because he refused to testify before the grand jury, and prosecutors cannot be faulted for trying to obtain information from a potentially key witness that results in delaying the investigation.  The Bonds case played out over a long period of time, but whether that is a ground for criticism is certainly not clear. (ph)

                                                                           

UPDATE: A New York Times story (here) indicates that Bonds is shopping for new counsel with more experience in federal prosecutions, something lacking on his current legal team.  There are plenty of outstanding white collar defense counsel in San Francisco, although a local attorney is not necessary for a case like this, so the search may well involve lawyers throughout the company.  Whoever wins the sweepstakes will see his or her name in the newspaper and on ESPN quite a bit. (ph)

Ashcroft's Bounty

Thanksgiving is a time to express gratitude for the benefits of the previous year, and former Attorney General John Ashcroft may well be counting quite a few of them from his appointment as an outside monitor for Zimmer Holdings, Inc.  The company was one of four medical device makers that entered into a deferred prosecution agreement (here) with the U.S. Attorney's Office for the District of New Jersey in September 2007 that included the now-standard provision requiring the appointment of an outside monitor.  According to a Newark Star-Ledger column (here), U.S. Attorney Christopher Christie approved the appointments of the monitors that included two former U.S. Attorney's and his former boss at the Department of Justice.  The Ashcroft Group LLC, which advertises itself on its website (here) as specializing "in strategic consulting for corporations worldwide in homeland security, corporate governance, litigation strategy, and data security," expects to charge Zimmer somewhere between $29 million and $52 million for the eighteen months that the firm acts as a monitor.  That's not a bad payday, and Zimmer -- like every other company that enters into a deferred or non-prosecution agreement -- can hardly object to the fees lest it look uncooperative and bring down the wrath of the U.S. Attorney's Office.  So much to give thanks for this Thanksgiving. (ph)

Vick's Thanksgiving

Former Atlanta Falcon's quarterback Michael Vick opted to begin his expected prison term almost three weeks before sentencing when U.S. District Judge Henry Hudson signed an order (available below) directing the U.S. Marshal to "take custody of the Defendant immediately upon his surrender."  By choosing to start his term now, Vick probably will spend his first -- and I suspect his only -- Thanksgiving in prison.  While the maximum term Vick is facing is five years, I expect he will receive a sentence of a year-and-a-day or thereabouts.  There's an outside chance of a split sentence that would include home confinement, but his use of marijuana while on bail pending sentencing probably jeopardizes his hopes for such a modest punishment.  I think the upside to entering the Bureau of Prisons system now is that the expected term will be completed by October 1 because of the 15% good time credit he would receive for a sentence of more than one year -- the extra day effectively cuts off about six weeks.  Vick would likely be released in August to a half-way house, at which point he could begin workouts in the hope of resuming his football career, perhaps even as early as the end of the 2008 season if NFL Commissioner Roger Goodell were to suspend him for one year from the date of sentencing on December 10.

The pressure on Vick to start generating an NFL salary again is enormous.  Federal prosecutors filed a motion for a restraining order (available below) seeking to keep Vick from dissipating assets before he pays approximately $930,000 in restitution for the care of the pitbulls seized from his property in Virginia.  The motion outlines other pending proceedings against Vick seeking to recover money from him that include: (1) the Falcons' arbitration proceeding to recoup almost $20 million of bonus money paid to Vick based on his being on the team's roster during his contract, which has now been voided; (2) a claim by Wachovia Bank for $1.3 million in loans for a wine store; (3) RBC Centura Bank's claim to recover on a $2.5 million line of credit extended to Vick; and, (4) 1st Source Bank's suit to recover on a $2.5 million loan for a car rental business.  That's a lot of money being sought by creditors, and the sooner Vick can get back to the NFL -- some team will certainly take a chance on a quarterback with his talent, even if he sits out two seasons -- the quicker he can start rebuilding his financial life.  Trading a Thanksgiving in prison for a shot at an earlier release may be a worthwhile exchange when prison is inevitable. (ph)

Download us_v_vick_order_voluntary_self_surrender_nov_2007.pdf

Download us_v_vick_restraining_order_motion_nov_2007.pdf

Waxman Wants to Hear from Cookie and Buzzy

The contradictory statements of State Department Inspector General Howard "Cookie" Krongard and his brother, A.B. "Buzzy" Krongard, about Buzzy's joining an advisory board for Blackwater Worldwide will be the subject of an early December hearing before the House Oversight and Government Reform Committee.  The issue will be whether Cookie Krongard committed perjury when he first denied to the Committee knowing about his brother's connection to Blackwater, which is being investigated by the IG's office, and then said his brother told him that there were no financial ties with the company.  Buzzy says he told his brother about the financial arrangements related to the advisory committee and his intention to take the position.  A memorandum (here) from Committee Chairman Henry Waxman states that

discrepancies between the testimony of Howard Krongard and the information from Buzzy Krongard raise questions about the truthfulness of Howard Krongard's testimony.  During the hearing, there were a number of other discrepancies between Howard Krongard's testimony and what the Justice Department and senior officials in the Inspector General's office told the Committee. This is a serious matter given Howard Krongard's position as the Inspector General of the State Department. I expect the Committee to hold a hearing during the week of December 3,2007,to provide members the opportunity to assess whether the Inspector General provided truthful testimony to the Committee.

Like anyone subject to a potential perjury charge, Cookie has retained counsel, who sent a letter (here on TPMmuckraker) to Representative Waxman asking that the hearing be canceled because "there is no legitimate legislative purpose to be gained by publicly pitting two brothers against each other."  The usual Thanksgiving contest to see who wins pulling apart the turkey wishbone may be just a prelude to more discomfort between Cookie and Buzzy. (ph)

Letters of Support for Reyes

Lawyers for former Brocade CEO Gregory Reyes filed a number of letters requesting that U.S. District Judge Charles Breyer show him leniency when Reyes is sentenced in December on the ten charges related to options backdating at the company.  It is commonplace in white collar crime cases -- particularly for convicted CEOs -- for a deluge of letters in support of the defendant to come to the sentencing judge.  A sample of the letters (available below) includes a number written by former Brocade employees attesting to Reyes' good character.  In addition, there are letters from the CEO and chairman of VeriSign, which recently announced that the SEC closed its investigation of the company for options backdating, the former U.S. CEO of PricewaterhouseCoopers who served on Brocade's audit committee, and a senior partner at McKinsey.

Whether these types of letters have any appreciable effect on the sentencing is an open question.  The Federal Sentencing Guidelines is usually the main driver of the sentence, but if Judge Breyer is willing to depart from the recommended sentence then they could provide the support necessary.  The sentencing will take place after the trial of a second Brocade officer, the former manager of its HR department, scheduled to begin after Thanksgiving. (ph)

Download us_v_reyes_sentencing_letters.pdf

A New Venue for Minnesota USA

The Minnesota US Attorney, who has been in the news quite a bit lately, will be shifting her employment venue to DC.  Philip Shenon (NYTimes) reports that  Rachel K. Paulose will be moving to legal policy issues in the main office. (see here)

(esp)

Upcoming Conferences

ABA - Criminal Tax Fraud - December 6-7, 2007 San Francisco

ABA New Issues in Attorney Client Privilege for Corporate Counsel - December 13, 2007

ABA - Internal Investigations for Multi-National Corporations - December 14, 2007

NACDL - White Collar Crime Track - May 1-4, 2008, New York City

(esp)

Grand Jury Opens Investigation into Matters Related to Blackwater

The New York Times reports that a grand jury has issued subpoenas into matters related to the Blackwater investigation.  Obviously, this is no indication that there will be indictments coming from this grand jury.  One consideration, however, is that once an enormous amount of money is spent on an investigation, there is a desire to show that the expenditure was worthwhile.

(esp)

More Troubles for Rep. William Jefferson

Allen Lengel of the Washington Post has an article titled, "Jefferson Accused of Two More Schemes."  The article notes that this will not result in additional charges, but rather additional evidence at the trial.

(esp)

Environmental Indictment

A DOJ Press Release reports on the indictment of a Texas company and two individuals associated with the company. The Press Release states that "the president and owner of [a Texas Oil Company], and .... the company’s operations manager, were arrested and charged today with illegally disposing of hazardous waste at facilities only approved to take oil and gas production waste. [The company], a licensed hazardous waste transporter and used oil handler, was also named in the indictment."  They were "charged with 14 felony counts including conspiracy, violating the Safe Drinking Water Act and violating the Resource Conservation and Recovery Act."

(esp)

Stryker to Pay 16.6 million

The Department of Justice issued a press release on an agreement reached with Stryker Corp. & Physiotherapy Associates. The company will pay 16.6 million.  The press release states that:

"The settlement resolves allegations that Physiotherapy, which is based in Memphis, Tenn., submitted claims for services to Medicare, state Medicaid programs, and the Department of Defense’s TRICARE program that were falsely billed as one-on-one services and that Physiotherapy improperly retained excess or duplicate payments it received from federal health care programs. Under the terms of the settlement, Physiotherapy agreed also to enter into a corporate integrity agreement with the Office of Inspector General for the Department of Health and Human Services."

The case came from two qui tam actions, with the two whistleblowers receiving nearly three (3) million dollars. The case was resolved civilly.

(esp)

Behind the Scenes at the AOL Related Trial

Amy Koltz at the American Lawyer has an article titled, A Jury Without Peer, that places you in the jury room during the decision-making process of the trial of AOL employees.  It is truly an extraordinary piece, detailing the reactions of lay jurors to a white collar case. It is an excellent read for what works and what does not work in these cases. Most important is that it emphasizes the need for professionalism and that credibility of the case may rest on the how the prosecution handles its deals, its presentation of evidence, and the courtroom presentation. One has to respect the jury in this case.

(esp) (w/ a hat tip to Attorney Hank Asbill)

WellCare Search - It's All Public

Richard Mullins of the Tampa Tribune reports on the evidence obtained from the government's search at WellCare.  The 200 plus agents that raided WellCare (see post here) secured materials that have now been indexed (43 pages), and some items have been described in the open press.

This is yet another difference between a white collar investigation that proceeds with a search as opposed to subpoenas. Searches can benefit the government in that they provide surprise and the security that materials will not be lost or destroyed. The downside is that the government has to index and find the materials as opposed to having the subpoenaed witness do the work of putting all the items together.  And yet, another important difference is that a subpoena is for an appearance before a grand jury, a body that is bound by secrecy.  Having these materials on the streets is an indication of what happens when the government investigates outside the grand jury process.  In the case of a company such as this, a search can have a detrimental effect on the business as the openness of the search presents the negative picture for all the public to see.

(esp)

The SEC Starts Winding Down the Options Backdating Investigations

The flood of options backdating investigations seems to be receding, with the SEC closing cases without filing civil charges.  An article in The Recorder (on Law.com here) reports that the investigation of VeriSign has concluded without any further action.  The company's 8-K (here) states, "The staff of the Securities and Exchange Commission (“SEC”) has formally notified the Company that the SEC’s investigation concerning the Company’s historical stock option granting practices has been terminated and that no enforcement action was recommended to the SEC."  The company took a $160 million accounting charge related to the options, and its CEO and CFO both resigned.  The notification to VeriSign comes on top of other recent case closings involving backdating at high-tech firms Electronic Arts, Linear Technology, Nvidia, PMC-Sierra. and Zoran Corp. 

The Commission appears to be clearing out its investigative docket, likely closing the weaker cases while it prepares the stronger ones for some type of enforcement action.  Don't be surprised to see some new filings in the new year as the SEC moves beyond options backdating and faces new areas of concern arising from the subprime meltdown, especially disclosure issues related to the multi-billion write-downs of CDOs by leading financial companies. 

Over on the criminal side, there haven't been any significant new cases since the conviction of former Brocade CEO Gregory Reyes in August 2007, and it may be that the criminal pipeline is also shrinking.  Options backdating looks like it may be on its way to becoming yesterday's news. (ph)

Siemens Bribery Saga Just Keeps Growing

The continuing investigation of overseas bribery by industrial giant Siemens A.G. seems to bring to light even more suspect payments throughout the world, with the total now pegged at nearly $2 billion in questionable transactions.  The amounts involved are staggering compared to other foreign bribery investigations, which are often in the hudreds of thousands of dollars and rarely exceed $10 million.  A BusinessWeek article (here) speculates that the likely fines the company will pay in the United States to resolve criminal and civil investigations will easily exceed the prior record of $44 million for Foreign Corrupt Practices Act violations.  Siemens' more recent public disclosure on Form 6-K (here) states:

The Company remains subject to corruption-related investigations in the U.S. and other jurisdictions around the world. As a result, additional criminal or civil sanctions could be brought against the Company itself or against certain of its employees in connection with possible violations of law, including the FCPA. In addition, the scope of pending investigations may be expanded and new investigations commenced in connection with allegations of bribery and other illegal acts. The Company’s operating activities and reputation may also be negatively affected, particularly due to imposed penalties, disgorgements, compensatory damages, the formal or informal exclusion from public procurement contracts or the loss of business licenses or permits.

That's not very reassuring for a quick resolution of the investigations, particularly in the U.S.  With the ever-expanding internal and governmental investigations comes the cost of paying for all those lawyers and accountants.  According to the most recent disclosure, in fiscal 2007 the company had "€347 million in expenses for outside advisors engaged by Siemens in connection with the investigations into alleged violations of anti-corruption laws and related matters as well as remediation activities."  No word yet on the estimated cost of any fines, and in all likelihood one or more outside monitors will be required as part of a settlement, which will drive up the expenses from the overseas bribery even more. (ph)