The BLT: The Blog of Legal Times

Too Much Enforcement? Panel Explores Criminalization Of Business Conduct

The U.S. Justice Department's stepped up enforcement in the pharmaceutical industry has struck "the fear of God" in executives, a top lawyer at GlaxoSmithKline said today, addressing whether prosecutors have gone too far in building cases rooted in business conduct.

The Glaxo lawyer, Elpidio Villarreal, vice-president of global litigation at the pharmaceutical company, said the rhetoric coming out of DOJ in the last couple of years concerns the ability and intent of the government to hold accountable an executive for the person's mere position in the company.

Executives, Villarreal said, speaking generally at a panel discussion sponsored by DRI—The Voice of the Defense Bar, are now living “in fear of losing everything" not for personal conduct but for what someone else may have done.

“It does seem to be imposing an astronomical burden on a well-meaning, well-intentioned, competent executive,” Villarreal said. GlaxoSmithKline, he said, has “spent a fortune” building and strengthening what he called a “robust” corporate compliance program.

The notion that an executive who does the right thing but still could end up getting charged will foster cynicism and create a sense of distrust, Villarreal said. Both feelings, he added, could undermine the government’s legitimate interest in corporate compliance.

Still, Villarreal said the increased government scrutiny is welcomed, calling the pharmaceutical industry “vastly improved” since ten years ago.

The panel’s moderator, Jonathan Rosen, a white-collar defense partner in the Washington office of Shook, Hardy & Bacon, described what he called a “highly aggressive” enforcement environment.

D.C. Appeals Court Weighs Exception to Government Contacts Rule

The District of Columbia Court of Appeals heard oral arguments Thursday morning on whether an allegedly fraudulent petition made to a federal agency is enough to extend jurisdiction to non-local parties in the city's courts.

Under the District's long-arm statute, non-local parties can be sued in a local court if they have local ties, such as doing business here or owning property. Precedent has long held, though, that if that party's only contact with the city is through the federal government, it isn't usually enough to extend jurisdiction.

A case pending in U.S. District Court for the District of Columbia is challenging that rule, known as the government contacts exception. After losing on jurisdiction in the trial court, the plaintiffs appealed to the U.S. Court of Appeals for the D.C. Circuit. The D.C. Circuit found that since this was an unsettled question of interpreting the D.C. Code, the local court of appeals should step in and issue a ruling.

The plaintiffs are a group of Brazilian producers of materials used to make steel. As previously reported in The National Law Journal, the Brazilian companies have accused U.S. producers of giving fraudulent information to the Washington-based U.S. International Trade Commission and manipulating the commission into imposing import duties on foreign producers in the 1990s. The duties were lifted in 1999, when the commission reported that it had received "false, misleading, or incomplete" information from U.S. producers.

Bruce Cohen of Philadelphia’s Meredith Cohen Greenfogel & Skirnick, arguing for the Brazilian plaintiffs, told the three-judge panel this morning that when a party comes into the city with the intent of committing fraud against another company, the long-arm statute should apply. The injury to the Brazilian plaintiffs “emanated” from the alleged fraud at the trade commission, Cohen said.

District of Columbia Court of Appeals Judge John Fisher asked Cohen whether that logic would open the door to creating jurisdiction for anyone who makes a misrepresentation to the federal government. What about spin from local lobbyists, Fisher asked, “are we going to be entertaining all those cases?”

The Morning Wrap

Edwards Seeks Dismissal: The Charlotte Observer reports on arguments in federal district court in Greensboro, N.C., over whether a judge should dismiss criminal charges against former presidential candidate John Edwards (D).

Cost of Living Matters: New lawyers in private practice in Dallas, Houston and Atlanta earn lower median salaries but enjoy more buying power than associates in New York, Boston, Los Angeles, Washington and San Francisco, The National Law Journal reports.

DLA Leadership: DLA Piper partners are considering bringing on former Linklaters managing partner Tony Angel to serve as co-global chairman of the firm, Reuters reports.

Defending China: Two Chinese lawmakers said in a briefing with reporters on Thursday that the country's legal system "provide[s] full protection to the freedom of the citizens," despite criticisms that it does not protect civil liberties, The Associated Press reports.

Eight-Figure Tort: The Boston Globe reports on a $15 million lawsuit filed against Domino's Pizza and Deutsche Bank in connection with a brutal killing of a pizza-delivery man at a vacant building where the bank held the title.

Latest on Giant Lego Man: The Sarasota (Fla.) Herald-Tribune digs into the deep questions surrounding a new local resident: Will he be seen in public again? What does his future hold? And does he enjoy any legal rights of his own?

Speakers at Pro Bono Breakfast Urge Crowd to 'Make the World Better'

At an event Wednesday hosted by the Washington Lawyers’ Committee for Civil Rights and Urban Affairs, law firm partners, a federal judge and the D.C. Bar president stressed the importance of pro bono work.

A couple hundred attended the John Burke Pro Bono Breakfast at the Capital Hilton in Washington to hear Marc Fleischaker of Arent Fox, Ronald Flagg of Sidley Austin, U.S. District Judge for the District of Columbia Gladys Kessler and Darrell Mottley, D.C. Bar President and partner at Banner & Witcoff.

Kessler encouraged the younger lawyers and associates in the room to take on pro bono work as not only a way to gain more courtroom experience but as a way to give back to a community, many of whose residents are in desperate need.

“At the end of the day you will get great satisfaction when you know you have made their lives a little more bearable and have enabled them to go on with their lives in a productive way,” Kessler said.

After the speakers, a panel of project directors spoke about the pro bono cases each of their organizations had handled in the past year.

Elaine Gardner, project director for the Disability Rights Project, spoke about a class action settlement with the U.S. Postal Service to ensure better communication with deaf employees in emergency situations. Magan Whyte, director of the Fair Housing Project, cited predatory lending and discrimination cases her group handled in the past year.

Laura Varela, director of the Immigrant and Refugee Rights Project, talked about asylum work and sexual harassment cases involving immigrant women. She said that often, because of cultural differences, immigrant women are unaware that sexual harassment doesn't have to be tolerated in the workplace.

Kessler’s final words resonated with the crowd.

“You may not be able to change the world in its entirety,” Kessler said. “But there is no question you can make the world better for a lot of individuals who matter by providing…pro bono services in this city and I hope you all do that.”

SEC Goes After Gupta

The U.S. Securities and Exchange Commission is going after the big fish, today indicting former McKinsey & Co. head Rajat Gupta for securities fraud in connection with the Galleon Group hedge fund.

Gupta, 62, allegedly passed material nonpublic information to Galleon's Raj Rajaratnam, who was ordered to serve 11 years in prison on Oct. 13 for trading on illegal tips.

Our sibling paper The New York Law Journal has more.

DADT Protester Challenges Judge's Denial of 'Vindictive Prosecution' Defense

Daniel Choi, a former U.S. Army lieutenant arrested last November while protesting the military's Don’t Ask Don’t Tell policy, is appealing a Washington federal court judge's decision to bar him from arguing a defense of selective or vindictive prosecution.

In an Oct. 11 order, U.S. District Chief Judge Royce Lamberth issued a writ of mandamus directing the magistrate judge hearing Choi's case to not consider a defense claim of selective or vindictive prosecution. Choi’s attorney, Fort Lauderdale, Fla.-based solo practitioner Norman Kent, filed a notice of appeal on Tuesday.

“The score is 1-1, and we need a judicial court of appeals to be the tie-breaker,” Kent said in a phone interview on Wednesday. The U.S. attorney’s office, through a spokesman, declined to comment.

The underlying facts of Choi’s case aside, the U.S. Court of Appeals for the D.C. Circuit will likely weigh for the first time whether Lamberth, or any district court judge, has authority to issue such a writ to a magistrate in the same court, much in the same way an appeals court can issue a writ to a district court judge. Lamberth acknowledged in his ruling that this was an unsettled issue.

In November 2010, Choi and 12 other demonstrators were arrested outside of the White House while protesting the now-defunct Don’t Ask Don’t Tell policy, which had barred the service of openly gay service members. Choi had been discharged under the policy in 2009 after publicly announcing that he was gay.

The group was charged with failure to obey a lawful order, a misdemeanor. The other demonstrators agreed to deferred-sentencing agreements with the government in order to avoid trial, but Choi declined offers to settle. Magistrates have authority to hear misdemeanor criminal cases, and a bench trial began Aug. 29 before U.S. District Magistrate Judge John Facciola.

Prosecutors halted the trial after Choi’s attorneys began presenting a theory that prosecutors had treated Choi’s case differently from his previous arrests for protesting and also with how other protestor cases were handled. Facciola indicated he would allow the defense to proceed, prompting the U.S. attorney’s office to file a petition for a writ.

Lamberth agreed with the government that a claim of vindictive prosecution should have been brought up as a pre-trial motion, not during trial. Such a claim is a constitutional question, he wrote, not a defense theory having to do with the underlying facts.

Business Group Opposes $3.4B Cobell Settlement

A conservative think tank that advocates for free enterprise and limited government is challenging the $3.4 billion settlement in a Native American class action in Washington, saying the judge in the high-profile case should not have certified a class.

The non-profit public interest group Competitive Enterprise Institute, represented by McGuireWoods, submitted a brief supporting opponents of the landmark settlement who are challenging the merits of the deal. The case is pending in the U.S. Court of Appeals for the D.C. Circuit.

“The proper administration of class actions is vital to the functioning of the free market and the rule of law,” the institute’s brief (PDF), lodged Tuesday, said. “Large settlements—including large class-action settlements—are rarely isolated events; instead they signal to future litigants (or future class-action lawyers) that the rules underlying litigation have changed, and that they should continue to push the boundaries of the legal system.”

The suit, filed by the late Elouise Cobell in 1996 in U.S. District Court for the District of Columbia, demanded an historical accounting of money the government held in trust for thousands of Native Americans. The settlement, which required congressional authorization, will pay potentially hundreds of thousands of class members.

The Competitive Enterprise Institute said the presiding Washington trial judge, Thomas Hogan, who approved the deal between the plaintiffs and the government, should have conducted a more “rigorous” inquiry before certifying a class for purposes of the settlement.

At issue, in the eyes of the free enterprise group, is the scope of the rule of civil procedure that governs class actions.

Without Naming Names, Boehner Blasts DOJ, NLRB

U.S. House Speaker John Boehner (R-Ohio) kicked off an annual defense-bar conference in Washington today by criticizing what he called "a federal regulatory onslaught" by the Obama administration.

Boehner delivered opening remarks at the annual summit of the U.S. Chamber Institute for Legal Reform, the arm of the business lobby that advocates on legal and regulatory issues. The summit is taking place today at the Chamber’s headquarters, which occupies a corner near the White House.

He singled out two recent enforcement actions that the Obama administration has taken: raids of the Nashville, Tenn.-based Gibson Guitar Corp. in connection with what Justice Department lawyers say were illegal purchases of foreign wood, and a complaint filed by the National Labor Relations Board regarding the Boeing Co.’s motivation for building a new plant in South Carolina, where labor unions are relatively weak.

Of Gibson’s CEO Henry Juszkiewicz, who is also scheduled to speak at the summit, Boehner said “the federal government raided his business because he’s buying imported wood.” The dispute, he said, “is costing this country millions of dollars, because of this raid by the federal government. It seems like an overly heavy handed way of doing business.”

It is unusual for a senior lawmaker to be so critical of an ongoing Justice Department case, though Boehner did not name DOJ and Juszkiewicz has been outspoken in defending his company. A civil forfeiture complaint and accompanying affidavit that the Justice Department filed in U.S. District Court for the Middle District of Tennessee alleges that wood from India was purposely mislabeled to avoid detection during import.

Republican lawmakers have been quicker to criticize the NLRB’s complaint against Boeing. Rep. Darrell Issa (R-Calif.), the chairman of the House Committee on Oversight and Government Reform, is investigating the agency for an action that he says overstepped its authority and undermines the ability of businesses to make basic decisions. The NLRB complaint alleges Boeing opened its new plant in South Carolina in retaliation for union activity at existing plants in Washington state.

“Boeing completed a plant that will create thousands of new jobs,” Boehner said. “And yet a federal agency is suing to stop that plant from actually operating. Listen, I’ve been around the government for quite a while, but I have never seen actions like this in my entire career. This is a federal regulatory onslaught like no one has ever seen.”

Click here for the agenda of the Chamber conference, which is sponsored by law firms including Mayer Brown and Akin Gump Strauss Hauer & Feld. Click here (PDF) for a report put out today by the Chamber's rival, the American Association for Justice, a trade group for plaintiffs' lawyers.

The Morning Wrap

New Galleon Indictment: Federal prosecutors are expected to file criminal charges on Wednesday against Rajat K. Gupta, the most prominent business executive ensnared in an aggressive insider trading investigation, according to The New York Times.

Regulatory Review: President Barack Obama’s "tsunami" of new government regulations looks more like a summer swell. Obama’s White House has approved fewer regulations than his predecessor George W. Bush at this same point in their tenures, and the estimated costs of those rules haven’t reached the annual peak set in fiscal 1992 under Bush’s father, according to government data reviewed by Bloomberg News.

Smuggling Ring: Radio-control parts hidden in roadside bombs in Iraq have been traced to a company in Minnesota, prompting a federal grand jury Tuesday to indict five people in an alleged smuggling ring that sent up to 6,000 of the devices from this country to Iran for use against U.S. military personnel, the Los Angeles Times reports.

Edwards Case: When Republican U.S. Attorney George Holding indicted former Democratic presidential candidate and Sen. John Edwards in June for campaign finance law violations relating to gifts to his mistress, many North Carolina Democrats suspected politics were at play. When, weeks later, the prosecutor and former Jesse Helms aide resigned and announced he was running for Congress as a Republican, they were all but sure of it, Politico reports.

Poopgate: A Fairfax County jury deliberated for less than 20 minutes Tuesday before exonerating a Fairfax woman of failing to clean up after Baxter, the fluffy Westie-bichon frise mix she cares for, The Washington Post reports.

Roger Clemens' Lawyers Seek Fees After Mistrial

The government should be forced to pay fees and costs associated with the botched obstruction and perjury trial of Roger Clemens, the defense lawyers for the former baseball pitcher told a judge in Washington today.

The attorneys, including Houston’s Russell Hardin Jr., said in court papers (PDF) filed this evening in Washington federal district court that trial judges have the inherent authority “to sanction conduct that abuses the judicial process.”

“The government had its day in court,” Hardin said. “The conduct of its own attorneys resulted in irretrievably wasted time and the loss of an opportunity for a one-time, fair resolution of these charges for all involved. This is not fair to the accused—any accused—nor is it fair to the United States District Court and the taxpayers of this country.”

U.S. District Judge Reggie Walton declared a mistrial in July after prosecutors presented to jurors evidence the judge had previously restricted.

Walton later refused to throw out the case entirely, setting the stage for a retrial in April. Clemens is accused of lying to Congress in testimony about his alleged use of performance-enhancing drugs.

At a hearing in September, Walton said jury selection and the several days of trial itself “obviously cost Mr. Clemens a lot of money.”

Hardin and co-counsel Michael Attanasio of Cooley did not specify the amount they are seeking. The lawyers said they would submit a petition to the court documenting fees and expenses incurred between June 25 and July 14.

Walton said in court last month he was unsure whether he has the authority to order the government to reimburse Clemens.

“I think fundamental fairness obviously would require that he be reimbursed for those expenses, but sometimes fundamental fairness doesn’t bear out when it comes to legal issues that a court has to resolve,” Walton said.

Clemens’ lawyers urged Walton to “sanction the United States to the same extent (the court) can sanction private parties.” An award of fees and costs, the defense lawyers said, “would at least partially restore Mr. Clemens to the same position he was in before the prosecutors engaged in conduct meriting a mistrial.”

William Miller, a spokesman for the U.S. Attorney’s Office for the District of Columbia, declined to comment on Clemens’ request for compensation.