The BLT: The Blog of Legal Times

Second Mistrial Declared In FCPA Sting Case In D.C.

A judge Tuesday afternoon declared a mistrial in a high-profile foreign bribery prosecution in Washington, dealing another setback for the Justice Department as the jurors in the case overwhelmingly supported not guilty verdicts for several defendants.

The jurors deliberated for more than a week before telling the judge, Richard Leon of Washington federal district court, that the panel was unable to reach a unanimous verdict.

The charges stem from a two-year sting rooted in the proposed sale of $15 million in military products to the African nation of Gabon. The sale was a ruse. FBI agents set up a fake deal using informants and undercover agents.

The panel voted 9 to 3 and 10 to 2--favoring not guilty--on several charges for three defendants who were indicted substantive provisions of the Foreign Corrupt Practices Act. Leon earlier dismissed an overarching conspiracy charge against the defendants.

The same panel, which heard evidence for three months, acquitted two defendants yesterday. Three jurors who left the courtroom after the mistrial declined to speak with reporters.

Prosecutors also declined to comment after Leon announced the mistrial. For the government, the jury's inability to reach a unanimous verdict was surely a disappointment.

The mistrial was the second in recent months. Last summer, Leon declared a mistrial for another set of defendants who were charged in the scheme.

In all, 22 executives and employees in the arms and equipment industry were charged in the novel prosecution, which employed undercover techniques more commonly seen in drug and racketeering cases.

Another set of defendants is scheduled for trial later this month.

Visa, MasterCard Fight Allegations of ATM Fee Conspiracy

In new motions to dismiss (PDF) filed yesterday, Visa Inc. and MasterCard Inc. disputed allegations that they conspired to fix transaction fees on ATMS in violation of federal antitrust laws.

The National ATM Council Inc., a trade association for ATM operators, sued Visa and MasterCard in October in U.S. District Court for the District of Columbia, accusing the two debit payment card giants of forcing ATM operators to charge the same fees for all transactions, regardless of whether they were completed over a network maintained by Visa and MasterCard.

Two sets of ATM users sued Visa and MasterCard in October alleging similar violations of antitrust law. In one of those cases, the users also sued several banks that the users claimed were part of the price-fixing scheme. The bank defendants filed a motion to dismiss (PDF) yesterday as well.

In similar motions to dismiss filed in all three cases by Visa and MasterCard, the companies disputed that the plaintiffs presented any evidence of an illicit conspiracy to restrict trade. The fact that banks are members of the Visa and MasterCard ATM network and follow its rules doesn’t constitute an antitrust violation, the companies argued.

Visa and MasterCard said that while they do have rules governing the ATM operators’ use of their networks to process transactions, those rules only restrict operators from charging higher access fees, which isn’t an injury envisioned under the Sherman Act.

“A practice that results in lower prices to consumers generally does not result in antitrust injury actionable under Sherman Act Section 1,” the companies argued in their motion.

House Democrats Defend Justice Department Leaders In Gun Sting

House Democrats today defended senior Justice Department leaders over the handling of a botched gun investigation that allowed thousands of firearms to flow into Mexico and into the hands of criminals.

Elijah Cummings of Maryland, the ranking Democrat on the House Oversight Committee, which is investigating the Operation Fast and Furious gun probe, said in a letter accompanying a report that the committee hasn’t turned up evidence showing that the sting “was a politically-motivated operation conceived and directed by high-level Obama Administration political appointees at the Department of Justice.”

“The documents obtained and interviews conducted by the Committee indicate that it was the latest in a series of reckless and fatally flawed operations run by ATF’s Phoenix Field Division during both the previous and current administrations,” Cummings wrote in the letter.

The committee, chaired by Rep. Darrell Issa (R-Calif.), is continuing its Fast and Furious investigation. Attorney General Eric Holder Jr. is scheduled to testify Thursday morning before the committee.

Holder hasn’t defended the sting. In earlier testimony, the attorney general has described Fast and Furious as “fatally flawed.” Holder has predicted law enforcement agents will grapple with the effects of the botched program for months, if not years, as guns continue to show up at crime scenes. "This should never have happened, and it must never happen again," Holder said at a Senate hearing last November.

Two assault rifles purchased in the United States ended up at the murder scene of border patrol agent Brian Terry. Terry was fatally shot in Arizona in December 2010. The authorities said the person who bought the rifles was a suspected straw purchaser involved in a gun trafficking ring.

Cummings in his letter today called Fast and Furious a “misguided” investigation.

“The report describes how, rather than halting this operation after its flaws became evident, ATF’s Phoenix Field Division launched several similarly reckless operations over the course of several years, also with tragic results,” Cummings said. “Operation Fast and Furious was the fourth in a series of operations in which gunwalking—the non-interdiction of illegally purchased firearms that could and should be seized by law enforcement—occurred since 2006.”

Sen. Chuck Grassley of Iowa, the ranking Republican on the Senate Judiciary Committee, said in a statement this afternoon that “the idea that senior political appointees have clean hands in these gunwalking scandals doesn’t pass the laugh test.”

Senior DOJ leaders, Grassley said, “ignored the warning signs and failed to put a stop to it or hold anyone accountable.” He noted that Assistant Attorney General Lanny Breuer has acknowledged knowing about gunwalking tactics as early as April 2010.

“He stood mute as this administration fought tooth and nail to keep any of this information from coming out for a year,” Grassley said. “It will take a lot more than a knee-jerk defense from their political allies in Congress to restore public trust in the leadership of the Justice Department.”

The Justice Department is conducting an internal investigation of Fast and Furious. Grassley said DOJ has provided its Office of the Inspector General with 80,000 pages of documents. He said DOJ officials have only turned over to Congress about 6,000 pages.

Judge Hashes Out Rules Governing Future of Occupy D.C.

An attorney representing Occupy D.C. protesters suing to stop the removal of tents or other property from McPherson Square called today's hearing on a motion for a preliminary injunction a "victory," even as he admitted the judge was unlikely to grant that request.

During the hearing this morning before U.S. District Judge James Boasberg, Assistant U.S. Attorney Marina Braswell confirmed that there were no imminent plans to seize tents or close the park, and that the National Park Service would comply with existing regulations requiring it to safeguard seized property and provide written notice of any future plans to close the park. She was careful to note, however, that the law gives the agency the right to close the park or cordon off sections in the event of an emergency.

“Those tents will be left alone, assuming there is no other problem,” she told Boasberg, referring to the property of protesters not in violation of a no-camping rule or any other laws. Besides public safety, she said sanitation was an example of a problem that could also warrant action.

Washington solo practitioner Jeffrey Light, attorney for the protesters, acknowledged in court that regulations already in place would require the government to give written notice of a plan to close the park – in the absence of an emergency – and give counsel time to object in new court filings. He said that as long as the government made sure to notify the court and counsel, he was satisfied.

Boasberg said he planned to issue an order within the next 48 hours that memorialized statements made by counsel. In light of what was said, Light said after the hearing that he didn’t expect Boasberg to grant the preliminary injunction, which provides relief in the face of an imminent problem.

Judge: FBI Confirmed Civil Rights Era Photographer Doubled As Informant

The FBI has long refused to confirm or deny whether civil rights era photographer Ernest Withers was a confidential informant.

The agency, however, accidentally confirmed Withers’ secret work in documents the government publicly released to a newspaper, a federal judge in Washington said today.

The judge, Amy Berman Jackson of Washington federal district court, ruled today against the U.S. Justice Department in a spat between a newspaper reporter and the FBI over access to the agency’s file on Withers.

Jackson said the FBI can longer exclude processing a newspaper reporter’s public records request about Withers.

Jackson said “Withers’ status as an informant has been officially confirmed.” Jackson ordered the FBI by March 16 to produce an index identifying the specific exemptions the agency is using to justify the continued withholding of documents. The agency had refused to prepare such a list.

Withers, known for his images of the civil rights movement, including photographs of Martin Luther King Jr., died in 2007. A year later, a Memphis-based daily, The Commercial Appeal, began investigating Withers and his connection to the FBI. The paper published a profile of Withers, in September 2010, that noted his work as an informant for federal agents.

The Commercial Appeal, represented by Holland & Knight, sued in Washington in 2010 for access to FBI documents.

Justice Department attorneys Lesley Farby and Wendy Doty of the Civil Division’s federal programs branch were not immediately reached for comment. A DOJ spokesman, Charles Miller, declined to comment on the court's ruling.

An attorney for the newspaper, Charles Tobin, a Holland & Knight entertainment and media law partner in Washington, was not immediately reached for comment.

The FBI had earlier turned over information to the newspaper. But Justice Department lawyers contend that the documents do not confirm Withers’ work as an informant. Justice attorneys said any disclosure from the FBI that revealed Withers’ alleged status as an informant was inadvertent.

Jackson said in her ruling (PDF) that the FBI’s earlier information responses to the newspaper confirmed Withers’ service as an informant. One document said “Ernest Withers, CI” and another document referenced “Conf. Info.”

“The documents that supply that information were not leaked or disclosed by some other agency or a rogue employee—they were transmitted to the plaintiffs” by the FBI in response to a request under the Freedom of Information Act, the judge wrote.

Jackson rejected the FBI’s argument that the references to “CI” and “Conf. Info.” do not signify Withers was an informant. “This argument is not worthy of serious consideration and it insults the common sense of anyone who reads the documents,” Jackson said.

Five International Trade Lawyers Jump to Morris, Manning & Martin

Morris, Manning & Martin has added five international trade lawyers to its Washington office, the firm announced Monday.

Donald Cameron Jr., Julie Mendoza, R. Will Planert and Brady Mills have joined as partners. Mary Hodgins joined as an associate. The group made moved from the D.C. office of Troutman Sanders.

The additions raises the headcount at Morris Manning's Washington office to 12 attorneys. The group handles trade remedies cases and World Trade Organization litigation, specifically antidumping, countervailing duty and safeguard operations. The laterals have specific ties to South Korea, China and Latin America.

“The synergies created by this elite group and MMM will provide significant benefits to our clients,” Louise Wells, managing partner of Morris, Manning & Martin, said in a written statement.

Nixon Peabody Working with Hogan Lovells on Telecom Lobbying Effort

Nixon Peabody last week notified Congress it is lobbying on behalf of Hogan Lovells for a New York-based hedge fund that has come under fire in Washington over a telecommunications company it supports.

Lobbyists from Nixon Peabody are advocating on Federal Communications Commission and U.S. broadband policy issues for billionaire Philip Falcone's Harbinger Capital Partners LLC, backer of LightSquared Inc., according to congressional records. LightSquared is trying to launch a national open wireless broadband network that received tentative approval from the FCC last year, despite concerns about disruption it causes.

The Defense and Transportation departments in December said testing on LightSquared signals showed “harmful interference” with several Global Positioning System devices and disrupted a flight safety system intended to alert pilots to changing terrain. The company has disputed the findings.

Congressional Republicans also have expressed concerns about interference, as well as LightSquared’s advocacy efforts in Washington.

House Science Committee Chairman Ralph Hall (R-Texas) and six of his Republican colleagues on the panel in September sent Barack Obama administration officials a letter that raised questions about the timing of donations by LightSquared officials to the Democratic Party and White House meeting requests from the company. Then last week, Sen. Charles Grassley of Iowa, the top Republican on the Senate Judiciary Committee, sent Falcone a letter that said an adviser to the billionaire offered the senator an “unseemly invitation to discuss a quid pro quo” for LightSquared. Grassley is investigating the FCC’s tentative approval of the LightSquared network.

Former Rep. Thomas Reynolds (R-N.Y.), a Nixon Peabody senior strategic policy adviser, as well as strategic policy adviser Sally Vastola and counsel Douglas Dziak, are handling the account for the firm. The lobbyists didn’t respond to requests for comment. Harbinger spokesmen couldn’t be reached for an immediate comment.

LightSquared spent $2.8 million on federal lobbying last year, according to congressional records. Lobbyists from 15 firms were registered to lobby for the company in 2011. They include Ballard Spahr; Brownstein Hyatt Farber Schreck; Dickstein Shapiro; Patton Boggs; K&L Gates; Kirkland & Ellis; and Gibson, Dunn & Crutcher.

The Morning Wrap

And They're Off: Mitt Romney and Newt Gingrich are going head-to-head today in Floriday's primary election. The Miami Herald reports that absentee ballots are likely to play a major role in deciding the winner, with at least 632,000 Republican voters mailing in their votes so far.

Confidence Vote: In an effort to boost sinking approval ratings and regain public trust, the Senate voted Monday to consider legislation that would bar lawmakers from making stock or securities deals based on information they learn as members of Congress, The New York Times reports.

Sound and Fury, Signifying Nothing: The much-anticipated showdown between the National Park Service and Occupy D.C. demonstrators didn't happen yesterday. Although the agency had said it would begin enforcing a no-camping rule starting at noon on Monday, no protesters have been cited or arrested so far, The Washington Post reports.

Big Names, Unclear Mandate: Corporate Counsel explores the make-up and mission of the new Residential Mortgage-Backed Securities Working Group, the new financial crimes unit announced by President Obama in last week's State of the Union address.

Antitrust Investigation: The European Union is investigating whether Samsung Electronics violated antitrust laws in its use of special patents known as "standards-essential," The Wall Street Journal reports.

Jury Acquits Two Businessmen In FCPA Sting Case

A jury in Washington today acquitted two businessmen in a high-profile foreign bribery case that has proven a difficult case for the U.S. Justice Department.

John Godsey, an attorney in Atlanta, and R. Patrick Caldwell, a former U.S. Secret Service official, were found not guilty on charges they violated the Foreign Corrupt Practices Act.

Prosecutors charged Godsey and Caldwell in a scheme with 20 other executives and employees in the arms and law enforcement equipment industry. The prosecution stemmed from a two-year undercover sting in which agents pitched a fake $15 million equipment deal involving the sale of goods to the African nation of Gabon.

The jury deliberated for seven days following a trial that lasted for more than three months.

“Justice has prevailed. We believe this case should never have been brought in the first place,” said Orrick, Herrington & Sutcliffe litigation partner Michael Madigan, who represents Godsey. “We are very gratified with the result.”

Caldwell’s lawyer, Eric Dubelier, a Reed Smith partner in Washington, was not immediately reached for comment.

U.S. District Judge Richard Leon today told the jurors to continue discussing the charges against the remaining three defendants who are still on trial.

The not guilty verdict marked yet another blow for prosecutors, who have struggled to mount a successful case. Leon recently dismissed the conspiracy charge against the defendants who are on trial now.

Last summer, a jury failed to reach a unanimous verdict with another set of defendants. Trials for others charged in the conspiracy are set for the coming months.

Patton Boggs Reports 6.2% Drop in Profits Per Partner in 2011

Updated at 6:46 p.m.

Reflecting a stagnant legal market in Washington, Patton Boggs posted a paltry $2 million increase in gross revenues in fiscal 2011, to $339.5 million, according to the firm's response to a new Am Law 200 survey. That was just a .6% gross revenue jump from the year before.

And profits per partner dropped from 2010-2011, from $885,000 to $830,000, a 6.2% hit. The average compensation for all partners decreased 6.8%, to $615,000.

Overall, compensation for equity partners, or net income, was cut to $90 million, a 3.7% decrease. Nonequity compensation was flat at $56.5 million.

Patton also reported 495 lawyers in fiscal 2011 — a 3.3% drop from 512 attorneys the firm employed in 2010. But the cut in lawyers didn’t touch partners, whose ranks jumped from 228 to 237. Of the nine new partners, two are equity and seven are nonequity.

Patton Chairman Thomas Boggs Jr. couldn’t be reached for an immediate comment.

But Managing Partner Edward Newberry wrote in an e-mail, sent soon after the initial publication of this report, that some of the numbers the firm had first sent to The American Lawyer were incorrect.

Newberry wrote that the number of equity partners in 2011 was 104 instead of 108, which then would have affected the firm's profits per partner — which, using the new figure, dropped to only $865,000. The new equity partner figure would also mean that average compensation for all partners had decreased to only $629,000, also a smaller decrease than the firm initially reported.

“The firm had a very solid year, made budget and had its strongest fourth quarter ever on revenue and fees billed, and among its strongest quarters ever on demand,” Newberry wrote. “Revenue per lawyer of $685,000 is the strongest in the firm's history as well.”

The National Law Journal will continue reporting this story.