The BLT: The Blog of Legal Times

Lawyer Agrees to Plead Guilty in "Pump and Dump" Case

Federal prosecutors filed a plea agreement today with a New York-based businessman and lawyer charged with lying to federal investigators about his knowledge of a fraudulent stock sale.

Robert Brown, a former partner at New York’s Reitler Brown & Rosenblatt (now Reitler Kailas & Rosenblatt), agreed to plead guilty to obstruction of justice for hiding what he knew about a “pump and dump” scheme involving an unnamed investment firm in Newport Beach, Calif. According to documents filed at the U.S. District Court for the District of Columbia, Brown also helped an executive from the firm, as well as the chief executive officer and a member of the board of directors of a Chinese company, fraudulently transfer more than $25 million dollars through a series of shell companies into accounts they controlled.

Under federal sentencing guidelines, Brown could face 10 to 16 months in prison, and up to a $30,000 fine. He also agreed to forfeit $275,000 in proceeds from his alleged illegal activities.

The plea agreement also sheds some light on the companies that may be involved in the government’s investigation. It says that none of Brown’s testimony will be used to prosecute him in any case relating to the following companies: Xinhua Finance Limited; Biophan Technologies, Inc., currently known as Phantom Entertainment, Inc.; Infinium Labs, Inc.; IT&E International, Inc., now known as Averion International Corp.; Aztec Oil and Gas, Inc.; Small World Kids, Inc.; Visijet, Inc.; Perfisans Holdings, Inc.; and Xinhua Finance Media Limited.

Former FERC Enforcement Head Joins Hogan & Hartson

Susan Court, former director of the Federal Energy Regulatory Commission's Office of Enforcement, has joined Hogan & Hartson's Washington office. Court began work this week as a partner in the energy practice group.

"I knew members at the energy practice group, which makes it a nice transition," Court said.

Court, 65, was a career employee at FERC, and is subject to a one-year "cooling off" period before she can go before the agency on behalf of clients. She said she also hopes to practice in other areas of energy law, adding that "I’m just not sure yet where it might go, but I think there are so many issues that are pressing right now."

In a statement, the firm noted that Court was "instrumental" in establishing regulations for North American Electric Reliability Corp. compliance, standards meant to improve the reliability of the bulk power system. Court said she spent nearly 28 years at the agency and held a series of positions there, including deputy solicitor, agency ethics officer, and chief of staff, according to the firm's statement.

Patton Boggs Lands DOJ Environmental Lawyer

Patton Boggs has picked up a veteran trial attorney in the Justice Department’s Environment and Natural Resources Division who says it's a time of "big change" in the environmental enforcement and regulatory arenas.

Scott Stewart, who spent eight years at Justice, will focus his practice on environmental litigation and regulation in the firm's environmental, health and safety practice. At Justice, Stewart worked in environmental enforcement. Stewart led the litigation team in a Clean Water Act enforcement in U.S. v. Chevron Pipe Line Company.

Stewart, a 1995 graduate of American University Washington College of Law, says he anticipates vigorous enforcement of environmental laws. His practice will be geared toward renewable energy and clean technology. Stewart joined Patton Boggs as a partner.

"By any metric, clean technology has seen unprecedented growth over the past five years," Patton Boggs managing partner Stuart Pape said in a statement. "Scott will lead the firm as it expands its stronghold in the clean technology sector."

Judge Says D.C. Can't Take Back Pershing Park Documents

Lawyers for the District of Columbia suffered a setback in the Pershing Park mass arrest cases Tuesday, after a federal judge said documents the city had accidentally handed to plaintiffs could be made public even though they allegedly contain sensitive and possibly embarrassing information.

The 7 p.m. ruling followed a flurry of filings yesterday, in which lawyers from the D.C. Office of the Attorney General argued that the 211 pages of documents were covered by attorney-client and attorney work-product privilege, and should never have been given to the plaintiffs’ lawyers in the first place. The city’s lawyers asked Judge Emmet Sullivan of the U.S. District Court for the District of Columbia to either stop the plaintiffs from using the documents in discovery or to issue an order that would keep any information related to the documents out of the public eye.

“In addition to the privileged nature of the communications, several of the documents include statements by high-ranking officials in the District of Columbia Government which, if disclosed to the public, would only serve to embarrass while not shedding light on any matter of controversy in this case,” the city’s lawyers wrote in a court filing.

The plaintiffs, represented by a team that includes Bryan Cave partner Daniel Schwartz, said the office waived its privilege by releasing the documents and failing to take reasonable steps to retrieve them. They wrote that city lawyers knew for months that it had disclosed the documents, and only asked for them to be returned last Friday, when it became clear they would be discussed in the upcoming deposition of an OAG official.

According to the plaintiffs, at least some of the documents dealt directly with former Police Chief Charles Ramsey’s role in the decision to order the mass arrest of IMF and World Bank protesters in 2002. They said portions of the documents already been published or referenced in earlier court filings.

“The claim that these documents remain privileged is farcical and, by its very nature, illustrates the District’s continued effort to continue its prior delaying and dilatory tactics,” they wrote.

The judge ruled for the plaintiffs on both fronts. Afterward, OAG lawyers filed a new motion to stop the deposition of Assistant Attorney General Stacy Anderson, whom the plaintiffs plan to question about the documents.

Obama Nominates Two from N.C. to the 4th Circuit

President Barack Obama today nominated two state judges from North Carolina to the U.S. Court of Appeals for the 4th Circuit, taking a big step toward filling vacancies on the depleted appellate court.

One nominee, Judge James Wynn Jr. of the N.C. Court of Appeals, was also a choice of President Bill Clinton, but then-Sen. Jesse Helms (R-N.C.) blocked Wynn’s nomination. The other nominee, Judge Albert Diaz, is a special trial judge for complex business cases. Both Diaz and Wynn have experience as reserve military judges.

In a statement, Obama called them “exceptional public servants” who would be “esteemed additions” to the Richmond-based court.

The announcement brings the total Obama nominations for the 4th Circuit to four, after the nominations of U.S. District Court Judge Andre Davis of Maryland and Virginia Supreme Court Justice Barbara Keenan. Davis and Keenan are still awaiting Senate confirmation. Five of the 15 seats on the 4th Circuit are vacant, giving Obama a chance to remake a historically conservative court.

Diaz and Wynn would add racial and geographic diversity to the 4th Circuit. Diaz would be the court’s only Hispanic member, while Wynn would be its third African American. They would triple the number of active 4th Circuit judges from North Carolina, the largest state in the circuit by population.

FTC's Pain in the Gas

With prices at the gas pump creeping upwards again, the Federal Trade Commission's new rule cracking down on market manipulation by the petroleum industry comes at an apt time.

The final rule, which goes into effect today, bars "fraudulent or deceptive conduct that could harm wholesale petroleum markets," according to the FTC. Penalties for violating the rule include fines of up to $1 million a day.


The rule will "help us prohibit conduct that harms consumers but that may not violate antitrust laws," said FTC chairman Jon Leibowitz in a statement when the commission voted on the rule in August.


Examples of such conduct include false public announcements of planned pricing or output decisions, false statistical or data reporting, and sales designed to disguise the actual liquidity of a market or the price of a particular product. 


But Commissioner William Kovacic voted against the rule, warning in a statement that when implemented, it will “cover a vast number of routine transactions – literally thousands daily – in petroleum products. These transactions are the indispensable means by which gasoline, diesel fuel, and jet fuel move from refineries to end users.”


Kovacic flagged language that makes it illegal to knowingly engage in acts that “would operate as fraud or deceit on any person.” He also objected to the section that makes it illegal to intentionally fail to state a material fact where “such omission distorts or is likely to distort market conditions.”


Kovacic wrote, “Because the final rule’s requirements are unlikely to proscribe only genuinely harmful conduct, there is a serious danger that it will impede routine contracting that is benign or pro-competitive.”


Antitrust partner Gerry Alexis at Perkins Coie in San Francisco, who represents petroleum companies, says that the industry is expecting “fairly aggressive enforcement” from the FTC. Alexis also predicted suits may arise under “little FTC Acts” – state consumer protection laws that authorize private causes of action.

Seyfarth Shaw Lawyer Picked for EEOC

A former Bush administration official now with Seyfarth Shaw is President Barack Obama's choice for a Republican seat on the Equal Employment Opportunity Commission.

Victoria Lipnic served as assistant secretary of labor for employment standards from 2002 until this year, overseeing wage and hour standards and nondiscrimination programs for government contractors. She has since been of counsel to the Washington office of Seyfarth Shaw.

Two seats on the five-member Equal Employment Opportunity Commission are reserved for people not of the president’s party. This is Obama’s third nomination for the commission, after tapping Jacqueline Berrien of the NAACP Legal Defense and Educational Fund as chair and Georgetown University law professor Chai Feldblum as a commissioner. Neither Berrien nor Feldblum has been confirmed by the Senate.

Lipnic (Allegheny, George Mason Law) previously worked as a Republican counsel to the House Education and Labor Committee and as an in-house counsel to the U.S. Postal Service. The White House announced Obama’s intent to nominate her late Tuesday. She did not immediately return a call today requesting comment.

DOJ Settles Former Drug Agent's Suit for $3 million

The federal government has agreed to settle for $3 million a long-running suit in federal district court in Washington that alleged a former CIA officer and a State Department official unlawfully eavesdropped on a drug enforcement agent in Burma.

The terms of the agreement were detailed in court papers filed Tuesday night in the U.S. District Court for the District of Columbia. The suit, filed by former DEA agent Richard Horn, was filed in federal court in 1994. The litigation had been under seal until this summer.

The suit has dragged on amid disputes about the state secrets privilege and whether and how much access the opposing lawyers should have to confidential information. In July and August, Chief Judge Royce Lamberth issued rulings against the Justice Department in which he ordered the government to provide security clearances for the private lawyers in the case. Justice attorneys were appealing the ruling when a tentative settlement was reached last month.

“This case has been pending for fifteen years, and the parties and the United States have now reached a comprehensive, global settlement of claims after extensive negotiations under the auspices of the Court of Appeals mediation program,” Justice attorney Alexander Haas of the Civil Division federal programs branch said in court papers. Click here for a copy of the settlement agreement.

Horn’s lawyer, Brian Leighton, a solo practitioner in Clovis, Calif., said Tuesday in an interview Tuesday night that the government “totally miscalculated our perseverance and resolve” in the litigation. Horn and Leighton have known each other for years, ever since Leighton’s days as a federal prosecutor in California. Leighton took the case on a contingency fee basis. He declined to comment on his portion of the settlement.

The Morning Wrap

Elections: Republicans won a tightly contested gubernatorial race in New Jersey and a blow out in Virginia. Meanwhile, Democrats took the House race in New York’s 23rd Congressional District, fending off an insurgent conservative candidate in the long-time Republican stronghold.

Maine: Voters in the Pine Tree State voted to repeal a law legalizing same-sex marriage while passing an initiative to allow non-profit medical marijuana dispensaries.

Saving the Sniper: Lawyers are asking the U.S. Supreme Court to stay the execution of D.C. Sniper John Allen Muhammad, reports The Washington Post. They argue that their client should not have been permitted to represent himself at trial because he was mentally unstable, suffering at the time from severe paranoia and delusions.

Madoff’s Money Man: The accountant who helped hide Bernard Madoff’s enormous Ponzi scheme pleaded guilty Tuesday in New York federal court to securities fraud, admitting he rubber stamped false SEC filings. "In what was surely the biggest mistake of my life, I placed my trust in Bernard Madoff," said David Friehling. "At no time was I ever aware that Bernard Madoff was engaged in a Ponzi scheme." The New York Law Journal has the story.