The BLT: The Blog of Legal Times

The Morning Wrap

Delayed: A federal judge in New Orleans has postponed the start of a trial over the 2010 Deepwater Horizon oil spill in an effort to give BP and the plaintiffs additional time to work out a settlement, The Times-Picayune reports. The trial, which was scheduled to begin Monday, now is set to start on March 5.

Started: An Egyptian court on Sunday began a trial against at least 16 Americans as part of a probe into the foreign financing of nonprofit organizations in the country, The Washington Post reports. Sam LaHood, the son of U.S. Transportation Secretary Ray LaHood, is among the Americans.

Guilty: Shepard Fairey on Friday pleaded guilty to a federal contempt charge amid litigation stemming from his use of an Associated Press photo to make his so-called "Hope" poster of President Barack Obama, The Am Law Daily reports. Manhattan U.S. attorney Preet Bharara said Fairey "went to extreme lengths to obtain an unfair and illegal advantage in his civil litigation, creating fake documents and destroying others in an effort to subvert the civil discovery process." Lawyers for Fairey didn't immediately respond to requests for comment.

Kennedy Arraignment: A son of former Attorney General Robert Kennedy has been arraigned on child endangerment and harassment charges, CNN reports. The charges stem from an incident last month when Douglas Kennedy knocked down a nurse at a New York hospital while holding his newborn son.

Going Strong: Workers in their 70s, 80s and 90s can thrive, The Associated Press reports after interviewing several lifetime tenured federal judges. "Everybody kind of goes on the assumption that you're going to crap out," U.S. District Judge Robert Sweet in Manhattan said. "Maybe you don't have to."

Suspicious Package at U.S. Office of Special Counsel Turns Out to be False Alarm

A suspicious package at the U.S. Office of Special Counsel in Washington caused the D.C. Fire Department to block off the 1700 block of M Street, N.W., this afternoon for about thirty minutes. Fire department officials later deemed it a false alarm.

“We had a package come in that set off alarm bells for our mailroom personnel,” said Ann O’Hanlon, spokeswoman for the Office of Special Counsel.

O'Hanlon didn't say exactly who the package was addressed to, nor was she able to provide other details about it.

Four fire trucks, as well as officials from the Department of Homeland Security, responded to the call. Nearby office workers gathered on the street and peered down from their office perches above. Authorities outfitted a man in a silver suit and set up a small kiddy pool in the street, in case firefighters needed to decontaminate anyone contaminated by the package's contents.

The property manager for 1730 M Street N.W. sent out an email to building tenants advising them of the situation. The building was not evacuated. At 3:20 p.m., firemen entered the building to investigate. They left minutes later after determining that the package was safe.

“We are sorry to have caused a commotion on M Street, but all is well,” O’Hanlon said.

The Office of Special Counsel is an independent, federal investigative and prosecutorial agency that, according to its Web site, protects federal employees and job applicants from "prohibited personnel practices, especially reprisal for whistleblowing."

Arent Fox Lobbying for Diner Chain on BWI Airport Location Issue

Arent Fox this week notified Congress that it is lobbying for a retro-diner chain based in Rockville, Md.

The firm is advocating for Silver Diner Inc. on the "[r]elocation and construction of Silver Diner restaurant at Baltimore/Washington International Thurgood Marshall Airport," according to a lobbying registration filing.

Silver Diner in 2007 opened a restaurant in the airport's Concourse B, which has gates for Southwest and AirTran. The Maryland Aviation Administration is planning a $100 million BWI expansion that "will destroy a significant portion of the existing restaurant space and will require the complete relocation of the kitchen, the bar and the restaurant seating area," according to a Maryland Department of Transportation fiscal 2013 budget report.

Arent partner Jon Bouker, co-manager of the firm’s government relations practice, and associate Amal Dave are handling the account. Neither the lobbyists nor a Silver Diner representative could be reached for comment.

Silver Diner hasn’t had federal lobbyists before, according to congressional lobbying records that date back to 1999.

The company has more than a dozen restaurants located in Maryland, Virginia and New Jersey. The chain’s diner at BWI is its only restaurant in an airport.

Virginia Attorney Sentenced to Two Years in Prison for Wire Fraud Conspiracy

A Leesburg, Va. attorney was sentenced to two years in prison today after admitting in November to helping organize a wire fraud scheme that illegally paid a former client of his more than $450,000 from a life insurance policy.

U.S. District Court Judge Liam O'Grady sentenced Christopher Agresto to 24 months in prison with three years of supervised release for one felony count of conspiracy to commit wire fraud, 13 months less than the 37-to-46 month guideline range. Two additional counts, one for wire fraud and the other for money laundering, were dropped following Agresto's guilty plea to the conspiracy charge.

Peter Carr, public information officer for the Eastern District of Virginia U.S. Attorney's office, where the case took place, said in an interview that it is "important to remember that Mr. Agresto did not receive any money from the account," a point of contention for the defense.

Agresto's attorney Greg Hunter said that while he was pleased his client received "a full third less time" than was suggested, he felt the fact that Agresto did not receive payment from the scheme, in addition to the repercussions in his private life, should have led the court to sentence Agresto to probation instead of jail.

"My difference of opinion with the prosecution could not be overstated," Hunter said. "This guy has been completely personally, financially and professionally destroyed by this."

The case stemmed from the 2009 death of Susan Cilenti, whose body was found under suspicious circumstances in the home she shared with her husband James Cilenti. Following an announcement by the Loudoun County Sheriff's Office that James Cilenti was a person of interest, military insurance provider USAA refused to pay him $507,048 from his late wife's policy, according to a press release issued by prosecutors in the case.

Cilenti then contacted Agresto to set up a trust to receive the funds that would benefit his adopted daughter. Agresto subsequently wrote more than $450,500 in checks and wire transfers to Cilenti, who later spent the money for his own benefit and not his daughter's.

Agresto and Cilenti were ordered to pay that amount in restitution.

Hunter said that despite the lower-than-suggested sentence, the guidelines were overly punitive from the outset, given that Agresto did not receive any money from the trust. He also expressed his "disappointment" with the rest of the legal community in which Agresto worked, saying that fellow attorneys "abandoned" his client in response to this case.

"I think the world of [Judge] Liam O'Grady," Hunter said. "But I could not disagree with him more here."

By Rob Stigile

SEC Official Says Agency Doesn't Shy Away From Bringing Tough Cases

During a panel discussion Friday, U.S. Securities and Exchange Commission chief litigation counsel Matthew Martens defended the agency's prowess in court - as well as its willingness to enter into what he termed "appropriate" settlements.

"The reality is, we've had tremendous success and are not shying away from bringing challenging cases," he said today at the Practicing Law Institute’s “SEC Speaks” conference in Washington. “We’re willing to take on litigated matters, knowing from the outset they will not be settled.”

Martens said that of the 68 cases that the SEC has brought against individuals in connection to the 2008 financial crisis, 50 are being litigated, or 74 percent.

The SEC came under fire by Judge Jed Rakoff last year, when he blasted the SEC for reaching a settlement with Citigroup Global Markets Inc. that did not require the company to admit or deny wrongdoing in connection with a failed mortgage-backed securities fund, and refused to sign off on the deal. The SEC has appealed his ruling to the U.S. Court of Appeals for the 2nd Circuit.

Martens said it was “good policy to accept a settlement” if it offered relief comparable to “what we could reasonably expect if we prevailed at trial.” He continued, “At the end of the day, it’s a mistake on our part to turn down a settlement simply because there’s not an admission of liability.”

The SEC has brought about 2,000 cases in the last three years, Martens said, and fewer than 10 judges had issues with settlement terms. (“And only one judge to my knowledge has rejected” a deal, he said, drawing a laugh).

He also noted that the SEC’s no admit/no deny settlement policy is “consistent with what every other agency does....We’re not some outlier in terms of a government agency.”

D.C. Judicial Applicants, Complaints Up in 2011

The number of attorneys applying for judgeships on the city's local courts is up, as is the number of complaints filed against sitting judges, according to testimony this morning before the District of Columbia Council.

Between 31 to 38 attorneys applied for vacancies on the District of Columbia Superior Court in fiscal year 2011, according to U.S. District Judge Emmet Sullivan, chairman of the District of Columbia Judicial Nomination Commission. In fiscal year 2010, vacancies on the same bench drew 21 to 32 applicants.

The number of complaints filed against judges on Superior Court and the District of Columbia Court of Appeals grew from 41 complaints in fiscal year 2010 to 54 complaints in 2011, according to U.S. District Judge Gladys Kessler, chairwoman of the District of Columbia Commission on Judicial Disabilities and Tenure.

Sullivan and Kessler, testifying at an annual performance oversight hearing before the council’s Committee on the Judiciary, offered the same explanation for the jump – a growing awareness of the courts’ inner-workings among the public and the D.C. Bar.

Sullivan told committee Chairman Phil Mendelson (D-At Large) that the nomination commission has made more of an effort to meet with attorneys representing a cross-section of the Bar – from private practice to the Justice Department. “We’re prepared to meet with any group, any individual who is interested in what we do,” he said.

The number of applicants from the city’s larger law firms is noticeably up, Sullivan said, a group that historically hasn’t applied because, among other reasons, they take a significant pay cut in becoming a judge. Sullivan said he found that group’s growing interest “encouraging.”

D.C. Judge Orders Government To Pay Whistleblower Millions More

The whistleblower who exposed a fraudulent billing scheme involving Verizon is owed several more million dollars from the government for the key role he played, a federal trial judge in Washington has ruled.

The U.S. Justice Department tried to convince the judge, Gladys Kessler of U.S. District Court for the District of Columbia, not to pay the whistleblower any additional money for his involvement in the False Claims Act case. Kessler's opinion is here.

Verizon Communications resolved the litigation in a $93.5 million settlement last February.

The suit, filed in 2007 and under seal for several years, alleged Verizon submitted false claims for illegal surcharges under two telecommunications contracts with the federal government in order to collect back certain costs of doing business.

DOJ had already paid the whistleblower, Stephen Shea, $13.7 million, the minimum he was owed under the false claim laws. Kessler, in a ruling issued Thursday, bumped up Shea’s take to 20 percent, meaning his overall award will be more than $18.8 million.

Shea’s attorney, Colette Matzzie of Washington’s Phillips & Cohen, declined to comment this morning through a spokeswoman. Matzzie had asked for an additional payment for Shea of nearly $7.5 million. The law firm has not disclosed how much money it received for its role in the case.

Shea is a former managing director at the consulting TechCaliber LLC, where he helped clients manage investments in telecommunications services and networks, Kessler said, noting that “many of his clients were Fortune 100 companies.”

The False Claims Act guarantees a whistleblower will receive a minimum payment of 15 percent and a maximum of 25 percent of the final settlement amount. The whistleblower’s share is based on how much the person contributed to the case.

Government lawyers downplayed the significance of Shea’s role in the action against Verizon, saying he had no first-hand knowledge of Verizon’s billing arrangements under the relevant contracts.

Kessler pulled a line from the government’s legal papers in which prosecutors said Shea’s complaint was “a guess, an educated guess, but a guess nonetheless that the defendant was billing the government for unallowable costs.”

“This is a profoundly unfair characterization of the nature and extent of the expertise, experience, knowledge, analysis and just plain hard work that Shea, and his lawyers, contributed to this litigation,” the judge said.

ABA Asks Congress for Single Standard for Handling Privileged Bank Documents

Concerned that privileged bank information submitted to the Consumer Financial Protection Bureau may not be protected, the American Bar Association has asked Congress to pass legislation that would create a single, consistent standard for handling privileged bank documents.

"As you know, it is settled law that privileged materials shared with federal banking agencies remain privileged as to all other parties,” wrote ABA President William Robinson III in a Feb. 21 letter to key House and Senate leaders. The problem is that the term “federal banking agency” is specifically defined in the Federal Deposit Insurance Act — and the definition does not include the new CFPB.

Prior to the creation of the CFPB last year, federal regulators examined banks for compliance with consumer protection laws — examinations that might include privileged materials without causing a waiver. Now that the CFPB has taken over this function, “there is uncertainty over whether the examination may include the review of privileged materials without causing a waiver of the privilege,” Robinson wrote.

In Jan. 24 testimony before a House subcommittee, CFPB head Richard Cordray acknowledged that there is “real concern” over the issue, and expressed support for legislation that would resolve any doubt, according to the ABA.

Two bills are pending — S. 2099 and and H.R. 4014 — that would explicitly apply the same privilege standards to the CFPB.

The bills would also add the CFPB to the list of agencies that may share privileged information with other agencies specified in the statute without causing a waiver.

The House Financial Services Committee recently approved H.R. 4014, which is now before the full House. The Senate version is before the Banking Committee, whose chairman, Tim Johnson (D-S.D.), and ranking member, Richard Shelby (R-Ala.), are co-sponsors.

Recently Reported in Supreme Court Insider

With the Supreme Court back in the news this week -- and certainly a hot topic in coming weeks as well -- here's a brief recap of what we've been reporting lately in our subscription-only newsletter Supreme Court Insider:

-- In addition to reporting on the Court's grant of review in the affirmative action case Fisher v. University of Texas, we obtained and published the document from the U.S. solicitor general's office that explains why Justice Elena Kagan is recused in the case.

-- Stories on decisions in the Montana riverbed case, and on Miranda rights, among others, and arguments over issues ranging from the meaning of the word "interpreter" in calculating what litigation costs losers must pay winners, to the power of Congress to criminalize lies about being awarded military honors.

-- A look-ahead analysis at Kiobel v. Royal Dutch Petroleum and whether it will be the next Citizens United case in terms of defining corporate rights and responsibilities.

-- Updates and analyses on the continuing debate over whether Justices Clarence Thomas and Elena Kagan should recuse in the upcoming healthcare cases.

-- Filings that we call "brief of the week," including one petition that the Court agreed this Monday to review, asking whether a houseboat is more like a house or a boat for maritime law purposes.

-- "Appellate lawyer of the week" profiles on lawyers arguing recent and upcoming cases including Harvey Schwartz, Cliff Sloan, Charles Rothfeld, Jose Garza and Dan Domenico. And a story on Steve Filarsky, the named party in a case testing qualified immunity for private lawyers hired by municipalities.

There will be much more in upcoming issues, including comprehensive coverage of the lawyers, briefs and issues in play in the cases testing the constitutionality of the Affordable Care Act. For more information on subscribing to the newsletter, click here.

The Morning Wrap

Readying: Prosecutors handling the civil case against BP PLC are expected to accuse the oil giant of decisions that led to gross negligence in the explosion of the Deepwater Horizon well last April, The Wall Street Journal reports, citing sealed documents. The trial in New Orleans federal district court is scheduled to begin Monday. The National Law Journal's preview of the trial is here.

Challenging: Nebraska's attorney general is leading a suit against the Obama administration over the requirement that employers cover contraception in health care plans. The Wall Street Journal reports seven states are participating in the action, the first filed to challenge the contraception requirement.

Tracking: The Obama administration has released a "Consumer Privacy Bill of Rights" in an effort to give Internet users more control over how companies track and use personal information, The National Law Journal reports. Attorneys are concerned the bill of rights could spur lawsuits.

Blaming: A former chairman and chief executive officer of Kellogg, Brown & Root Inc. was sentenced yesterday to 30 months in prison for conspiring to violate the Foreign Corrupt Practices Act. Albert "Jack" Stanley blamed his bribing of Nigerian officials on "ambition, ego and alcohol."

Celebrating: Proponents of same-sex marriage heralded the Maryland Senate's passage of a bill that would make the state the eighth in the country to allow such unions, The Washington Post reports. Gov. Martin O'Malley (D) has vowed to sign the bill. Conservative and Catholic groups said they will fight to repeal the measure.

Breaking: Bank of America is no longer selling new mortgages to Fannie Mae, The New York Times reports, in a move that highlights the legal battle over the purchase of defaulted mortgages. Bank of America was Fannie’s third-largest provider last year, Inside Mortgage Finance reported.