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Pietragallo's White Collar Criminal Defense Group

In today's environment, the government has never more aggressively regulated, investigated, pursued and prosecuted white collar crime. If you or your company becomes embroiled in any type of federal or state government investigation, you need experienced trial lawyers who have gone toe-to-toe with prosecutors and government agents.

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    DOJ Rolls out New Initiatives for Opioid Enforcement

    What Happened
    In mid-April, the Department of Justice announced several new initiatives in the war on opioid-related crime:
    • On April 17, 2018, Attorney General Jeff Sessions announced that the DEA reached information sharing agreements with 48 states to exchange prescription drug information to aid law enforcement investigations.  These agreements will allow states to share information gathered through programs like state-run Prescription Drug Monitoring Programs.  In turn, the federal government will share information with states, including the data gathered by the DEA Automation of Reports and Consolidated Orders System (“ARCOS”) program, which collects information on the 80 million transactions for distributors and manufacturers.  This information – from both state and federal governments – will be used by law enforcement to, in DOJ’s words, “find the tell-tale signs of crime.”
    • Also on April 17, 2018, DOJ announced the DEA’s proposed rule change which will set limits on opioid production in the United States.  The proposed rule is in response to the belief that the United States produces far more prescription opioids than necessary, far more than other countries and, thus, is more susceptible to drug diversion.
    For the Record
    Attorney General Sessions indicated, “Under the proposed rule, DEA’s opioid production limits would be more responsive to the risk of drug abuse by explicitly taking diversion into account. It’s a common sense idea: the more a drug is diverted, the more its production should be limited. Today’s proposed rule will give DEA more information to help the agency protect law-abiding Americans from the threat of drugs—and that makes all of us safer.”

    A Quick Look at the President’s 2019 Budget Request for DOJ


    What Happened
    President Trump requested $28 billion for the Department of Justice in his budget proposal for the 2019 fiscal year.  

    The Rundown
    The request reemphasizes this administration’s priorities in fighting violent crime and crimes related to immigration, and of course in combating the opioid epidemic. 

    $295 million of the total budget request is slotted for program enhancements related to the opioid epidemic.  This amount includes $31.2 million to fund eight new heroin enforcement groups that will target DEA field divisions that have identified heroin as the first or second greatest threat to the area.  It would also provide for $6.8 million to expand the DEA’s Fentanyl Signature Profiling Program and $2.5 million for identification technology and protective equipment for agents to prevent exposure to deadly opioids in the field.  The vast majority of the $295 million will go to facilitating coordination of the DEA’s High Intensity Drug Trafficking Area Programs with other DEA programs to focus resources where drug trafficking poses the greatest threats. 

    $65.9 million of the budget would focus on immigration-related enhancements, such as border security and enforcement and the hiring of 76 additional immigration judges and their support staff.  Other budget highlights include $109.2 million for combating violent crime; $10 million for BOP’s apprentice program; $3 billion for the Crime Victims Fund, including $486 million for Violence Against Women programs and $45 million for victims of human trafficking; and $3.9 billion in discretionary and mandatory funding for Federal grants to State, local, and tribal law enforcement.

    The Take Away
    Given the political conflict over the budget for the remaining portion of 2018, which almost led to a government shutdown in mid-March, the President’s proposed 2019 budget, which was introduced in mid-February, may not carry much weight by the time Congress acts on it.  Though some political commentators have argued that the 2019 budget proposal is nothing more than a political document, it does provide criminal practitioners with some insight into the administration’s law enforcement priorities. 


    DEA’s 45-day “surge” nets 366 leads and 28 arrests

    What Happened
    In the “surge” announced in late-January 2018, the DEA focused its enforcement and administrative resources on prescribers and pharmacies for 45 days in February and March.  The results – announced on Monday, April 2 – included 28 arrests stemming from 366 leads and 188 active investigations.

    The Rundown
    As in February covered by here, DOJ announced the planned “surge” of DEA agents and investigators targeting pharmacies and prescribers dispensing an unusual or disproportion amount of drugs, including opioids.  The DEA aggregated the 80 million transaction reports collected annually from manufacturers and distributors to identify statistical outliers and trends.  The data was to be used – as Attorney General Jeff Sessions described it – in “targeting packages” by the DEA.

    On Monday, April 2, the DEA announced the results of the “surge:”  366 leads to DEA field offices, 188 of which or 51% resulted in active investigations by the DEA.  The data gathered by the DEA went beyond the transaction reports and included reports on suspicious orders and drug thefts, as well as leads from federal partners like HHS.

    The result of the investigations also included 28 arrests, 54 “other law enforcement actions” like search warrant executions, administrative inspection warrants, and 283 administrative actions of other types, such as inspections, surrender of DEA registrations, and suspension orders.

    For the Record
    Attorney General Jeff Sessions:  “Over the last 45 days, the DEA has surged resources and personnel to prevent the diversion of opioids, arresting dozens of people and taking away drug dispensing authority from nearly 150 medical professionals.  And our efforts are just getting started.  …These new resources will help us catch and convict more of the drug traffickers and corrupt medical professionals who are fueling the opioid crisis.”


    Supreme Court Limits Tax Obstruction

    What Happened
    This week, the United States Supreme Court in Marinello v. United States held that in order to sustain a tax obstruction conviction, there must be a nexus between the defendant’s conduct and a particular administrative proceeding.  The ruling overturns the Second Circuit’s holding that a tax obstruction charge did not require a defendant’s action to be directed at an ongoing IRS audit or proceeding.

    The Rundown
    Carl Marinello, who ran a cash courier freight business, did not pay taxes and, for years before hearing from the government that he was under audit, systematically destroyed records.  An investigation by the IRS was open and ongoing during a portion of these years.  The government charged him with violating a number of criminal tax statutes, including the Omnibus Clause of the Internal Revenue Code.  The Omnibus clause forbids:

    Corruptly or by force or threat of force (including any threating letter or communication), obstruct[ing] or imped[ing], or endeavor[ing]to obstruct or impede the due administration of the [Internal Revenue Code].

    26 U.S.C. §7212(a).

    To determine the scope of the Omnibus clause, the Supreme Court looked to its prior decision in the United States v. Aguilar, 515 U.S. 593 (1995), which discussed the obstruction statute.  In Aguilar, the Court adopted a “nexus” requirement, which required that a defendant’s actions “must have a relationship in time, causation or logic with the judicial proceeding.”  In Marinello, the Court found that the Omnibus Clause was not intended to serve as a “catchall” and held that the same nexus requirement applied.

    The Take Away
    The Court’s decision, which limits what could otherwise be interpreted as a broadly sweeping catchall statute, is a win for the criminal defense bar.  Accordingly, the nexus requirement will be an obstacle for the government to overcome before it can prevail on tax obstruction charges in the future.


    John Schwab to Speak on Opioid Enforcement at New York Pain Society Conference

    John Schwab will be speaking at The New York State Pain Society: 2018 Annual Meeting & Scientific Sessions on April 27, 2018. Mr. Schwab will be presenting on "Opioid Enforcement in 2018: DOJ, HHS, DEA, FBI - Who Does What?" during Session Two - Legislative Update. This conference will be held at the Renaissance Westchester Hotel in West Harrison, NY. 

    For more information, please click here.


    DOJ Takes New Steps in Opioid Enforcement

    What Happened
    In the last few weeks, the Department of Justice has announced new initiatives in the fight against the opioid crisis.  These initiatives included the creation of the Prescription Introduction & Litigation Task Force and a directive that the DEA review regulations regarding production quotas for prescription opioids.

    The Rundown
    In late February, Attorney General Jeff Sessions announced the creation of the Prescription Introduction & Litigation Task Force – termed the “PIL Task Force” – which will focus DOJ’s civil and criminal enforcement tools on manufacturers, distributors, prescribers and pharmacies.  For manufacturers, the task force will use “all available criminal and civil remedies” to hold them liable for illegal activities, including false or misleading marketing of opioids.  DOJ will also examine pending litigation against manufacturers filed by state and local governments to determine if federal law can assist the litigation.

    For prescribers, pharmacies, and distributors, the PIL Task Force will investigate whether DEA regulations are being followed and if the federal False Claims Act can be used to “crack down on pain-management clinics, drug testing facilities and physicians that make opioid prescriptions.”

    The PIL Task Force will also partner with HHS to (1) improve coordination and data sharing against the federal government to better identify violations of law and patterns of fraud related to the opioid epidemic; (2) evaluate possible changes to the regulatory regime governing opioid distribution; and (3) recommend changes in laws.

    Additionally, on March 1, the Attorney General issued a memo directing the DEA to evaluate its regulations concerning production quotas for prescription opioids.  As readers may know, the DEA is charged with regulating the amount of opioids that manufacturers are allowed to produce as set forth in DEA regulations establishing these production and manufacturing quotas.  However, as the Attorney General’s memo notes, “the United States is an outlier in the number of opioid prescriptions issued each year.”  The Attorney General directed the DEA to revisit the quotas and accompanying regulations to determine if they are appropriate in light of the opioid crisis.

    For the Record
    Remarks by Attorney General Sessions

    PIL Task Force:  “The PIL Task Force will aggressively deploy and coordinate all available criminal and civil law enforcement tools to reverse the tide of opioid overdoses in the United States, with a particular focus on opioid manufacturers and distributors.”  (February 27, 2018).

    Opioid production quotas:  “Time is of the essence.  Given the urgency of this crisis, with an estimated 175 Americans dying per day, we need DEA to act quickly to determine if changes are needed in the quotas.”  (March 1, 2018).


    DOJ Expands FCPA Declination Policy to Other Criminal Matters

    What Happened
    The Department of Justice suggested last month that it will decline prosecution in corporate criminal matters in which the corporation engages in voluntarily disclosure.

    The Rundown
    On February 28, 2018, DOJ sent a letter declining to prosecute Barclays in connection with crimes involving a foreign exchange front running scheme.  Though several Barclays executives were charged, DOJ declined to prosecute the corporation.  Barclays had agreed to pay back $13.9 million in profits after cooperating with DOJ in an extensive investigation of the alleged wrongdoing.

    The declination signals a policy shift toward presuming declination in cases where the corporation voluntarily discloses, which is DOJ’s default position in all FCPA matters.  John Cronan, the acting head of DOJ’s Criminal Division and Benjamin Singer, chief of the securities and financial fraud unit confirmed the move, telling attendees at the ABA’s white collar conference in the beginning of the month that DOJ will use the FCPA Corporate Enforcement Policy as nonbinding guidance in other criminal cases.  Pursuant to that policy, unless certain aggravating factors are present, DOJ will decline to prosecute corporations who cooperate and proactively disclose and remedy FCPA issues.

    For the Record 
    In the declination letter to Barclays, Deputy Attorney General Rod Rosenstein wrote that one aspect of DOJ’s commitment to “finding effective ways to ensure that individual wrongdoers are held accountable for corporate criminal behavior . . . is to punish the people who make or knowingly participate in decisions that violate the law” but the Department also wants “to avoid imposing penalties that disproportionately punish innocent employees, shareholder, customers and other stakeholders.”


    No Downward Variance for ex-Akin Gump Partner in DOJ Suit-Selling Case

    What Happened?
    Jeffrey Wertkin, a former Akin Gump Strauss Hauer & Feld LLP partner who previously had worked at the Department of Justice (“DOJ”), received 30 months’ imprisonment for offenses related to his theft and attempted sale of a sealed government whistleblower complaint to a cyber-security company being investigated by the DOJ. The sentence was at the low end of Wertkin’s 30-37-month range under the U.S. Sentencing Guidelines and far more than the year-and-a-day sentence that his attorney had requested.

    The Rundown
    In November 2017, Wertkin pleaded guilty in the U.S. District Court for the Northern District of California to two counts of obstruction of justice, in violation of 18 U.S.C. § 1505; and one count of interstate transportation of stolen goods, in violation of 18 U.S.C. § 2314.  As he transitioned from his role as a civil prosecutor at the DOJ to Akin Gump’s Washington D.C. office, Wertkin stole approximately 40 sealed complaints. In November 2016, he cold-called general counsel at a Silicon Valley company and left a voicemail offering to provide information about a complaint that implicated the company for a fee.  The general counsel called the FBI, and, after a series of monitored phone calls with the general counsel, Wertkin – dressed in a wig and sunglasses – was arrested in a Sunnyvale, California hotel, at which he intended to exchange the complaint for more than $300,000 in cash.

    In a lengthy and well-crafted sentencing memorandum, Wertkin’s counsel, Cristina Arguedas of Arguenda Cassman & Headley LLP focused on his undiagnosed anxiety and depression, the personal struggles caused by a taxing career, the aberrant nature of his misconduct, and the steps he had taken towards rehabilitation, including his cooperation and his embrace of mental health treatment. Arguedas submitted 85 character letters on Wertkin’s behalf.

    In its filing, the government, which requested a mid-guidelines sentence of 34 months, focused its attention on Wertkin’s position of public trust when he stole the complaints and the continuing nature of his course of conduct. At the sentencing hearing, the government keyed in on the number of potential victims, noting that, after being charged, Wertkin had staged his office at Akin Gump to make it look as though the complaints had been mailed to him by the DOJ.  That act of obstruction initiated an investigation into blameless DOJ attorneys. 

    The Take Away
    Though crediting Wertkin’s struggles with mental health issues and his significant support from the community, the Court fashioned a guidelines sentence. Among other factors, the need for general deterrence weighed heavily on the Court. While Wertkin, who had forfeited his law license, would never engage in this kind of activity again, the Court had to send a message that these matters are taken seriously.


    Elder Fraud Sweep by DOJ Targets More than 250 Defendants

    What Happened
    In a joint press release by Attorney General Jeff Sessions and representatives from the FBI, Postal Inspectors and Federal Trade Commission, it was announced that the largest coordinated sweep of elder fraud cases in history was conducted related over half a billion dollars in losses.  The cases included criminal, civil and forfeiture actions across more than 50 federal districts.  The fraud schemes took a variety of forms from mass-mailing, telemarketing and investment fraud schemes to individual incidents of identity theft and theft by guardians and caretakers.  Many of the cases involved transnational criminal organizations that defrauded hundreds of thousands of elderly victims but other schemes involved a single relative or guardian who took advantage of an individual victim.

    Actions by the federal government involved the following:

    • Mass-mailing fraud industry:  DOJ’s Consumer Protection Branch worked in conjunction with the U.S. Attorney’s Office for the Eastern District of New York, brought cases against over 40 mass-mailing fraud operators, including criminal charges against six individuals.  Law enforcement executed search warrants at 14 premises from Las Vegas to Florida, even coordinating with Vancouver Police in Canada, who executed over 20 search warrants.
    • Other elder law fraud schemes were targeted by DOJ’s Fraud Section and the Consumer Protection Branch involved a variety of schemes including “lottery phone scams,” in which callers convince seniors that a fee or tax must be paid before they can receive lottery winnings; “grandparent schemes” which convince seniors that a grandchild has been arrested and needs bail money; and “IRS imposter schemes” which defraud seniors by bad actors posing as IRS agents and claiming that victims owe back taxes.

    Beyond the historic number of defendants targeted, the sweep was also noteworthy due to the degree of coordination between United States and foreign law enforcement.  General Sessions announced that the sweep benefited greatly from the work of the International Mass-Marketing Fraud Working Group (IMMFWG), a network of civil and criminal law enforcement agencies from a variety of nations including Australia, Belgium, Canada, the Netherlands, Nigeria, Norway, the United Kingdom, and the United States. 

    For the Record
    Attorney General Sessions:  “The Justice Department and its partners are taking unprecedented, coordinated action to protect elderly Americans from financial threats, both foreign and domestic … when criminals steal the hard-earned life savings of older Americans, we will respond with all the tools at the Department’s disposal – criminal prosecutions to punish offenders, civil injunctions to shut the schemes down, and asset forfeiture to take back ill-gotten gains.  Today is only the beginning.  I have directed Department Prosecutors to coordinate with the domestic law enforcement partners and foreign counterparts to stop these criminals from exploiting our seniors.”

    Supreme Court Hears Oral Argument About Fifth Amendment Rights at Pretrial Proceedings

    What Happened
    On February 20 the Supreme Court heard oral argument in City of Hays v. Vogt, a case addressing whether the government’s introduction of a compelled statement at a probable cause hearing violates the Fifth Amendment.

    The Rundown
    Vogt was an officer with the Hays Police Department in Kansas when he applied for a different job with the Haysville Police Department.  Haysville offered Vogt the position, but conditioned acceptance on Vogt’s disclosure to the Hays PD that he kept a knife he obtained while on the job.  Vogt disclosed this information to Hays, which demanded that he make a more detailed statement or he would lose his job.  Vogt made the detailed statement requested, resigned, and accepted the job with Haysville. 

    The Hays PD referred Vogt for prosecution based on his disclosure. The State charged him with a crime and the Haysville PD rescinded his job offer. The State introduced Vogt’s statement to the Hays PD at his preliminary hearing, though it ultimately dropped the charges against him.

    Vogt sued both cities.  Relying on the Supreme Court’s 1967 holding in Garrity v. New Jersey that public employees’ statements are compelled when made under threat of termination, Vogt argued that the use of his compelled statements against him in the preliminary hearing violated the Fifth Amendment.

    The District Court dismissed Vogt’s civil lawsuit because in its view, Vogt’s Fifth Amendment right was not violated because the compelled statements were never used against him at a criminal trial.  The Tenth Circuit reinstated the case, finding that the Fifth Amendment’s use of “criminal case” includes probable cause hearings. 

    At oral argument last week, the City of Hays argued that the Fifth Amendment only applies “during a proceeding where that person’s guilt or punishment are adjudicated.”  An attorney for the United States clarified their position that while a defendant cannot be compelled to incriminate themselves at a preliminary hearing, the admission of their previously compelled statements in that type of proceeding would not violate the Fifth Amendment.  Vogt’s attorney maintained their position that compelled statements can never be used in a preliminary hearing or any other part of a criminal case.

    Oral argument proved complicated as the Justices had genuine concerns about major factual issues in the case, including whether Vogt objected to the use of the statements at the preliminary hearing; whether Vogt’s statements were actually compelled; whether the statements were even used adversely; and whether any causation theory supported Section 1983 damages.  These issues led the Court to suggest that maybe they should not have taken the matter at all and that they may consider dismissing the case as improvidently granted (known as issuing a “DIG”). 

    For the Record
    Justice Ginsburg noted that the City of Hays’ position “shrink[s] to almost a vanishing point the possibility of using the Fifth Amendment . . . because . . . upwards of 95 percent of cases are disposed of by plea bargaining.”  She added that by making this argument “you’re saying effectively the Fifth Amendment, which is considered very important, is out of the picture in most criminal cases.” 

    The Take Away
    The Court’s ruling in this case—if they issue a substantive decision—will have significant implications for criminal prosecutions.  A broad holding for Vogt, for example, could necessitate trial-type suppression hearings for all pretrial proceedings in which statements are admitted.