Oklahoma Criminal Defense Blog

Given the scope of the financial meltdown of 2008 and the suspicions of some wrongdoing to explain it, everyone has been expecting some big time prosecutions.  Not much so far.  Lee Farkas may be the biggest thing so far, and he isn’t all that big.

Farkas was a mortgage industry executive, chairman of the firm of Taylor & Whitaker in Florida.    He was accused of carrying out one of the largest bank fraud schemes in history.  He caused the failure of Colonial Bank, resulting in the loss of billions for investors and the federal government.  However, his firm was not a large one, and his deeds began long before the financial crisis, so it really had nothing to do with the meltdown.

There was a prosecution in 2009 against some Bear Sterns hedge fund managers that resulted in an acquittal.  Recently federal prosecutors dropped an investigation into Angelo Mozilo, the former head of subprime lending giant Countrywide Financial.  He’s the one who testified to Congress that his performance at Countrywide was better than Warren Buffet’s performance at Berkshire Hathaway was for the same period.   The statement was correct, but it omitted the period immediately after that period when Countrywide’s performance dropped off a cliff, so the statement was grossly misleading.   He would have been a wonderful fish for the feds to fry.

U.S. District Judge Leonie Brinkema sentenced Farkas to 30 years.  There is no parole in the federal system.   The government asked the judge to impose the maximum sentence of 385 years, or, in the alternative, a sentence of at least 50 years so Farkas would spend the rest of his life in prison.    The criminal defense attorneys for Farkas asked for a 15-year sentence, so they certainly acknowledged the prospect of a significant sentence.  In addition to the 30 years in the sentence, the judge ordered Farkas to disgorge about $38.5 million.

Former fellow executives of Farkas decided to cooperate with the government to improve their chances at a sentence.  The former chief executive and treasurer of Taylor, Bean pled guilty and agreed to testify against Farkas.  Their sentences ranged from 3 months to 8 years.

Farkas did not plead guilty.  After 10 days of trial, the jury found him guilty on all 14 counts of securities, bank and wire fraud and conspiracy to commit fraud.   The government’s case was that Taylor, Bean was facing losses, and they schemed to hide the losses.  In 2002, a they began to secretly overdraw Taylor, Bean’s accounts at Colonial Bank and sold Colonial $1.5 billion of worthless and fake mortgages.  The U.S. Government guaranteed the worthless loans.

As things bled, Farkas persuaded Colonial Bank to seek $570 million in taxpayer bailout funds to staunch the flow.  After initially approving this payment, the U.S. Treasury canceled the order.   Colonial then filed bankruptcy in 2009, the 6th largest bank failure in U.S. history.   Farkas was busy spending $40 million from Taylor, Bean and Colonial to fund his fancy lifestyle for usual things: private jet, vacation homes, a collection of classic cars.

At sentencing, the judge did not think Farkas was remorseful but just regretted getting caught.  That’s never good to have the sentencing judge to believe that about you, but federal judges are sophisticated about human nature and the fine art of sentencing, so such things are just part of the mix to them.  Sentencing is an art that has generated lots of literature, lots of theories and opinions and speculation, some science, but requires a strong will to wield.

Bernard Madoff swindled billions of dollars from his investors for years, but once caught, he promptly pled guilty to the criminal complaint filed against him in federal court.  He did not plea bargain with the government.  He just took his medicine.  Well, maybe.  That way, just pleading to the Complaint as Madoff did, he did not have to give an interview with the prosecution and answer all those detailed questions about where the money went and to whom.

Madoff admitted his guilt to the 11 counts filed against him, including counts alleging fraud, money laundering, and perjury.  Madoff then returned 3 months later, on June 29, 2009, to the courtroom to find out what sentence he would receive.  Considerable motions and memoranda were filed in preparation for the sentencing hearing.  Madoff’s criminal defense lawyers had asked United States District Judge Denny Chin for a 12-year sentence.  The presentence report from the probation department recommended a 50-year sentence, and the United States Attorney asked for a 150-year sentence, the maximum sentence under the advisory guidelines, achievable only by running the maximum sentence for every count consecutive to the other counts.

As the judge pondered an appropriate sentence, a just sentence, he considered what the judge described as the unprecedented scale of Madoff’s crime, its duration over 2 decades, and the thousands of victims it harmed.   Originally, it was believed that Madoff had caused losses in the neighborhood of $65 billion, but the court-appointed received after investigation estimated investors’ losses at about $10 billion.  The judge reflected also that none of the counts to which Madoff carried a life sentence, but any sentence that totaled over 15 or so years would probably be an effective life sentence in light of Madoff’s age.

Of course, Madoff’s lawyers urged the lower sentence in order to give Madoff some sliver of hope he might get out before he died.  They also argued Madoff should be given credit for pleading guilty without bargaining with the government, but, as noted above, Madoff could have had his own selfish motive for taking that path.

Madoff personally addressed the court in his allocution, expressed regret and apologized to the public, the court and the victims of his Ponzi scheme, some of whom were present in person.   The judge had already read a number of letters from victims of Madoff’s scheme.   He found many had lost their life savings, many had lost their trust in the financial system, faith in humanity, suffered loss of dignity.

The judged was struck by one man who had invested his life savings with Madoff and died 2 weeks later.  The man’s widow then met Madoff, who told her not to worry and that her money was safe.  Trusting Madoff, the widow then invested her own 401(k) with him.   That is the kind of damning story that might have gotten lost in the numbers.  But it wasn’t, to Madoff’s detriment.  And, midst all the letters written by these victims of Madoff, the judge received not one letter written on behalf of Madoff.

Judge Chin sentenced Madoff to 150 years in prison.   He explained that Madoff did not deserve a lower sentence, that the punishment should be in proportion to the blameworthiness, and Madoff’s conduct was  “extraordinarily evil.”  The judge thought the 150 year was, among other things, symbolic, and that it should be symbolic given the enormity of Madoff’s crimes.  The judge also doubted Madoff was genuinely remorseful, although that probably would not have changed the sentence rendered.

Speculation continues about why Madoff did it.  He had to know he would get caught.  All Ponzi schemers know they will get caught.  Was it just for the fun of it?   Psychopaths lie, manipulate, and deceive in sometimes similar ways.  People always wonder why someone would do something like this, but there is never a good answer.

The federal Bureau of Prisons projects Madoff’s release date for the year 2039, but it is considered academic given Madoff’s age.   He is serving his time at the medium security Federal Correctional Facility at Butner, North Carolina.  Medium security is not a country club. Meanwhile, Judge Chin was nominated to the U.S. Court of Appeals for the Second Circuit, where he now serves.

First, it was Barry Bonds.  Next, it is Rogers Clemens, and, after that, maybe Lance Armstrong.  The cost to the federal government so far, including the investigation of BALCO (Bay Area Laboratory Co-Operative), is over $50 million.  Whether it’s worth that brings different responses.   Proponents insist it is worth it for the “integrity of sports” or perhaps for the “integrity of the justice system,” since the government ended up taking Barry Bonds to trial on perjury that had been committed during the investigation.  Similarly, Roger Clemens will be prosecuted for perjury committed in his voluntary giving testimony to Congress.  Opponents insist the $50 million (and counting) could be well used at catching real criminals or otherwise spent by the federal government.

The investigator who has made it all happen is Jeff Novitsky.  He is now employed by the Federal Drug Administration’s Office of Criminal Investigations, but he was an IRS agent when he began the investigation of BALCO and famously searched the dumpster outside its company headquarters in Burlingame, California.  Novitsky has been digging for nine years now.  Until the Barry Bonds trial, Novitsky had succeeded in convicting ten of the eleven charged from the BALCO investigation, including a confession from Olympic sprinter Marion Jones.  Bonds was convicted on one count of perjury, the jury having hung up on three other counts.  There is strong speculation that the trial judge in Bonds’ case will not sentence him to hard time, however.

Novitsky served a subpoena on the laboratory that tested the confidential drug results from Major League Baseball, showing he is willing to squeeze the privacy of anyone whom he perceives as bad guys or anyone at all who can fit into his quest for evidence.  Criminal defense lawyers are well-acquainted with law enforcement heroes who will are willing to “whatever it takes.”   And that is a dangerous attitude to take for those with all the power possessed by federal law enforcement, dangerous to citizens, that it.  Maybe Novitsky is not that dangerous, but you might have a tough time convincing the baseball players as they watch leaks in the press about who failed those “confidential” tests.  Major League Baseball and the player’s union are still fighting to keep these results confidential, notwithstanding those leaks to the press.

Some question the use of the Federal Drug Administration to prosecute the use of steroids by professional sports participants as not even a “danger to the public health.”  Only one U.S. Representative has raised significant questions in hearings before the Congress about Novitsky’s unending investigations, but now Novitsky may get help pursuing Armstrong from other agencies, like the I.R.S., the F.B.I., the D.E.A.  INTERPOL may even get involved.

One angle of investigation the government may take against Lance Armstrong is whether he or his teammates misappropriated money from their team sponsored by the United States Postal Service in 2002 -2004 to purchase performance-enhancing drugs.  That could lead to charges of fraud and illegal importation.  Former Postal Service teammate Floyd Landis has allegedly said the team sold 60 new bicycles to finance the purchase of steroids, and Landis is allegedly in contact with Novitsky.

One area of concern to a criminal defense lawyer is that both Barry Bonds was, and Roger Clemens is, charged with perjury that they could have avoided.  Barry Bonds could have insisted on immunity before testifying to the grand jury before which he was convicted of perjuring himself.  Similarly, Roger Clemens did not have to testify before Congress without immunity.  Surely his criminal defense attorneys told him that.  But Clemens did testify, without a grant of immunity, and he will face trial next month for perjury in that testimony to Congress, in denying he took steroids.

Although the statute of limitations on Armstrong’s activities has or will soon run, all the government needs to do to restart the statute is to issue another subpoena and get a new piece of evidence for a new count.  At least Armstrong has been smart enough not to volunteer to testify.

But now there is a new wrinkle the government is investigating: witness intimidation.  Just this month, the F.B.I. requested surveillance video from a restaurant in Aspen, Colorado.  The bureau wants to know more about a confrontation between Armstrong and his former teammate, Tyler Hamilton.  Hamilton testified last year to a federal grand jury in Los Angeles, and he appeared on a television program telling about a systematic scheme for using dope by the U.S. Postal Service team.

Armstrong has a house in Aspen and is a regular at the Cache Cache restaurant there.   According to Hamilton’s lawyer, Armstrong held out his arm to block Hamilton and began berating him.  It was Hamilton’s lawyer, Chris Manderson, who called the F.B.I. about the incident, quoting Armstrong as saying, “We’re going to destroy you on the witness stand and we’re going to make your life a living hell.”

However, according to the Jodi Larner, co-owner of the restaurant, Armstrong spoke to Hamilton but never left his barstool.   Tony DiLucia, a patron standing next to the two of them, said he could not hear what was said but could tell from the body language that things were not combative.  He said he nothing aggressive.

Larner later on that evening told Hamilton he was not welcome to come back to the restaurant because his group did not tip their server.  The next day she received threatening voicemails because she had stood up for Armstrong the night before.

When the F.B.I. investigates something, it is with the prospect of presenting their evidence in federal court.  That is likely what the F.B.I. had in mind when a dozen agents showed up in April, 2010, at the Muscogee (Creek) Nation headquarters in Okmulgee, a federal prosecution.  The F.B.I. has for the last year been conducting an undercover investigation of the Muskogee Creek tribe tobacco activities.  F.B.I. investigations are notoriously thorough – and lengthy.

But the Muscogee Creek tribe wasted no time.  The following month, last May, the tribe filed charges in tribal court alleging at least some of the matters the federal authorities would want to prosecute in federal court.   The federal government, via the local United States Attorney in the Eastern District Attorney of Oklahoma, then obtained a preliminary injunction prohibiting the tribal court from proceeding with the prosecutions.  The tribe’s special prosecutor, Rod Wiemer, has appealed the issuance of that injunction to the United States Court of Appeals for the Tenth Circuit, and the tribal prosecutions are on hold until the Appeals Court rules on that.

Muscogee Creek Chief A.D. Ellis says he is the one who got it all started.  He says he has been telling everyone who will listen for the last three years to look into the activities of the tribe’s business arm, the Trade and Commerce Authority.  He claims Dana Johnson, former tribe tax commissioner, left him $3600 in an envelope given her by Randy Benham.  Ellis claims the F.B.I. now has 40 agents working undercover to investigate the tribe’s tobacco dealings.  Of course, the F.B.I. has no comment, referring all inquiries to the U.S. Attorney’s office, which neither confirms nor denies an investigation was in progress.

The tribe has charged three people with bribery (i.e., accepting bribes from tobacco wholesalers):

Dana Johnson, former Muscogee Creek Nation Tax Commissioner, is charged with 4 counts of bribery, to wit: accepting bribes from Randy Benham, former president of Briggs Wholesale Tobacco, and from Marvin Wesley of Seneca-Cayuga Tobacco Company;

Gene Antone Lee, former warehouse manager for the tribe’s Trade and Commerce Authority, is accused of 3 counts of bribery, including one from Benham;

Edward Warrington, also a former warehouse manager for the tribe’s Trade and Commerce Authority, is charged with one count of taking a $7600 bribe from Benham.

The tribe has also charged eleven people with embezzlement from the tribe’s Duck Creek
Community Center in Beggs.  A couple of these, Jeanetta Carr and Cecil Harry, are accused of embezzling over $100,000, and another five of them between $15,000 and $40,000.

The Randy Benham named above pled guilty last November in federal court in Mississippi to defrauding Mississippi, South Carolina, and and United States of $20 million in cigarette taxes and proceeds and money laundering.

The Oklahoma Tax Commission has a lawsuit pending that alleges the Creek Nation maintained a warehouse in Okmulgee to stock contraband cigarettes for distribution.  The Muscogee Creek Nation, 71,000 enrolled citizens strong, has no cigarette compact with the State of Oklahoma for five years.   Chief Ellis says in the past he thought handling Indian-made cigarettes was justified by the tribe’s sovereignty but now believes the tribe should enter into a compact.

Meanwhile, Doug Burnett, speaker of the the National Council of the Muscogee Creek Nation, he was not aware of any investigation by the federal government and the council is not investigating anything because there is no evidence to investigate.  While those statements may be technically correct, would not they cause anyone, criminal defense lawyer or anyone else, to wonder a little about what is going on?

The Attorney General in the State of New York has limits to his criminal jurisdiction that are surprising, given the high profile prosecutions the office has pursued in recent years.  Last summer, candidates for the attorney general post asked the governor to give the new attorney general enhanced powers under New York’s Executive Law, giving permission to inquire into “matters concerning the public peace, public safety and public justice,” including the power to subpoena records and compel testimony.

Now the state comptroller, Thomas DiNapoli, has joined with the new attorney general, Eric Schneiderman, in an agreement to work together to prosecute criminally what they believe is corruption involving taxpayer’s money.  They call it a joint task force on public integrity, and they will focus on legislative earmarks, state pensions and government contracts.   DiNapoli has also agreed to refer any findings from their joint investigation to Schneiderman for criminal prosecution.

There are still matters the attorney general cannot prosecute.  He cannot investigate or prosecute violations of election laws or the legislature for any offenses unrelated to expenditures of public money, such as failure to disclose outside income.    These are areas Governor Cuomo wants to pursue in an ethics proposal to the legislature.  If that fails, the governor can appoint an investigative commission under the Moreland Act, but such commission would be unable to prosecute criminally any violations it uncovered.

What the attorney general’s agreement with the state auditor does enable him to do is look into a number of issues that have plagued the state for some years: fraud in the public authorities, padding of pensions, no-show jobs, and abuse of legislative earmarks.

State law prohibits the attorney general from investigating on his own public officials for violation of campaign finance laws, violations of ethics laws or even taking bribes.  For that reason, major investigations of state officials have been undertaken by district attorneys or federal prosecutors.  But the attorney general has sometimes been able to pursue corruption cases.  When now-Governor Andrew Cuomo was attorney general and using laws empowering him to investigate securities and charities, investigated the state pension fund and Bronx state senator, Pedro Espada, Jr.

Schneiderman is wasting no time in pursuing his new agreement.  He has already subpoenaed a development corporation and its prime contractor in regard to a $224 million upgrade performed on Monroe County’s emergency communications system.  The subpoenaes were served with notices from the state auditor’s office, giving notice to the officials of the auditor’s intent to conduct an audit.

State Auditor DiNapoli’s agreement with an attorney general never would have happened with Schneiderman’s predecessor, Andrew Cuomo.  Cuomo investigated DiNapoli for four years in an investigation into “pay-to-play.”  The investigation resulted in the conviction of DiNapoli’s predecessor, Alan Hevesi, Cuomo publicly cleared DiNapoli of wrong-doing only days before DiNapoli’s election.   Cuomo did not endorse the fellow Democrat for reelection, and the two squabbled over pension abuse cases and their competing proposals to control influence-peddling at the State Pension Fund, which is the responsibility of the auditor.   And DiNapoli, also a former state senator as is Schneiderman, has introduced legislation to allow his office to inspect wage records to determine when retired public employees are collecting full pensions while working at public jobs, i.e., “double-dipping.”

Suzanne Wooten was sworn in as judge of the Texas 380th District Court in January, 2009. She defeated Charles Sandoval in the 2008 Republican primary. Sandoval had held the judgeship for the 12 previous years and had never previously had an opponent.  The 380th District Court is in McKinney, Texas, in Collin County, the county immediately north of Dallas County.

Collin County District Attorney John Roach has been investigating now-Judge Wooten, apparently for election fraud.  This investigation has been going on for a year, and Peter Schulte, a lawyer representing Judge Wooten says that is too long to keep her under a cloud of suspicion.  Roach’s office has presented evidence to several grand juries, but has never asked the grand jury for an indictment.

In Texas, as in United States District Court, all criminal charges must come for the indictment of a grand jury.  Oklahoma law permits, in addition to proceeding by indictment, the signing of an Information by the prosecuting attorney to initiate such charges.  Without an indictment, there are no criminal charges. Grand juries are in session for only so long, to be replaced by a grand jury with different members.  The grand jury that hears the evidence must act on that evidence to decide whether to indict.

Now Judge Wooten, through her lawyers, has filed an objection to this continuing saga in a 12-page document.  She claims Roach is seeking her resignation, saying this latest grand jury, possibly the fifth grand jury to be used to invade her private, personal and professional life for purely political, harassment and/or intimidation purposes.  She claims the judge she defeated, Charles Sandoval, met with district attorney supervisors the day after the election and said Sandoval believed the only reason he lost was that Wooten “must have cheated.”  She offered to talk to prosecutors several times but was not accommodated.  According to Peter Shulte, Assistant District Attorney Chris Milner, chief of the special crimes unit, mentioned election fraud but refused to give any specific allegations that were being investigated.  Milner allegedly encouraged Wooten to resign, and Schulte claimed, even urged Wooten to resign immediately before authorities took “her law license, her family, her home, her liberty and her reputation.”  If those words were indeed used, that is the most gross of threats. It is so strong, it sounds like a bluff.

Roach asked the Texas attorney general’s office a year ago to assign a prosecutor to the investigation.  Assistant Attorney General Harry White wanted Judge Wooten to appear before the grand jury a week ago, but a judge ruled that the grand jury’s term ended and evidence would have to be presented to a future grand jury.  District Attorney Roach says he is not directing White’s investigation.  Another grand jury begins this month.

Now three former prosecutors who served under District Attorney John Roach have criticized the lingering investigation.  Sharon Curtis, Mitch Nolte, and Hunter Biederman, have spoken out publicly against the length of time it has taken to investigate without bringing charges. One said even the most complex of cases should not take more than two or three months to go to the grand jury.

Roach’s response is to essentially a stone-wall and to criticize his criticizers.  He responded that the case against Wooten is taking so long because it is complicated but would not elaborate.   He said Wooten could have ended things if she had agreed to appear before the grand jury last week.  Wooten’s lawyer, Peter Shulte, however, said Wooten said she received only 48 hours notice after a year-long wait.  He said a sitting district judge was entitled to more notice than that.

Roach has been district attorney since 2002 and has not filed for re-election in this year’s Republican primary.  His term of office will end December 31st.