Kathryn Keneally specializes in white-collar crime, tax controversy, and commercial litigation. In practice in New
York City, she is a member of the U.S. Sentencing Commission Practitioners' Advisory Group. She
is chairperson of the ABA Subcommittee of the Tax Section's Civil and Criminal Penalties
Committee on Department of Justice Procedures. She is a member of The Champion Advisory
Board.
A double-edged sword of white-collar criminal defense is that, in the ordinary course, my clients are intelligent, sophisticated, and often thoughtful people. Thus I am faced with the recurring need to attempt to explain to them aspects of the law, or the ways in which the legal system operates, when the law and the system are incongruous, unfair, and simply defy explanation.
Singleton Decision Was Correct,
There Is No Valid Explanation for its Vacation
For example, I have received a number of inquiries from people who have read newspaper accounts of the decision in United States v. Singleton.1 As has been widely reported, the Tenth Circuit three-judge panel in Singleton held that it is a violation of Section 201(c)(2) of Title 18 for the government to offer anything of value in exchange for, or because of, testimony. It is clear on the face of Section 201(c)(2) that such conduct is a federal felony. The Singleton decision was ground-breaking, however, because the Tenth Circuit held that when the statute made a felon of "whoever" violated this proscription, "whoever" included prosecutors; and that when the statute spoke of "anything of value," that term included "the promise not to prosecute [the witness] for certain offenses, . . . the promise to inform [state] authorities of his cooperation, and . . . the promise to inform the district court of his cooperation."2The panel decision in Singleton is clear and well-reasoned. The conclusion would seem obvious on the face of the statute. Both defense attorneys and our clients have long known that prosecutors can -- and do -- offer witnesses that which is of greatest value: leniency and freedom. In the exchange, testimony is shaped and shifted.
The Tenth Circuit vacated Singleton, and scheduled reargument en banc for mid-November. How do I explain to my clients that the Singleton panel decision did not survive ten days? How do I explain that I am not optimistic about the outcome of the en banc reconsideration, even when I can find no fault with the reasoning of the panel decision? How do I explain that the government, despite the reasoning of the Singleton panel decision, is moving forward in precisely the same manner as it did before?
The issue is not whether the Singleton panel decision is or ever will be the rule of law. The bottom line is that the Singleton decision set out a statement of fundamental fairness, which should be the rule of law. It is this sort of business as usual that I am at a loss to explain to my clients.
There Is No Reason To Ask a Defendant To Proceed
Based Solely on Trust in the Government
Of course, often my clients want to receive something of value from the government. They seek a guarantee of freedom or leniency. At a minimum they expect that when they strike a bargain, they will know what it is that they are giving, and what to expect in return.So how do I explain that the government can insist on promises from them, and can demand performance, and yet the anticipated return benefit from the government may be anything but guaranteed?
When a defendant pleads guilty in federal court, the rules require that the defendant be informed that he or she has the right not to plead guilty, the right against compelled self-incrimination, and the rights to a jury trial, assistance of counsel, and confrontation of witnesses.3 These are fundamental, indeed cherished, rights which should never be waived lightly. Thus in the course of a guilty plea, the judge will take care to determine that each of these rights is understood, and knowingly waived.
When a defendant enters into a cooperation agreement with the government, he or she may give up rights that are even more fundamental and cherished than those just mentioned. Certainly there is a loss of privacy, as once-secret conduct is detailed to prosecutors, agents, and jurors. There is a loss of control, as the witness is often at the beck and call of the government. There is the intangible price of teaming up with the government against former colleagues, associates, and even friends. For some, the process may be liberating, but for many, it is heart-wrenching.
In exchange, under the Federal Sentencing Guidelines, the government may make a motion calling to the attention of the court that the defendant has provided "substantial assistance in the investigation or prosecution of another person who has committed an offense,"4 and the court may depart from the sentencing range imposed by the guidelines. The government may elect not to make the motion, however, or it may fail to cast the cooperation in terms that adequately describe the defendant's efforts and sacrifice. Even so, the court may decide not to depart, or may not depart to an extent that fully takes into consideration the particular defendant and his circumstances. At the end of the process, when the defendant has waived his rights, entered into the bargain, performed, and suffered the real life consequences of being a government witness, there is little recourse at sentencing for any failure by the government or the court to account sufficiently for these acts.
Yet it is the only game in town, and so we play it. I can explain to a client what I may know about a given prosecutor, or a given judge, and that there is good reason to trust each player to do what is right if the client meets his end of the bargain. I can even explain that the system in general provides a motivation for the prosecutor and the court to meet the spirit as well as the words of the cooperation agreement, so that in the future, the next witness will enter into the next agreement. But I must also explain to the client that is before me at any given point, that in his or her case there is no guarantee, and there may be no remedy if the system does not proceed as hoped or expected. Unfortunately, I am not able to explain why we have a system that not only tolerates, but mandates, such uncertainty.
There Is No Way To Make a Person Understand
They Can No Longer Speak Freely
We are too often called upon to explain to clients that they can only trust that the system will work, that the government will play fair, and that the court will be just. However, it is a given that we also tell them that they must now act as if they have distrust of the very people with whom they share their work, their business dealings, and their private lives.When government agents knock on someone's door or visit someone's office, it is presumed that they are engaged in a search for truth. When the agents arrive at dinner time, or announce their presence loudly in a reception area in the middle of the business day, the intimidating nature of their conduct is not questioned, but rather is viewed as good investigative technique. When an agent shows skepticism toward a witness, or when the agent describes for the witness the potentially dire consequences of failing to recall that the events happened in a manner consistent with the government's case, such tactics are not labeled an obstruction of justice.
Yet when two potential witnesses get together to review their recollection of shared events, their conduct is innately viewed with suspicion. If one witness recalls differently after the discussion than he or she did before, the other is open to an obstruction charge. If a person under investigation inquires of a witness as to what the government agents were asking, or what the witness told the agents, such conduct may reflect understandable curiosity. Yet the line between what may be viewed as natural and what may be charged as tampering is frighteningly thin.
Therefore, we instruct our clients not to speak with anyone about any aspect of the matters under investigation, except counsel, and others in a privileged relationship. We explain to our clients that those with whom they feel they share a confidence are nonetheless not part of any privileged relationship. We cut off communication between clients and accountants, business partners, employers and employees, friends, siblings, and even parent and child. We do this at a time when people are under stress, and when the government is seeking to invade many of these relationships. We ask our clients to trust that this is the best way.
I give this advice, and I explain the reasons why it is in my client's interests to follow my advice. I cannot explain, however, why the rules do not work the same way for those under investigation as for those doing the investigating. After all, if innocence is presumed, and a fair and just result is desired, then more even-handed rules would make more sense.
It Is Nearly Impossible To Make Sense of U.S.
Cross-Border Law Enforcement
We face many difficulties in explaining the criminal law and justice system to those of our clients who live and work in the United States, and who were educated here. For those who refuse to believe that anyone ever goes to jail for the crimes of which they are accused, I keep close at hand not only the Federal Sentencing Guidelines, but a folder of newspaper clippings, which report on lengthy sentences in white-collar cases. For some, who rail against the system, I may even inquire as to whether they are registered to vote, and whether they considered issues of civil rights and liberties when they last cast their ballots. The system may not be right and fair, and it may defy explanation, but at least to a fellow citizen, I can make it understandable that it works the way it does.Recently, however, I had the privilege of representing a South American businessman and his sons. These men were decent, hard-working people. All of their business activities were in their country, a country that is known for its respect for legal systems. Unlike neighboring countries, their country was one largely untouched by narcotics trafficking.5
Among the father's many businesses was a passive investment in a money exchange, or cambio, operated by his brother. To his great misfortune, a man presenting himself as a Mexican doctor exchanged currency at the cambio. Unfortunately, this Mexican doctor was fronting for a high-level narcotics trafficker, and together they were seeking to establish a base of investment in my client's country. Also to my client's misfortune, the doctor and his accomplice sought to purchase a home from my client's wife.
Many others in my client's country were also fooled by the front presented by these narcotics traffickers. To my client's unique detriment, however, he and his sons maintained bank accounts in a U.S. bank.
With no more information than that funds had transferred between one of these U.S. accounts and an apparent drug dealer, and that currency had been exchanged with a drug dealer in a foreign country, the government seized and commenced forfeiture proceedings against all of the accounts of all of the family members.6
Thus I found myself explaining that under the U.S. forfeiture laws, the government could -- and indeed did -- wreak such havoc based on nothing more than probable cause. I explained that the burden of proof was now on my clients to prove that they did not know or have reason to know that the persons with whom they conducted arms-length business dealings were drug dealers.7 I explained that the U.S. government exercised its authority over my clients -- who were neither citizens nor residents of this country, and who did not conduct business here -- based on activities that had taken place outside the United States, solely because the transactions were conducted in American dollars through domestic banks.
To the credit of the prosecutors involved in this matter, we proceeded systematically through proffer sessions and negotiations to resolve this matter expeditiously. Most of the funds for most of the family members were released quickly. In the settlement my clients agreed not to dispute forfeiture of the amount of money that corresponded to the transactions with the two men who were drug dealers, in exchange for the release of the balance of the funds. My clients thought this resolution was one of pure pragmatism, not justice. They had merely engaged in arms-length business transactions that were routine in their country. As a result, they saw considerable assets tied up and put at risk under U.S. law, and they were placed in the position of bearing the burden of proving a negative -- that they did not know or have reason to know that the Mexican doctor and the businessman with whom they did business were in fact narcotics traffickers.
The point in time that best summarized the situation from my perspective came when I was interviewing a witness in the South American country. The witness, a law professor and a member of a prominent family in his country, had been retained by the Mexican doctor and the businessman to negotiate the purchase of the house from my client's wife, and to assist in other business transactions. He was one of many who saw no reason to suspect the Mexican doctor and the businessman. When I explained the forfeiture proceedings that had been commenced in the United States, and the burden placed on my clients, he said succinctly, "Tell your government that your country has dumb laws."
Miscellaneous Incomprehensible Rules of Law
In United States v. Balsys,8 the Supreme Court recently held that the Fifth Amendment privilege against self-incrimination cannot be invoked against compelled testimony which would tend to incriminate the witness under the laws of another country. The Court made this ruling in the context of deportation proceedings; thus, if the proceeding resulted in deportation, the witness would be sent to the very jurisdiction whose laws created the concern of self-incrimination. The analysis of the case can be explained, but the result cannot be justified. If it is fundamentally repugnant, and a violation of our Constitution, to compel testimony that might then be used against a witness, there is no comprehensible basis to allow the United States government to compel testimony that can and will be used against the witness by a foreign government.In United States v. Watts,9 the Supreme Court held that acquitted conduct may be considered in determining a sentence under the Federal Sentencing Guidelines. Again, the analysis may be explained, but the result is simply wrong. The Sentencing Guidelines are not "guidelines" in the true sense, because too much of the computation under them is mandatory. By including acquitted conduct in the calculations, the decision in Watts did not merely uphold the inherent authority of the sentencing court to consider evidence of crimes beyond the counts of conviction. As the guidelines operate, far too often the inclusion of acquitted conduct makes a mandated sentence more harsh.
These are two recent Supreme Court decisions that are now accepted statements of law. I can explain the holdings, but I cannot explain to my clients how a just system can operate in this manner.
Sometimes, we can say little more by way of explanation than to repeat that the law is what it is just because: because Congress said so, because the Court said so, and not for any more rational reason than that. Sometimes I am left with nothing more to say than I know that what I am describing as the law or the system makes no sense, and should not be the way it is. Sometimes I seek to buy some solace by telling my clients, and myself, that I have gone so far as to put into writing my problems with and objections to how the system is; indeed, that is the motivation for this column in particular, and for several others.
At the core, always, I recall the first and most fundamental issue that made me realize that our criminal justice system is too frequently the product of irrationality and even prejudice. After all, the government in this country kills people to show people that killing people is wrong.
Notes
1.No. 97-3178 (10th Cir. July 1, 1998), vacated, rehearing en banc granted, 144 F.3d 1343 (10th Cir. July 10, 1998).2. The quoted language is from the panel decision of the Tenth Circuit in Singleton. When the decision was vacated, however, it was apparently also removed from publication. Thus the panel decision in Singleton is unavailable in the Federal Reporter and on LEXIS.
3. Rule 11(c)(2), Fed. R. Crim. P.
4. U.S.S.G. 5K1.1.
5. For more details, see How Money Laundering Hit a Wealthy Family, The Wall Street Journal, May 6, 1998.
6. See 18 U.S.C. 981.
7. For a good overview of the forfeiture laws on these issues, see I. Comiskey et al., Tax Fraud and Evasion, Vol. II, Chapter 13 (Warren Gorham & Lamont 1994); R. Fink, Tax Fraud, 16A.04 (Matthew Bender 1997).
8. 188 S. Ct. 2218 (1998).
9. 519 U.S. 148 (1997).
Readers with ideas, comments, information etc., are welcome to contact:
White-Collar Crime
Kathryn Keneally
230 Park Ave
Suite 1140
New York NY 10169
Phone (212) 808-8100
Fax (212) 808-8108