Last week, the prosecution and the defense filed their sentencing memoranda in the Rajaratnam case. Raj was convicted of 14 counts in all — 9 counts of securities fraud, and 5 conspiracy counts. So what do the parties think that’s worth? The feds asked Judge Holwell to sentence Raj...
Real nice, Google. Because we were bored out of our skull this afternoon, we checked this blog’s stats on Google Analytics. Browsing through the various keywords people have used to find this blog over the past year, all we can say is “The hell is wrong with you people?” Leaving...
When we were just starting out in the law, we frankly had no problem with the concept of profiling. Not racial profiling — that’s just a logical absurdity along the lines of “most people who commit crime X are of race Y, therefore it’s reasonable to suspect people of race...
Wiretaps are arguably the greatest invasion of privacy that the government can do. They’re listening in on private conversations, not intended to be overheard by anyone else. So to get a wiretapping warrant, the government has to do more than for a normal search warrant. There has to be...
First, a shameless plug: Tomorrow, we’ll be participating in a Dow Jones webinar for Private Equity and VC types, discussing how the current environment of insider-trading prosecutions affects them, and what they might do about it. (Link here, if you’re interested.) Of course, those guys aren’t so much...
This’ll be quick, because we’re pretty busy working on a wiretap case, which is always time-consuming if done right. But as our mind’s on that topic anyway, we thought we’d quickly point out that the latest round of insider-trading cases is again largely derived from wiretaps. Here’s a roundup over...
The feds are really ramping up their insider-trading enforcement. But instead of going after real insiders, they’re going after consultants and investors who use them. This is a big risk for the feds, and they could lose big. It started a year ago, when the feds indicted a bunch...
The other day, we drew a contrast between the Manhattan DA’s new public integrity unit and the way the feds go after FCPA violations, and some folks asked just what exactly the feds do in these cases. That’s a good question. Especially now, as the FCPA has become a...
As we were coming out of court the other afternoon, we got a call from one of the nice folks over at the WSJ, asking us what we thought about the Manhattan DA’s new Public Integrity unit. We didn’t even know it had been formed — though we had...
The news is full of reports today about the hung jury in the Blagojevich trial — they found the governor guilty of a single count of lying to federal agents something like five years ago, and hung 11-1 in favor of conviction on the remaining counts. All kinds of pontificators...
It looks like we spotted the trend. Unfortunately. Last week we noted that, when faced with an ambiguous statute, some on the Supreme Court are now willing to read new language into the statute, rather than toss it back to Congress to do it right. And we wondered if that might...
There are four Mondays left in June. Four more days in which the Supreme Court is expected to announce its decisions in the 27 or so cases still out there this term. That’s about one case per day from now till then. We’re picturing the Justices pulling all-nighters, stacks of...
What’s with all the lawyers getting arrested these days, being charged with financial frauds, Ponzi schemes and the like? Is this a new trend? It sure seems like one.
The latest news is the announcement about an hour ago that the SDNY is charging one Kenneth Starr (no, not that one, this one), money manager for a bunch of celebrities, with yet another Ponzi scheme, funnelling $30 million of investors’ money into his own pockets. He’s a lawyer in New York. (You can read the complaint here.)
Then there’s the former law firm partner Michael Margulies, charged the other day with embezzling $2 million from his firm and clients in Minneapolis over the past 16 years. Coincidentally-named lawyer James Margulies of Cleveland was charged the other day in a $60 million stock swindle. A couple of weeks ago, two lawyers were charged with a mortgage-rescue fraud involving stripping $3 million in equity. A lawyer went to prison a little before that for rigging tax-lien auctions.
That’s just a handful of headlines from this month alone. But it’s been going on for several months now. We’ve been noticing lawyers getting charged with increasing frequency ever since last July when Marc Dreier got sentenced to 20 years for hedge fund swindles totaling God knows how many hundreds of millions of dollars. It really kicked into high gear, however, in December, after Scott Rothstein was arrested for a $1.2 billion Ponzi scheme. And now there are several cases being announced every month.
What’s going on here?
Sure, these kinds of schemes tend to get noticed all at once, when the economy goes south, and the market’s gains no longer mask the fraud. So we’re not wondering why all of a sudden there’s a bunch of financial-fraud arrests. Our question is how come so many of these cases involve lawyers.
Has the profession changed? Is it something new about how lawyers are getting more involved as investment managers and financial advisors? Or is there a new focus by law enforcement? We really don’t know.
But it sure looks like something’s going on out there. What do you think?
Lanny Breuer, the DOJ’s Assistant Attorney General for the Criminal Division, gave a speech today announcing a “new era of heightened white-collar crime enforcement — an era marked by increased resources, increased information-sharing, increased cooperation and coordination, and tough penalties for corporations and individuals alike.”
You can read his prepared remarks here. We did, and we find them very troubling.
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“The techniques that have been used historically to go after organized crime or blue-collar crime need to be used at times in white-collar crime, because the American people expect no less.” That’s a quote from Breuer’s speech today.
That ought to scare you. It scares us. We’re going to have mob agents looking at Wall Street with the wrong filter. Bring a shopping bag to a friend’s house? It’s a cash delivery! Share gossip and rumors heard on the street? It’s insider trading!
And how many federal prosecutors really understand the day-to-day nuts and bolts of the financial world? Sure, they’re mostly bright and well-educated, but how many know the lingo? How many know what actually goes on at those long tables, with everyone on the phone and banging away on their keyboards? Considering where federal prosecutors come from, we’re willing to bet it’s not a big number at all.
So agents are going to be interpreting things wrong. And prosecutors are going to be interpreting things wrong. And now they’re just going to be doing it more.
How is that not scary?
The SEC filed its suit about 2 weeks ago. Then during this past week, they referred it to the DOJ for criminal investigation. The fine folks at the Southern District are now looking into whether any criminal acts took place.
We’re sure the SDNY is going to be a lot more careful than, say, the Eastern District was with the Bear Stearns case. [Full Disclosure: We represented one of the BSAM fund managers in that case, who was ultimately not indicted.] You know, maybe actually reading emails in context, actually figuring out how hedging is supposed to work, stuff like that?
Nevertheless, it’s a tough job. So as a good citizen, unaffiliated with the case in any way, we’d like to make their job easier. We’ve pored over the factual allegations that have been made, and delved into the facts that have been publicly disclosed so far. And after a great deal of legal analysis and number-crunching (yes, we do this for fun), here is a complete list of all criminal activity that we have been able to identify at Goldman Sachs here:
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