Recently in Criminal Investigations Category

January 7, 2013

Pennsylvania Supreme Court Holds That No Interception Occurred Where Police Read and Replied to Defendant's Text Messages

899402_you_have_mail.jpgWhen it comes to wiretapping, Pennsylvania is a two-party consent state--meaning both parties to a conversation must consent before a wire, electronic or oral communication is intercepted for the interception to be lawful. Although there are exceptions available, sometimes the "two-party" requirement in the Pennsylvania Wiretapping and Electronic Surveillance Act ("Wiretap Act") presents difficult issues for law enforcement. But in order for the Wiretap Act to even apply, there must be an interception of a communication. In Commonwealth v. Cruttenden, decided on December 17, the Pennsylvania Supreme Court narrowed the circumstances in which an interception occurs.

Cruttenden started out as an ordinary car stop along interstate 80 in Clearfield County. After the Pennsylvania State Troopers obtained consent to search the car, they found 35 pounds of marijuana, methamphetamines, drug paraphernalia, a .45 caliber handgun, and a cell phone. One of the car's occupants told the troopers that he had been using the cell phone to text one of the two defendants concerning an exchange of the marijuana for $19,000. The trooper, posing as the supplier, used the phone to text that defendant, and a meeting was set up. The two defendants arrived at the meeting place to conduct the transaction and were arrested. Both defendants were charged with attempt and conspiracy, and both filed motions to suppress the texts, claiming that the texts had been unlawfully intercepted under the Wiretap Act.

The trial granted the suppression motion. On appeal to the Superior Court, the Commonwealth argued that under a Superior Court case called Commonwealth v. Proetto, no interception had taken place and therefore the Wiretap Act did not apply. The Superior Court disagreed and affirmed the suppression order.
In Proetto, an officer, posing as an underage female, communicated with a suspected sexual offender in an Internet chat room using the screen name "Kelly15F." The Superior Court held that because the officer was a direct party to the conversation in the chat room, there was no interception and the Wiretap Act did not apply. But in Cruttenden, the Superior Court distinguished Proetto, on the basis that in the chat room the officer, rather than posing as an actual person, created an entirely separate computer profile, misrepresenting himself as a fictional person, "Kelly15F," while in Cruttenden the officer misrepresented himself as the intended recipient of the communication, namely the defendant's drug supplier. In effect, the Superior Court seemed to be saying, "if you pose as the intended recipient, as opposed to creating a totally separate identity, you have intercepted the communication and the Wiretap Act is violated."

The Supreme Court disagreed and reversed the Superior Court, calling the respective factual circumstances in the two cases "distinctions without a difference." It does not matter, the Supreme Court held, who the intended recipient of the communication is--"the fact which takes the case out of the purview of the Act is that [the defendant] elected to communicate with the person answering the call and that the communication was direct. Therefore, there was no eavesdropping or listening in, and no interception took place."

The effect of the Cruttenden decision is significant, particularly given the ease with which people today text each other. Any time a person texts, he or she is taking a risk that the person on the other end is a police officer. In Cruttenden, the defendant involved in the texts was suspicious and texted questions that only his drug supplier would know. When he got the right answers, he thought he was in the clear and proceeded to set up the rendezvous spot. What he didn't know was that his supplier was feeding the trooper the answers. After Cruttenden, the Pennsylvania Wiretap Act will not save the casual texter.

November 19, 2012

Department of Justice Publishes Business Persons' Resource Guide to the FCPA

1083202_business_man.jpgThe Criminal Division of the United States Department Of Justice has just published a 125-page "Resource Guide" to give both non-lawyers and lawyers at least some clarification in the real world workings of the Foreign Corrupt Practices Act ("FCPA"). Link to the FCPA Resource Guide here: FCPA Guidebook 2012.pdf. The Resource Guide is written in a conversational, non-legalistic style that business persons will likely find helpful. Business persons who conduct business in foreign countries have complained for many years that the practical workings of the FCPA were ambiguous, at best. Employees of American corporations abroad were unsure whether whether relatively minor conduct might be enough to amount to a violation of the law subjecting their employer and themselves to horrific penalties. There were many rumors of "zero tolerance" for even the most abstract payments and no place to quickly consult for an authoritative answer. The Resource Guide, while not perfect, at least partially fills that gap.

The most valuable part of the Resource Guide is the section that lists numerous travel, gift and entertainment hypotheticals that sound very much like real life situations that a corporation engaging in foreign commerce might run into. The first hypothetical for example finds no fault with an American company which provides business class airfare to foreign senior officials traveling a long distance to examine the company's facilities and products especially since the company's own employees would be entitled to such an upgraded ticket if they were on a journey of similar length. The hypothetical continues to find no fault with taking the foreign officials to a reasonably priced dinner, a baseball game and a play. The line is crossed in the hypothetical, however if the foreign officials are given first class tickets, told to bring their spouses and given a week long, all expenses paid trip to Las Vegas after the review of the more mundanely located factory.

Continue reading after the jump.

Continue reading "Department of Justice Publishes Business Persons' Resource Guide to the FCPA" »

November 16, 2012

Attennnnn-tion! 4 Important Lessons From the General Petraeus Scandal

6444_email_or_e-mail.jpgThe dirty details of this presently unfolding scandal do not require repetition on this page. Google will lead you to all that you want (and don't want) to know about these sordid details. However, you won't read much of the following advice in the mainstream media. So, here we go ...

1) Discuss business on corporate e-mail accounts only

The FBI's cyberstalking investigation led to a personal Gmail account, which the government accessed and ultimately resulted in the downfall of General Patraeus. A recent Google transparency report revealed that it has fully or partially complied with at least 90% of the U.S. government's nearly 8,000 requests for user data during the first half of 2012. http://www.google.com/transparencyreport/userdata requests/ The lesson learned is that it is much easier for the government to get e-mails from Gmail, then from your own IT department. This is information that (1) you do not control; (2) might not have notice that the government has requested access to; and (3) do not have say whether the communications are protected by some privilege or confidentiality clause. As a corporation, there are many things that you might want to keep quiet: trade secrets, potential business deals, future products, etc. As Google does not have your company's interests at heart, having employees discuss these developments through personal e-mail accounts could lead to their public disclosure. Further, you would receive no notice that the information has been sought out by the government. Therefore, reminding your employees to keep business e-mails on corporate e-mail accounts will prevent your company's private issues from going public.

2) Be careful who you are e-friends with

While investigating the cyberstalking complaint, the e-mails of the victim led to the discovery of potentially inappropriate e-mails of another senior general who was uninvolved in the original cyberstalking charge. Now that senior general is being investigated. The lesson learned here is that the government, while investigating someone else on a matter unrelated to you, could come to learn information that would place you or your corporation under surveillance or investigation. Therefore it is imperative that not only you keep your corporate and personal e-mails separate (see point 1), but also that you know the person who are sending the e-mails to. A joke in poor taste to someone under surveillance could result in you landing in hot water.

Continue reading after the jump.

Continue reading "Attennnnn-tion! 4 Important Lessons From the General Petraeus Scandal" »

November 16, 2012

Financial Advisor Convicted of Insider Trading for Trading on Info Received at AA Meeting

952313_gavel.jpgHere is an update to our October 8, 2012 post about an insider trading case involving information received at an Alcoholics Anonymous ("AA") meeting.

On November 15, 2012, a jury in the Eastern District of Pennsylvania found Timothy McGee guilty of insider trading based on his use of information he received from a fellow member of his AA group. McGhee was a financial adviser for Ameriprise Financial Services Inc. As you may recall, a corporate executive of Philadelphia Consolidated Holding Corporation ("PHYL") who was also a member of McGhee's AA group spoke to McGhee about his struggles arising out of the stress created by the pending acquisition of PHYL. McGee used that knowledge to purchase PHYL stock in advance of the acquisition transaction, netting almost $300,000 after the company went public. In less than four hours, a jury determined that McGee was guilty of acting on insider information. Sentencing has been scheduled for February 20, 2013 and McGee could face up to 25 years in prison. In addition, McGee also faces a civil suit, which had been stayed pending the outcome of the criminal trial, based on the $1.5 million that others netted from his disclosure of the information.

November 8, 2012

Internal Investigations and Attorney-Client Privilege: CAVEAT SPEAKER

592542_businessman_walking.jpgJoseph M. Elles, Carter's Inc.'s former Vice President of Sales, is facing federal criminal charges alleging that he aided Carter's in misstating its income in various Securities and Exchange Commission filings. The case is United States v. Elles, No. 1:11-CR-445 (N.D. Ga). Elles has objected to the government's attempts to introduce into evidence statements that he made to attorneys conducting an internal investigation for Carter's. (See U.S. v. Elles Response in Opposition to Motion to Admit Defendant's Statements.pdf) The government contends that Elles admitted his guilt during the course of a seven hour interview with counsel that conducted the internal investigation. Elles disagrees, arguing that his statements are "a far cry from the elements necessary to prove guilt beyond a reasonable doubt as alleged."

Elles raises several arguments why his statements should not be admitted. First, he claims that his cooperation with the internal investigation was coerced because Carter's said it would withhold his severance payments if he did not participate. He also attacked counsel's motives, calling them "former SEC and AUSA attorneys [who] were working hand in glove with prosecutors." As proof of this collusion, Elles pointed out that Carter's immediately waived privilege and turned over his interview to the FBI and the United States Attorney's Office the day after the interview was conducted. Elles also argues that if the portion of the interview that the government seeks to introduce is allowed, that he should be allowed to introduce other portions of his interview (which was summarized by counsel in a 33 page memorandum) and to cross examine the attorneys who conducted the interview to explain the context of his statements and to demonstrate that, as Vice President of Sales, he was not responsible for deciding how "accounting issues" were to be reported on financial statements.

Mr. Elles' co-defendant, Carter's former President, Joseph Pacifica, has similarly objected to the admission of statements he made to counsel during Carter's internal investigation.

This case highlights a critical dynamic concerning internal corporate investigations. Corporate employees who cooperate in such investigations do so at their own peril. The corporation will ultimately decide whether to assert or to waive privilege. And where, as here, the corporation decides to waive privilege, an individual employee who is incriminated by information over which privilege is waived has little recourse or ability to stop the damage. Our rule, therefore, for corporate employees deciding whether to participate in an internal investigation is caveat speaker.

September 14, 2012

Recent Ninth Circuit Decision Further Muddles Treatment of AWCs

by Robert Vaughan Cornish, Jr.

836705_wallstreetbroadway.jpgEntities and individuals subject to discipline or review by the SEC, CFTC or self-regulatory organizations such as FINRA or the NFA are sometimes faced with the classic Hobson's Choice of settling allegations of misconduct under what is called an "Acceptance Waiver & Consent" or AWC. Notwithstanding one's desire to settle such matters and the truth regarding such allegations, AWCs often recite the facts as they were originally pled or recited by the regulatory body in its original submission that commenced the proceedings. These AWCs tend to find their way into related civil litigation, whether in court, arbitration or before other administrative bodies, for a variety of purposes. AWCs have been submitted as evidence of prior conduct, knowledge of prior conduct or the proclivity to engage in similar conduct.

A recent decision by the United States Court of Appeals for the Ninth Circuit, United States v. Bailey, No. 11-50132 (9th Cir., August 27, 2012), addressed the admissibility of AWCs in criminal proceedings and determined that AWCs are not admissible to demonstrate intent and knowledge of wrongful conduct. In Bailey, the SEC sought to introduce an AWC concerning violations of federal securities laws as evidence of knowledge of the defendant's criminal conduct. The District Court below permitted the AWC to be admitted into evidence at the defendant's trial for criminal violations of federal securities laws. The defendant was convicted and subsequently appealed, arguing that the admission of the AWC was prejudicial. The Ninth Circuit agreed. Of particular importance was the Court's recitation as to why AWCs should generally not be admitted as evidence of knowledge of wrongful conduct:

A defendant may settle a case for a variety of reasons. He may have committed the conduct alleged in the complaint [upon which the AWC is based] or he may not have - but having settled the claim, there is no way to know. Admitting prior conduct charged but settled with no admission of liability is not probative of whether defendant committed the prior conduct, much less whether he committed the conduct in question. There is no logical relevancy to admitting this type of evidence.

This post continues after the jump.

Continue reading "Recent Ninth Circuit Decision Further Muddles Treatment of AWCs" »

August 28, 2012

Forensic Linguistics: An Area to Keep In Mind In Investigations and Litigation

331980_paper_3.jpgBy analyzing syntax and linguistic patterns an expert can, on occasion, reach reasonable conclusions as to whether a particular individual authored a document. This can be a crucial matter in an internal investigation or in the defense of a crime. A lengthy recent article in The New Yorker Magazine (July 23, 2012, J. Hitt), entitled "Words on Trial", discusses the subject in an entertaining and informative way and would be helpful for the reader seeking more detail. Even if such analysis can't conclusively prove a specific person wrote a document or uttered a phrase it can be helpful in cutting down the number of suspects to a more easily investigated group.

The field of forensic linguistics received considerable attention in 1996 when it was partially responsible for solving the Unabomber case. Within a few days of publishing the Unabomber's Manifesto the FBI received tips from over a dozen people, including the Unabomber's brother, that the mode of expression, vocabulary and syntax of that document was similar to Ted Kaczynski's utterances. The Manifesto made repeated use of the terms "chimerical" "anomic" and "cool headed logicians" as well as the phrase "you can't eat your cake and have it too." People personally familiar with Ted Kaczynski immediately recognized these phrases as catchwords of his and the focus of the far ranging investigation was immediately and very effectively tightened to just him.

Historically, forensic linguistics has been used in a common sense way. In the Old Testament, at Judges12:6 an early use is made of forensic linguistics. In that passage it is recounted that after a melee between a tribe of Israel (the Gileadites) and their enemies (the Ephramites) a number of Ephramites attempted to pass as victorious Gileadites and make their escape from the battlefield. The Gileadites were able to unmask the posing Ephramites by forcing them to pronounce the Hebrew word "shibboleth". Ephramites apparently pronounced the first syllable "sib" unlike the proper Hebrew pronunciation of "shib". To quote the text, "If he say 'shibboleth' then they seized him and slaughtered him at the fords of the Jordan". Also historically in the Lindbergh Kidnapping case the prosecution made much of misspellings in the ransom note which matched errors made by the defendant Bruno Hauptmann in other contexts. The text of the kidnapping note to Colonel Lindbergh included, "We warn you for making anything public or for notify the Polise the child is in gut care." Hauptmann had misspelled "police" and used the German "gut" for good in other contexts.

This post continues after the jump.

Continue reading "Forensic Linguistics: An Area to Keep In Mind In Investigations and Litigation" »