In Berghuis v. Thompkins, 560 U.S. ___ 2010 (No. 08-1470, June Term, 2010), the court considered the common situation where law enforcement officers have advised the suspect of his/her right to maintain silent (the Miranda warnings), the suspect is aware of their right to remain silent, but does not explicitly state she/he will either invoke or waive these rights.  The Supreme Court held suspects must unambiguously invoke Miranda to prevent subsequent statements from being offered as evidence in court proceedings.  This means passively listening to Miranda warnings without explicitly claiming the right to remain silent or demanding to speak to lawyer before making a statement would allow law enforcement officers to later testify at trial concerning statements made during the custodial interview. 

Miranda was intended to protect individuals from the coercive effects of law enforcement interrogations.  This ruling makes the failure to invoke Miranda essentially an explicit waiver of the right to remain silent and/or have the assistance of counsel during an interview.

The disputed expenses, which Mr. Hurd claims were mistakes filed by his staff rather than by him personally, amounted to about $20,000 (all of which he paid back)—a trivial amount for a man who in 2008 made $43 million. 

H-P stock dropped significantly following Mr. Hurd’s departure and on Friday, August 13, the first shareholder lawsuit was filed against H-P, alleging that the board of directors breached its fiduciary duties in how it handled Mr. Hurd’s resignation.

The actress, whose credits include bit parts as a barmaid, a housewife and a nurse in assorted B-list movies, retained Gloria Allred, who is best known for representing Nicole Brown Simpson’s family.  The actress’s claims have been resolved “privately.”

Mr. Hurd’s resignation highlights the pivotal role internal investigations play in today’s business climate.  An allegation of wrong-doing prompted an investigation.  The findings of the investigation resulted in the ouster of an acclaimed CEO.  There has now been a “private” resolution of claims by the alleged victim and a very public lawsuit against the company’s board for the way it has handled everything.  Stockholders have lost billions.

Whether an internal corporate investigation involves criminal allegations, civil claims or both, the quality and integrity of the investigation are critical.   Prompt and thorough action is crucial, as it demonstrates the company’s good faith and desire to correct possible mistakes or wrongdoing by employees and, should the company decide to cooperate with the government, often results in lower fines, fewer targeted employees and reduced sentences for those who are targeted. 

While it may be too early to evaluate H-P’s internal investigation process, the investigation itself has been and will be the subject of much scrutiny.  If H-P is to prevail on the claims brought by shareholders last week, it may need to establish that the investigation was handled fairly, effectively and consistent with the board’s obligations to shareholders.

United States District Judge James B. Zagel declared a mistrial as to the other 23 counts, which included allegations of Theft or Bribery Concerning Programs Receiving Federal Funds (18 U.S.C. §666(a)(1)); Wire Fraud (18 U.S.C. §1343); Honest Services Fraud (18 U.S.C. §1346) and Racketeering (18 U.S.C. 1962(c) and (d)). 

The charges included the accusation that Blagojevich tried to sell or trade President Barack Obama’s old Senate seat and that the governor had tried to use the power of his office for personal gain.

Federal prosecutors said immediately after the Court declared a mistrial that they will try Blagojevich again on the 23 counts.  Judge Zagel scheduled a hearing for August 26, 2010 to determine the manner and timing of retrial.

Significantly, the new agreements on extradition replace the prior list of offenses that were deemed extraditable with a new dual criminality standard.  In the past both the requesting and the requested country had to have the same criminal laws before an extradition request could be granted.  Because many United States criminal laws did not have European Union counterparts, the old extradition treaties provided potential barriers for the United States in extraditing for offenses such as criminal antitrust violations.  The new extradition agreements require only that both countries have similar provisions.

As a result, a European Union citizen may now be extradited to the United States if indicted for criminal antitrust offenses or offenses involving interstate transportation, the use of United States mail, among others. Further, a European Union executive may now face extradition to the United States for acts that occurred entirely outside of the United States and did not constitute a violation of European law.  The treaties also allow the U.S. to request the provisional arrest of the requested person by Interpol.

Finally, the new MLAT’s allow the United States to obtain prompt identification of European Union financial accounts as part of a criminal investigation, allow U.S. prosecutors to obtain testimony by means of video conferencing and authorize United States investigators and prosecutors to work jointly with European Union partners.

Historically, only the federal False Claims Act (“FCA”) allowed whistle-blowers, (called “relaters”), to receive a portion of the government’s recovery if they provided information to authorities or won a civil lawsuit brought in the name of the United States.  The whistle-blower’s payment was limited to 15%-25% of the recovery.  When Congress passed the Sarbanes-Oxley Act of 2002 it charged the Department of Labor with protecting whistle-blowers from retaliation.  In May 2009, as part of the stimulus, Congress passed the Fraud Enforcement Recovery Act which expanded the reach of the FCA and allowed whistleblowers to access information obtained by the Department of Justice under a Civil Investigative Demand before the federal government’s Qui Tam lawsuit is unsealed.  See Garvey Schubert Barer’s  Legal Update, July 30, 2009.

The financial reform bill, called the Dodd Frank Act, allows that the Securities and Exchange Commission to pay 10-30% of the money received as penalties, disgorgement and interest for securities law violations.  See Sec. 922 Whistlebower Protection. The prospect of a substantial monetary reward may to lead to increased claims that corporations have violated the Foreign Corrupt Practices Act (FCPA), the recent focus of government enforcement actions which have lead large settlements, fines and disgorgement orders.  The substantial sums the SEC would seek for FCPA violations can provide an incentive for employees to look for potential FCPA violations even if they were not involved in the company’s overseas business activities. 

 To reduce the risk of whistle-blower complaints, companies should review their compliance programs and, if they have not already done so, develop policies that require employees to report suspected violations to upper management while protecting such employees from retaliation.

In the Skilling case (reported in our blog), the Supreme Court interpreted the honest services fraud statute, 18 U.S.C. § 1346, which prohibits “a scheme or artifice to deprive another of the intangible right of honest services.”  The Supreme Court limited the scope of the honest services fraud statute so that it covers only bribes and kickback schemes.  In other words, the Supreme Court limited the scope of prosecutions under the honest service fraud statute to those cases where prosecutors put forward evidence that defendants accepted bribes or kickbacks.

In the underlying case against Scrushy and Siegelman, the prosecution argued that Siegelman appointed Scrushy to a significant regulatory board in exchange for Scrushy’s alleged orchestration of $500,000 in contributions to the governor’s campaign.  

Scrushy and Siegelman countered by arguing that the prosecution failed to prove the existence of  deal between them and that prosecutors failed to establish any explicit “quid pro quo” agreement, which is required in federal bribery cases.

Last year, the 11th Circuit upheld Siegelman’s convictions for fraud, bribery, conspiracy and obstruction of justice, and upheld all six of Scrushy’s convictions including four arising from the honest services fraud law.

 Now the 11th Circuit must review the cases against Scrushy and Siegelman in light of the limitations placed on the honest services fraud statutes by the Skilling case.

The United States Supreme Court vacated one of the convictions of former Enron executive Jeffrey Skilling for so-called “honest services fraud” (18 USC §1346).  Skilling v. United States, all nine Justices agreed that the “honest services” conviction should be reversed, but for different reasons.

In an opinion written by Justice Ginsburg,  the majority declined to strike the entire statute as unconstitutionally vague.  Rather, the majority concluded that in order to survive a vagueness challenge, the statute must be construed to criminalize only those “core cases” involving bribes and kickbacks. So limited, the Court found that the law passes constitutional muster, but that Skilling did not violate the statute under the Court’s interpretation.    Justice Scalia, joined by Justices Thomas and Kennedy, wrote in a concurring opinion that the language in 18 USC §1346  (“a scheme or artifice to deprive another of the intangible right to of honest services”) is vague and violates the Due Process Clause of the Fifth Amendment.

Although the Court vacated Skilling’s “honest services” conviction, the Court remanded the case to the lower court to determine whether the error was harmless, given that the government had also charged Skilling under separate theories.  Further, Skilling’s other 18 fraud convictions remain intact.

The phrase “scheme and artifrace to defraud” is contained in a number of other criminal statutes:  Mail Fraud (18 USC §1341), Wire Fraud (18 US §1343), Bank Fraud (18 USC §1344), Health Care Fraud (18 USC §1347) and Securities Fraud (18 USC §1348), the scope of which will also likely be significantly narrowed due to the Court’s decision in Skilling.

Further, the Skilling decision may also impact the prosecution of former Illinois Governor Blagojevich who was is currently charged of ”honest services fraud.”