The BLT: The Blog of Legal Times

The Morning Wrap

Much Ado About Nothing? NBC News' Michael Isikoff reports that the Pentagon has so far not found much to be worried about in the massive amount of classified documents made public by WikiLeaks on Sunday. But military officials are continuing to review those documents, some of which chronicle the close relationship between the Pakistani intelligence service and the Taliban.

BP to Slim Down: Dow Jones Newswire reports that BP plans to sell around $30 billion in assets in the wake of the loss the energy company has suffered since the Gulf of Mexico oil spill. The changes will leave the company smaller and focused on restoring its battered reputation, though it will continue to pursue opportunities in deep water and plans to remain as a strong presence in the U.S., senior BP executives said.

Obama's Campaign Finance Reform: President Barack Obama on Monday called out Republican opponents to the campaign finance reform measure he has championed, saying they were voting for “nothing less than a vote to allow corporate and special-interest takeovers of our elections.” The measure is expected to fail when the Senate votes on it, but The New York Times reports that Obama may be trying to take political advantage of the debate.

Perhaps It's In the Laundry? The Los Angeles Times reports that the Department of Defense cannot account for about $8.7 billion out of $9.1 billion in Iraqi oil revenue entrusted to it between 2004 and 2007. According to a newly released audit by the Special Inspector General for Iraq Reconstruction, much of the money was not properly deposited in special accounts as required under Treasury Department rules, making it difficult to trace how it was spent.

D.C. Judge Blocks The National Law Journal in Court Records Dispute

By Mike Scarcella

A D.C. Superior Court judge on Friday blocked The National Law Journal from publishing information from court records about a regulatory investigation into juice maker POM Wonderful.

An NLJ reporter had legally obtained the information from court files, but the judge, Judith Bartnoff, ruled the records should have been under seal. She issued a temporary restraining order just before the paper’s deadline on Friday to block publication of the information.

Attempts to restrain a publisher are exceedingly rare. But Bartnoff said that the court’s interest in maintaining the integrity of its docket trumped First Amendment arguments.

The NLJ reviewed the records for an article about an ongoing battle over legal fees between POM and Hogan Lovells. The newspaper first viewed the docket weeks before the sealing order and printed copies of publicly available documents on July 15.

A lawyer for POM filed for a temporary restraining order July 22 in Superior Court to block the NLJ and its parent company, ALM Media, from naming the regulatory agency and from writing about the substance of the investigation.

After more than two hours of argument on July 23, Bartnoff issued a 10-day temporary restraining order against the paper. Bartnoff allowed the paper to publish the fact POM is a target of a regulatory inquiry, but the judge said the paper is banned from naming the agency.

“If I am throwing 80 years of First Amendment jurisprudence on its head, so be it,” Bartnoff said at the hearing. “None of that First Amendment jurisprudence, to my knowledge, is dealing with this issue—the integrity of the functioning of the court system.”

Senator Aims at DOJ 'Recreational' Grants

A frequent U.S. Senate critic of federal spending is stepping up his attack on grants handed out by the Department of Justice.

The office of Sen. Tom Coburn (R-Okla.) today released a 42-page critique of DOJ programs that try to prevent crime through social services and community programs, including such events as basketball tournaments. The department calls the strategy “weed and seed,” and it dates to the anti-drug efforts of then-Attorney General William Barr, who served from 1991 to 1993.

Drawing on stories from local newspapers nationwide and from photos posted on Facebook, the report from Coburn’s office says the programs are a waste of money. It highlights, for example, a luau held in East Chattanooga, Tenn., and summer programs involving trips to amusement parks and bowling alleys.

“Amusement parks and bowling can never take the place of law enforcement, and taxpayers should never be forced to pay extra for police protection while available funds are being spent on such recreation when the evidence is lacking to demonstrate such activities reduce crime,” says the report (PDF), titled "Party at the D.O.J."

Vivian Hixson, site director for East Chattanooga Weed and Seed, said the report is incorrect when it says the May luau involved DOJ funds. In a phone interview today, Hixson said that, although photos were later posted on a Weed and Seed page on Facebook, the luau was staffed by volunteers and paid for with private donations. It was for children and included an education component, she said.

“This is not some luau party like he’s making it sound,” Hixson said. She added that Coburn’s office did not contact her before issuing its report. “I wish that we had been asked,” she said, “because I think that we could have cleared this up very easily.”

Told of the Chattanooga program's response, Coburn spokesman John Hart wrote in an e-mail: “In many of these cases, it comes down to a question of whether the funds in question are fungible. Also, because DOJ does not track the funds, it is difficult to pin this down."

In a June 18 letter (PDF) to Coburn, David Maurer of the Government Accountability Office wrote that breaking out DOJ spending on recreational activities is difficult because the department “does not require grant recipients to itemize and associate costs with each individual activity.” Moreover, Maurer wrote, it can be difficult to separate purely “recreational” activities from activities designed to prevent crime.

In testimony before a congressional committee in April, Assistant Attorney General Laurie Robinson defended the practice of sending seed money to community groups, saying it “has been an important element in encouraging innovative, place-based community responses to crime.” Robinson heads DOJ’s Office of Justice Programs, which last year awarded $5.6 billion in grants to states, localities and American Indian tribes.

This isn’t the first time Coburn has criticized the “weed and seed” strategy. In March 2009, he proposed eliminating funding for such programs.

Updated at 4:15 with Hart's comment.

Chamber Will Rate Senators on DISCLOSE Act Votes

The U.S. Chamber of Commerce will include Senate votes on the DISCLOSE Act on its annual legislative scorecard, the group said today.

The Chamber has lobbied heavily against the campaign finance legislation, which is a response to the Supreme Court's January decision in Citizens United v. Federal Election Commission. That ruling lifted a ban on the use of corporate general treasury funds on independent political expenditures in federal elections.

The legislation seeks to place other limits on corporate political activity. It passed the House earlier this year, and the Senate version is expected to come up for a test vote tomorrow.

In a letter to senators, the Chamber said the legislation "would violate free speech protections embodied in the First Amendment."

President Barack Obama spoke this afternoon at the White House to urge passage of the DISCLOSE Act. Referring to the bill's requirement that those who finance political ads be named, he said, "They have the right to put forward their view. They even have the right to advertise. But the least we should be able to do is know who they are."

D.C. Circuit Slams Transportation Agency for 'Multiple Foul-ups'

Judge Douglas Ginsburg wrote a 13-page opinion last week criticizing a federal agency for its "multiple foul-ups" in blocking a commercial truck driver's effort to get a hazardous materials endorsement on his license. Then, in a one-paragraph concurrence, the judge stepped up the criticism.

Ginsburg, who sits on the U.S. Court of Appeals for the D.C. Circuit, said he cannot determine whether the driver, Lewis Boniface, is entitled to a waiver of the Transportation Security Administration’s regulations that deem him a security risk for a 1975 conviction of possession of an unregistered explosive device. That's up to the agency, the judge said.

“I can say, however, that he was entitled to an administrative process that was not riddled with errors,” Ginsburg wrote in his July 23 concurrence. “The Keystone Kops might have done a better job than did the TSA in this case. Instead of sending Government counsel into battle to defend the indefensible, the agency should have long ago confessed error, apologized to the appellant, and tried to do right by him.”

Ginsburg and Judges Judith Rogers and Janice Rogers Brown remanded the dispute to the TSA and ordered additional proceedings. Boniface, 61, will have another shot to convince the agency that the decades-old offense does not disqualify him from obtaining a hazardous materials endorsement.

The court’s ruling was also a win for the Duke Law School appellate litigation clinic. A team of third-year students, including Meghan Ferguson, who argued the case in the D.C. Circuit in April, represented Boniface’s interests as an amicus. Boniface was proceeding pro se.

The four-person Duke law school team--including Samuel Burness, Kristin Cope and Lisa Hoppenjans--was led by Sean Andrussier, co-director of the appellate litigation clinic. Ferguson was not immediately available for comment on her experience in the D.C. Circuit.

Ferguson argued against Benjamin Shultz, a Harvard Law School graduate who is a Justice Department attorney in the Civil Division appellate section.

The Duke appellate clinic works on cases in the D.C. Circuit and the 4th Circuit. Last year, a third-year Duke law student, Sarah Campbell, successfully argued as an amicus in a dispute over the dismissal of a grand juror from District of Columbia Superior Court.

Lawyers Associated Worldwide Names New Chairman

Lawyers Associated Worldwide, or LAW, has tapped William Savarino, a partner at Washington’s 13-lawyer Cohen Mohr, to serve as its new chairman. Savarino had previously been vice chairman.

LAW is an Minneapolis-based network of 110 law firms around the world that often work together to provide local lawyers in areas where a firm may not have a presence. The organization’s members include roughly 27 U.S. firms.

Savarino took over as chairman of the organization on July 1. As one of his first acts, he will preside over LAW’s annual meeting in Istanbul, Turkey, in November. Previously, LAW had been helmed by Martin Davies, who stepped down after taking a job with U.K.-based Clydes & Co.

Savarino, who will continue to practice while serving as chairman, advises businesses about selling goods and services to the U.S. government. He also counsels on e-records retention practices and handles U.S. security clearance matters for companies and individuals.

In a statement from LAW, Savarino said, “LAW is a natural extension of my international practice. My clients appreciate my ability to serve their cross-border legal needs with lawyers I personally know and trust.”

This Week in The National Law Journal

This week's edition of The National Law Journal is chock full of hot stories.

Jenna Greene reports on the FTC's antitrust blitz, which has picked up speed in recent weeks. In the past two weeks alone, the Federal Trade Commission announced two consent orders requiring companies to sell off assets from past mergers deemed anti-competitive. Court cases are pending as well. The FTC in May filed suit against The Dun & Bradstreet Corp., targeting its purchase of a competing education data provider 15 months after the fact, while the U.S. Department of Justice has challenged Dean Foods Co.'s acquisition of Foremost Farms last year.

Jeff Jeffrey filed a report on a fee dispute between Hogan Lovells and its former client POM Wonderful. Hogan alleges that POM failed to pay $666,000 in fees for work the firm did on a regulatory inquiry into POM. On Friday, D.C. Superior Judge Judith Bartnoff issued a temporary restraining order barring The National Law Journal from reporting the name of the agency leading the inquiry.

Karen Sloan trolls the world of maritime law, which can be "obscure" to people who don't regularly practice it. Sloan reports that the Deepwater Horizon spill has thrust maritime law into the spotlight in a way few disasters have, prompting a gusher of proposed legislation that could significantly alter the practice.

The National Law Journal's special report on health care finds that recent health care reform legislation could spur consolidation in the health sector. Now that the legislation has passed and there is less uncertainty about how the reforms will be applied, the freeze on deal making could begin to thaw. Read more about it here.

In Washington news, David Ingram has an article on the Justice Department's push to test the limits of its powers to investigate Congress. Two ongoing cases present opportunities for the Justice Department to make inroads against the 2007 ruling in the case of convicted former Rep. William Jefferson (D-La.) — a ruling that department officials strongly disagreed with at the time and appealed, unsuccessfully, to the U.S. Supreme Court.

Carrie Levine reports that lobbying spending has spiked for three companies who have found themselves in the national spotlight in the wake of their respective controversies. BP, Goldman Sachs and Toyota have all upped their lobbying spending, though BP's report looks less costly due to an accounting change.

The Morning Wrap

An Inside Look: A cache of secret military documents made public yesterday by WikiLeaks reveals that Americans fighting the war in Afghanistan have long harbored strong suspicions that Pakistan’s military spy service has guided the Afghan insurgency with a hidden hand. The New York Times reports that the documents show that Pakistan allows representatives of its spy service to meet directly with the Taliban in secret strategy sessions.

A Yankee In BP's Court: With news breaking over the weekend that embattled BP CEO Tony Hayward may be stepping down, the question immediately became, "Who will replace him?" The Wall Street Journal reports that the answer to that question is New York-born managing director Robert Dudley, who will become the first American to lead the U.K.-based company.

Taliban Offers an Exchange: Members of the Taliban say they are willing to trade the body of a U.S. Navy member they said was killed in an ambush two days ago in exchange for insurgent prisoners, The Associated Press reports. U.S. and NATO officials confirmed that two American Navy personnel went missing Friday in the eastern province of Logar, after an armored sports utility vehicle was seen driving into a Taliban-held area.

Arlington Cemetery's Shoddy Record Keeping: A Washington Post investigation has revealed that there are problems with more than 130 graves Arlington National Cemetery, including in the plot where former Chief Justice William Rehnquist is buried. The discoveries come six weeks after the Army ousted Arlington's top two officials in a sweeping probe of the nation's most hallowed cemetery.

SEC Gives $1 Million Reward for Information in Pequot Insider Trading Case

The Securities & Exchange Commission is giving out $1 million for information provided in its insider trading case against Pequot Capital Management, Inc. - the biggest reward in agency history for such a case.

The money goes to Glen Kaiser and Karen Kaiser of Southbury, Conn. She’s the ex-wife of David Zilkha, a former Microsoft Corp. employee who had accepted a job at Pequot.

The SEC had previously investigated alleged insider trading in Microsoft securities by hedge fund adviser Pequot, its chief executive, Arthur Samberg, and Zilkha, but the investigation stalled and was closed without action.

That is, until the Kaisers in late 2008 uncovered what the SEC described as “key evidence,” including email communication between Zilkha and another Microsoft employee. The email was not turned over to the SEC in the first investigation.

Without admitting or denying the allegations in the SEC’s complaint, Pequot and Samberg in May 2010 agreed to pay civil penalties totaling $10 million, plus disgorgement and prejudgment interest totaling more than $17 million.

On the same day the commission filed the settled complaint against Pequot and Samberg, it also issued an order instituting administrative and cease-and-desist proceedings against Zilkha. That matter is pending before an SEC administrative law judge.

The SEC approved the award pursuant to Section 21A(e) of the Securities Exchange Act of 1934, which authorizes the commission to grant an award of up to 10% of the penalties paid in an insider trading case to a person who provided information.

Legal Groups Lobbying Fiercely

Legal groups have been in the thick of legislative fights to overhaul the financial regulatory system and change liability laws in the wake of the oil spill, though their lobbying spending varies widely.

Disclosure reports filed this week show the U.S. Chamber's Institute for Legal Reform spent $3.75 million and the trial lawyers' group, the American Association for Justice, spent $1 million, lobbying on dozens of proposals in the second quarter of the year. They weren't the only ones pressing lawmakers. The American Civil Liberties Union, for instance, reported spending $339,340 lobbying on issues that ranged from the Fair Sentencing act to immigration detention. And the Lawyers' Committee for Civil Rights Under the Law, which registered to lobby in April, reported spending $7,241 lobbying on issues such as school integration, financial regulatory reform and judicial nominations.

The third quarter promises to be busy, too. Linda Lipsen, the chief executive officer and lead lobbyist for AAJ, said the group is now focused on legislation related to the oil spill. "I think that right now, our attention is on what's going on in the Gulf Coast, and making sure that victims of the disaster emanating from the oil spill are fully compensated," she said.

Matthew Webb, senior vice president for legal reform policy at the Institute for Legal Reform, which is opposing the trial lawyers' push for the liability changes in the wake of the spill, said the proposed shifts are a "big deal." "They are wholesale rewrites to admiralty law at this point," he said, adding that "it's a very well-settled area of the law" and changes warrant more debate.

The two groups have also recently traded words over a tax change pushed by AAJ that would benefit trial lawyers. In a sign that the issue is still a hot topic, two high-ranking Repubicans weighed in on Friday. Rep. Dave Camp (R-Mich.) and Sen. Chuck Grassley (R-Iowa), the ranking members on House Ways and Means and Senate Finance, respectively, sent a letter to Treasury Secretary Timothy Geithner expressing concern about the proposed change and questioning whether the Treasury Department has significant regulatory authority to make it.