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Call an attorney before responding to an SEC subpoena February 18, 2010

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Receiving a subpoena from an SEC can be a  confusing and troubling situation.  The SEC subpoena will just be asking for documents.  You probably won’t know exactly who or what they are investigating.  As a result, too many people underestimate the seriousness of the situation.  This is compounded by the fact that the SEC does not prosecute cases; that’s for the Department of Justice. 

The SEC may not give any indication to your attorney as to what is going on.  Regardless, a good attorney with experience in these matters should be able to piece things together within minutes.  Once your attorney figures out which way the wind is blowing, he or she should be setting a detailed plan in motion that will cost you some money but, in the end, could save your life.

The first questions to answer are, what is your criminal liability (if any)?   Are you the target of the investigation or just a witness? If you are not the target of the investigation or you don’t have any criminal liability, then you can focus on whether you may be facing any civil or regulatory issues.  Unfortunately, too many attorneys never even ask these questions.  They process the subpoena, shelve the file and hope for the best.  This is truly sad as it can lead to disaster for the client.

If you have criminal liability, trial prep has to start today.  This is the most difficult concept for clients to understand.  As a result, I’ve had people walk out of my office thinking I’m the crazy for suggesting that.  Ironically enough, I’ve read about several of them in the paper months or years later when they are entering a guilty plea or going off to prison.  However, I’ve also had clients that took my advice and they have not been charged, let alone found guilty.  I think the results speak for themselves.

When I say trial prep starts today, I’m not kidding either.  Notice I skipped right over the subpoena?  I’m going to start assessing the entire case and working it up before the subpoena is processed.  I usually want not only all of the documents referenced in the subpoena but in some cases, I want every paper my client has in his/her possession.  Of course, I tailor  it to the case.

Getting back to the SEC subpoena, a good attorney does more than just pass documents from you to them.  Research must be done to determine if the subpoena is valid, over broad, etc.  As with any subpoena, the more you can narrow its focus, the better for your client.  While challenging subpoenas can be expensive, they may yield important information about the investigation behind the subpoena itself.  When it comes to fighting for a client, information is power.

Moving forward in the trial preparation, the next focus should be on possible witnesses and whether or not they should be interviewed.  Even many fellow attorneys might think that this is crazy.  As a result of one subpoena, I’m interviewing witnesses?  Yes. Its not for everyone but tell my client that walked away without an arrest while about a dozen other people associated with his case went to prison.  Ask him if our tactics were overkill.

Finally, all of the legal research needs to be done.  This includes possible charges, defenses, motions, other legal issues and sentencing.  Trial prep does include sentencing research.  A client can change their mind at any time.  You have to be ready to discuss a plea and explain to possible risks to the client.  Furthermore, you may be able to work  on mitigation evidence now to get a lower sentence. 

Keep in mind that not every SEC subpoena requires this level of work.  Every case is different and all options must be on the table.  Most importantly, all options need to be explained to the client so they can make an intelligent decision about how the case should proceed.

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Defenses to receiving child pornography must take into account all facts February 14, 2010

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Because I see so many pleas to receiving/distribution of child pornography, I think lawyers just assume that receiving/distribution of child pornography goes hand in hand with possession. Of course, this is not the case. Sometimes a lawyer needs to concede possession and fight the receiving/distribution charge. Unfortunately, this is not always done with great results. Lawyers cannot just rely on an expert to tell them if the receiving/distribution charge is valid and what the defenses should be. They need to know the law and the facts for themselves so both can be weaved into trial the trial theme via cross examination, openings, closings, etc. Most importantly however, they must also address all of the facts.  

When possession is conceded, the defense will be that the receiving of the child pornography was accidental. In U.S. v. Miller (2008), the Third Circuit set forth an excellent review of the legal and factual analysis involved in determining if the knowing element exists. Unfortunately for Mr. Miller, it seems like his defense did not include a complete analysis of all of the facts. In Miller, the Court said:

The evidence required to establish the intent-element of § 2252A(a)(2) may be greater than that required to establish the intent-element of § 2252A(a)(5)(B) because, while a person who

knowingly receives” child pornography will necessarily “knowingly possess” child pornography, the obverse is not the case. Cf. United States v. Myers, 355 F.3d 1040, 1042 (7th Cir. 2004) (upholding sentencing calculation for defendant who received videos and computer-generated image files

depicting minors engaged in sexually explicit conduct, in violation of § 2252). In Myers, the court observed that “a person who seeks out only adult pornography, but without his knowledge is sent a mix of adult and child pornography,” could not be found guilty of knowingly receiving child pornography.

Id. “That same person, however, could be in violation of the possession provision of § 2252(a)(4)(B) if he or she decides to retain that material, thereby knowingly possessing it.” Id. It follows that the quantum of evidence required to prove knowing receipt of a downloaded file may, in some situations, be greater than that minimally required to prove knowing possession of the file.

More difficult is the question whether Miller received the images knowingly. Other courts, confronting this question, have deemed at least four factors relevant to this inquiry: (1) whether images were found on the defendant’s computer, see United States v. Irving, 452 F.3d 110, 122 (2d Cir. 2006); (2) the

number of images of child pornography that were found, see id. (finding defendant’s possession of 76 images relevant); (3) whether the content of the images “was evident from their file names,” United States v. Payne, 341 F.3d 393, 403 (5th Cir. 2003) (finding “number of images in [defendant’s] possession, taken together with the suggestive titles of the photographs” established knowing receipt); and (4) defendant’s knowledge of and ability to access the storage area for the images, see Romm, 455 F.3d at 997-1001 (addressing defendant’s ability to access cache files in hidden subdirectory); cf. Kuchinski, 469 F.3d at 861-63 (same).

We summarize the evidence bearing on these four factors:

(1) The government adduced no direct, forensic evidence that the images were downloaded onto Miller’s computer. Agent Kyle testified that it was his “educated guess” that Miller downloaded the images onto the zip disk via the Internet, perhaps by trading them in a chat room or by searching for them on a website. However, Agent Kyle went on to testify, the government had no proof from Miller’s hard drive that supported this hypothesis. Agent Price, on cross-examination, acknowledged that, despite the FBI’s use of forensic software designed to recover deleted material from hard drives, the FBI had discovered no evidence that Miller’s computer had been used to upload or download child pornography.

Agent Price further testified that there was no evidence that Miller ever used search engines to locate child pornography websites, or that such websites had ever been visited from Miller’s computer (the

FBI’s investigation did reveal, however, that two websites containing adult pornography had been visited from the computer). Agent Price also acknowledged that there was no evidence that Miller ever participated in email exchanges or online chat rooms that pertained to child pornography. Finally,

Price acknowledged that there was no evidence that Miller used a “wiping” or “eliminator” program to clear his hard drive of evidence that files had been downloaded. A. 296-97.

(2) The second factor, the number of images of child pornography found, likewise does not weigh in the government’s favor in light of the overwhelming number of adult images that were found. The government presented evidence pertaining to only twenty of the 1200-1400 images found on the zip disk, and the District Court subsequently determined, in the process of sentencing Miller, that only eleven of these images constituted child pornography. Miller contended that he was unaware of the existence of these images and, significantly, Miller volunteered the password of the zip disk to Agent Kyle, cautioning him that the disk contained pornography. Miller also presented evidence that 586 of the images were copied onto the disk at periodic intervals over a seven-hour period, suggesting that they were not individually viewed when they were being copied. Agent Price’s rebuttal to this suggestion was that Miller may have first downloaded the images onto his hard drive, or that of another computer, before copying them onto the disk. This possibility puts sharp light, however, on the facts that no forensic evidence of child pornography was found on Miller’s hard drive, and that there was no evidence adduced that another computer may have been used to download the images.

(3) Nor does the third factor, whether the content of the images “was evident from their file names,” weigh in the government’s favor. Several of the images were embedded with the names of websites that possibly advertised child pornography, but — according to Agent Kyle’s and Smith’s testimony — this does not suggest that the images were obtained from those websites. Moreover, these website names would not be seen unless a person opened and viewed the files. While there is strong evidence that Miller eventually came to view some of the images of child pornography that were on the disk, and thus to knowingly possess the images, this evidence does not lend much support to the inference that Miller knowingly downloaded the images.

(4) Turning to the fourth factor, whether the defendant had knowledge of and an ability to access the storage space for the images, it is clear that Miller had access to the images on the zip disk. Indeed, Miller admitted to storing image files, including adult pornography, on the disk. In this respect, the facts of this case are more akin to the facts of Romm, 455 F.3d at 997-1001, where the court found that the defendant’s knowledge that he could access cache files supported the inference that he knowingly possessed the files, than to the facts of Kuchinski, 469 F.3d 853, 861-63, where the court rejected this inference because the defendant was unaware of, “and concomitantly lack[ed] access to and control over the existence of the files.” In contrast to the facts before us, however, the defendant in Romm had stored images of child pornography on the hard drive of his computer, albeit in a subdirectory that was difficult for a typical computer user to access. The Romm court acknowledged that “[n]o doubt, images could be saved to the cache when a defendant accidentally views the images, as through the occurrence of a ‘pop-up,’ for instance.” 455 F.3d at 1000. However, the court concluded that this “[wa]s not the case” in Romm’s circumstance: “By his own admission . . . , Romm repeatedly sought out child pornography over the internet. When he found images he “liked,” he would “view them, save them to his computer, look at them for about five minutes [ ] and then delete them.” Id. By contrast, Miller has consistently denied that he knowingly viewed or had any interest in viewing child pornography.

 –So, you would think that Miller was out of the woods right? Not quite. I really hate to blame his attorney but I have to. His lawyer did not account for all of the facts of the case and did not appear to have really gone though the hard drive to address all of the issues. The Court went on to say that:

 “Beyond the facts relevant to these four factors, however, the evidence presents a fifth factor that may support the jury’s determination: the number of occasions that the images were copied onto the zip disk. Smith testified that the images copied onto the zip disk on October 13, 2002, were likely transferred automatically. However, images of child pornography were also copied onto the disk on subsequent dates. Specifically, according to their dates created, the eleven images that the District Court determined to actually be child pornography were copied to the zip disk on October 13, October 29, December 17, and December 20, 2002. A reasonable juror might have concluded, from this evidence, that Miller copied the images on more than one occasion.”

 –Admittedly, I don’t have all of the facts in front of me but what is Miller’s witness doing testifying to one thing when the facts show another? It seems like Miller’s lawyer did not address this issue in anyway. A lawyer must first identify all of the bad facts and then determine which are facts beyond change. If the defense cannot attack the dates then the defense must incorporate the different dates on the drive. If it doesn’t, than it is sure to fail. 

Possession of child pornography is a lesser included offense of receipt of child pornography February 14, 2010

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While it may seem like common sense, the Government actually tried to argue that possessing child pornography is not a lesser-included offense of receiving child pornography. Luckily, the Third Circuit in U.S. v. Miller (2008) saw otherwise.

In Miller, the defendant argued that possessing child pornography is a lesser-included offense of receiving child pornography, and thus that § 2252A(a)(2) (prohibiting receipt) and § 2252A(a)(5)(B) (prohibiting possession) “proscribe the same offense.” The Court stated that for the purpose of double jeopardy analysis, two offenses are the same if one is a lesser-included offense of the other under the “same elements” (or Blockburger) test. This test “inquires whether each offense contains an element not contained in the other; if not, they are the ‘same offence’ . . . .” United States v. Dixon, 509 U.S. 688, 696 (opinion of the court) (internal quotation omitted); see also Blockburger v. United States, 284 U.S. 299, 304 (1932) (“[W]here the same act or transaction constitutes a violation of two distinct statutory provisions, the test to be applied to determine whether there are two offenses or only one, is whether each provision requires proof of a fact which the other does not.”).

The Court found that, as a general matter, possession of a contraband item is a lesser-included offense of receipt of the item. See Ball v. United States, 470 U.S. 856 (1985). In Ball, a felon convicted of possessing a firearm in violation of 18 U.S.C. § 922(h) (since revised) was also convicted of receiving that firearm in violation of 18 U.S.C. App. § 1202(a) (since repealed). Applying the same elements

test, the Supreme Court concluded, in Ball, that “[w]hen received, a firearm is necessarily possessed. In other words, Congress seems clearly to have recognized that a felon who receives a firearm must also possess it, and thus had no intention of subjecting that person to two convictions for the same criminal act.” Id. at 862 (internal quotation omitted).

Drawing on Ball, the Ninth Circuit, in United States v. Kuchinski, 469 F.3d 853, 859 (9th Cir. 2006), in which the defendant was indicted both under § 2252A(a)(2) and under § 2252A(a)(5)(B), observed, in dicta, that “[i]f, as it seems, the counts were based on the same acts, entering judgment on both the offenses would be improper.” See also United States v. Morgan, 435 F.3d 660, 662-63 (6th Cir. 2005) (noting that a defendant charged under § 2252A(a)(2), who pled guilty to violating § 2252A(a)(5)(B), had pled to “a lesser-included offense of the charged violation”); United States v. Mohrbacher, 182 F.3d 1041, 1048-49 (9th Cir. 1999) (consulting dictionary definitions of “receive” after concluding that “there is no indication that Congress intended a specific legal meaning for the term”). The observation of these courts that possession of child pornography is a lesser-included offense of receipt of child pornography, though offered in dicta, appears to be correct under Ball. See also United States v. Kamen, 491 F. Supp. 2D 142 (D. Mass. 2007) (holding that possessing videotapes depicting “a minor engaging in sexually explicit conduct,” in violation of § 2252(a)(4)(B) is a lesser-included offense of receiving the same videotapes in violation of § 2252(a)(2)).

As a result, the Court concluded that pursuant to Ball, possession of child pornography in violation of § 2252A(a)(5)(B) is a lesser included offense of receipt of child pornography in violation of § 2252A(a)(2).

What is a proffer session and what should you do? January 3, 2010

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This article will explain what a proffer is, who should proffer and how a proffer works.

A proffer session, sometimes called a “Queen for a day” is an exchange of information between you, the suspect and law enforcement. You can generally admit to criminal activity and any admissions cannot be directly used against you later at trial. Proffer sessions are frequently used by law enforcement on the federal level such as the U.S. Attorney’s Office, although some state law enforcement agencies use proffer sessions as well. Furthermore, these sessions are usually used for white collar crime investigations and rarely used for “street crimes”.

The people at the proffer session will be you, your attorney one or more Assistant US Attorneys as well as members for law enforcement agencies involved in your case such as FBI, ATF, IRS Criminal Division, etc. The meeting takes place in a conference room, not a court room and it is rather informal. More importantly, there is no court reporter or audio recording so you are left with no one, unless your attorney will become a witness, to support your version of events. However, federal law enforcement usually has the highest professionalism and integrity so you rarely have to worry about someone “coloring” your statement.

There is no set format for a proffer session but you are there to give information, not get information. While the other side may give you a flavor of their case, it should be nothing more than what you attorney has already uncovered through prior discussions. Thus, preparation of the case and the client by an experienced white collar crime attorney is very important.

The outcome of the proffer session depends largely on your status. First off, if you are just a witness, you are not really there for a proffer session as you are not under any suspicion. For a proffer session, you are either a subject or a target. A subject means that the law enforcement agency is on the fence with regard to your status. It could go either way. Thus, the information given at the proffer session could turn you into a witness or a target.

If you are a target, then they think you are guilty. You just haven’t been arrested as a courtesy to you so that you will make a confession or they still need more evidence to make a solid case for trial. Rarely can you change their mind absent a polygraph test or some other evidence. Since polygraph tests are not admissible in court, there are only a handful of people around that can administer them. Thus, don’t expect to be offered one unless your attorney does a lot of convincing.

A plea offer may be provided to you at the end of the proffer session or soon there after. Another option is an immunity agreement which assures that you will not be prosecuted. In either scenario, you will likely have to agree to testify against others. If no agreement is reached, you will likely be free to leave. While nothing you said can be used against you to support the Government’s case, they can still use the information you gave them to further their investigation. Furthermore, if you are found to have deliberately lied to them, you can be charged in that regard, i.e. Martha Stewart.

While the decision to proffer, like all major decisions in a case, is up to you, it should not be made without the assistance of a skilled white collar crime attorney. There must be a purpose behind it. Just showing up to see what happens is a huge mistake that can lead to disaster. The attorney should discuss all pro’s and con’s as well as alternative options.

There are any number of reasons to proffer and not to proffer. If you have been contacted by any law enforcement agency or any other agency that requests you to make a proffer, give a statement or turn over any document, call our team of tough, smart proffer attorneys right away. If you already have an attorney but he or she does not have experience in this area, it probably makes sense to replace that attorney or, at the very least, hire another attorney as a consultant. No matter where you live, our proffer session lawyers and consultants can help you.  Call using the toll free number above to discuss your case with us for free.  

Responding to a Federal Office of Inspector General (OIG) Subpoena November 4, 2009

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You and/or your company may receive a subpoena from something called the OIG or Office of the Inspector General.  This could be very confusing and your business attorney may know nothing about the OIG, how to handle the subpoena or what this may be about.  You need good advice ASAP as  your response to this subpoena may have a long term impact on you and your company.

First, you have to understand that the OIG is not one actual agency.  There are actually 69 different and autonomous OIGs.  They  employ criminal investigators, forensic auditors, evaluators, inspectors and a variety of other specialists.   OIG Investigations may be internal, targeting government employees, or external, targeting grant recipients, contractors, or recipients of the various loans and subsidies offered through the thousands of federal domestic and foreign assistance programs.  Most importantly for this post is that if they uncover criminal activity, they will turn that information over to the DOJ for prosecution.

All of the federal OIGs share information and some coordination through the President’s Council on Integrity and Efficiency (PCIE) and the Executive Council on Integrity and Efficiency (ECIE), as created or amended in 1992 by Executive Order 12805.

Some of the OIG’s to be more concerned about include:

Environmental Protection Agency-OIG
Department of Health and Human Services-OIG
Department of Labor-OIG
Small Business Administration-OIG
Social Security Administration-OIG
Department of Transportation-OIG
Securities and Exchange Commission-OIG 
 

Those are just a few examples but just because an OIG doesn’t sound criminal, doesn’t mean that you or your company are out of the woods.  Take, for example, the Department of Labor. What could they possibly be concerned about in the criminal context?  Well, just look at their home page:

In addition, the OIG is unique among Inspectors
General because it has an “external” program function to conduct criminal investigations to combat the influence of labor racketeering and organized crime in the nation’s labor unions. We conduct labor racketeering investigations in three areas: employee benefit plans, labor-management relations, and internal union affairs.

Surprising huh?  Also keep in mind that a violation of a regulation may be a related to an on-going criminal investigation or one may lead to the other.

Now that you understand the seriousness of an OIG subpoena, you need a serious response.  Make sure you retain an attorney that actually has a plan to not only handle the subpoena but to investigate the situation to determine any and all criminal liability and prepare accordingly.  Too many attorneys seem to think that their job is to just help process the subpoena.  In my opinion, that is just 2% of the attorney’s job. 

Call me if you have received an OIG subpoena.

Don’t allow your attorney to sit around and do nothing. October 21, 2009

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Some attorneys don’t realize that criminal charges can seriously impact the lives of the clients and their family members.  I’ve seen too many recent cases that are getting out of control because an attorney sat around and did nothing.  As an attorney, you are limited in what you can do right away.  However, an attorney should be able to do a decent amount of work before charges are filed.  I’ll give you a few examples.

Client that called me this week is involved in a pretty big investigation out west.  She hired one attorney that took her money and did nothing.  So, she hired another attorney.  This attorney seems to be doing nothing.  The client  wants to hire a private investigator which is a great idea.  It’s sad that she had to come up with that idea.  The case has gone on for a year and nothing has been done.  So, she called me and it looks like I’m going to be flown out there to sort all this out before it gets messy.

Another client I had received a letter from the NJ Attorney General’s Office.  Her attorney made a few calls and then the AG’s office went away.  Her attorney then did nothing for an entire year!  So, she was rather upset when a subpoena came in the mail asking for a ton of files.  So, they worked on their investigation over the year while her attorney let the file collect dust.  She then hired me to get something done.

Another client who hired me off this blog had an attorney in another state who was helping him deal with an investigation here in NJ.  His business was actually raided and just about everything that wasn’t nailed down was taken.  His business manager was arrested.  Was anything done after that?  No.  So, he hires me.  Three hours later he is arrested before I can even get in the office to open the file and make some calls.

I can go on and on.  The common theme in these cases is that these attorneys get money  for nothing.  They have no plan, no ideas and there is no effort made to avoid arrest.  We handle many cases (click on the big wins link at the top of this page) where we can help our clients avoid arrest by working hard.  Of course, this takes time and money but I can assure you that the price of working to avoid arrest is much,

So if you are involved in any type of investigation your attorney cannot rely on hope that the case will just go away.  After all, are you paying your attorney just so they can wish your case away?  Can’t you do that on your own for free?  Of course, these cases usually only go away if they are made to go away.  If you think its time to switch attorneys or you want me to come on board the case to act  as a consultant to quarterback the case (regardless of the location), just give me a call.

How to deal with a demand for inspection August 3, 2009

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As a white collar crime defense attorney in New Jersey, you will eventually encounter an administrative demand to inspect if you represent enough clients in the medical field. Since this isn’t exactly a criminal defense issue, most attorneys may be confused by this demand and how to handle it. Hopefully, this article can provide a little guidance.

 A demand for inspection, usually issued by the Department of Consumer Affairs is essentially a request to come into a place of business for the purposes of gathering evidence that the person has violated a regulation. While the agents for the Department cannot force their way in, the person must comply or face various sanctions. The key case that fully addresses this issue is Medical Soc’y v. Robins, 321 N.J. Super. 586 (App.Div. 1999).

 The first question that any attorney handling this issue may have is “is this even legal and if so, why?”. You have to understand that different rules apply to highly regulated industries. In Robins the Appellate Division found that there can be no doubt that the medical profession is highly regulated. This is because, licensure to practice medicine is required, it follows extensive education, and is subject to the rules and regulations of the Board of Medical Examiners. Thus, an administrative search as part of a comprehensive statutory scheme to assure compliance with specific regulations governing the profession is authorized by New York v. Burger, 482 U.S. 691 (1987). In Burger, the Court held that there is a significantly reduced expectation of privacy in a closely regulated business.

 The good news here is that the Department of Consumer Affairs cannot go on a witch hunt. In order for their demand for inspection to be valid there has to be sufficient evidence before the Board of a violation of a regulation or there has to be a factual basis in the public interest to inquire whether any such violation may exist. In addition, its findings have to be sufficiently made of record and the administrative demand must be sufficiently tailored in terms of time, place and scope.

 I know your primary concern is keeping your client out of prison, but you have to realize that this demand for inspection will probably lead to criminal charges at some point. Law enforcement should not be involved in a demand for inspection. Instead, the Appellate Division stated that the Division of Consumer Affairs or Attorney General enforcement officers should conduct the inspection. While the Appellate Division views this warrantless search to be conducted to assure compliance of laws and regulations and not to gather evidence of crime they also recognize that the discovery of evidence of crime during an otherwise valid administrative inspection need not necessarily be suppressed. This is incredibly important since the Attorney General will likely be the same entity that may eventually use evidence of criminal activity to prosecute your client.

 Maybe I’m cynical but I think you have to assume that criminal charges are coming and that the Attorney General’s office is using the administrative process to get evidence on your client. Even if you eventually have to give in to the demand, you at least have to try to bring out as much information in the process. This will allow you to prepare for trial before any criminal charges are even filed.

 In order to challenge the demand, you should first file with the administrative agency, in this case, the Board of Licensing and not with your local superior court. Your challenge will be primarily directed to making sure that they have at least some information of wrong doing on behalf of your client and that this is not a witch hunt. You also want to make sure that the inspection is limited as discussed above. Your challenge should also be made before the date for the demand for inspection. Of course, this is impossible where there is no advance notice. While I see no law on the issue, I cannot see how any sanctions would be lawful if your client was not given any opportunity to challenge it before the scheduled inspection. If you are not satisfied with the result, you have to file an appeal with the Appellate Division.

 As I indicated before, you must assume that your client will be facing criminal charges at some point. At the end of this process, you should have gathered enough information to figure out where this case is going. Thus, you must start to conduct your own investigation in order to nail down the statements of potential witnesses and to photocopy documents that may eventually be taken during a search warrant. Early preparation will always pay dividends later on in the case.