Wednesday, March 28, 2007


Legal Blog Watch

Can Justice Department Official Monica Goodling Take the Fifth?

Monica Goodling, a Justice Department official, invoked the Fifth Amendment when called to testify under oath before a Senate panel investigating the December 2006 purge of eight U.S. Attorneys. But bloggers aren't remaining silent about Goodling's decision.

As this account from the New York Times (3/26/07) reports:

Monica Goodling, the Justice Department’s White House liaison, who helped coordinate the dismissals, asserted her Fifth Amendment protection against compelled self-incrimination in a letter that her lawyer sent to the Senate Judiciary Committee. In the letter, Ms. Goodling’s lawyer, John M. Dowd, questioned the fairness of the panel and cited the possibility that she might be a witness in a criminal inquiry, although there is currently no known criminal investigation into the dismissals.

Some bloggers either don't buy or understand Goodling's approach. At Above the Law, David Lat asks:

We're going to play unfrozen caveman legal commentator, and ask: Based on what we currently know about the U.S. Attorney firings, how could Goodling's testimony expose her to criminal liability, to place her in a position to invoke the Fifth Amendment? What are we missing here?

Orin Kerr says this:

I'm not sure I follow the rationale here. The Fifth Amendment privilege is available if the witness has reasonable ground to believe that her testimony will be used against her to prove an element of a crime. Brown v. Walker, 161 U.S. 591, 598 (1896). What crime might Goodling have committed? I'm also puzzled by the comparison to the Libby case. Libby was prosecuted and convicted because he lied under oath, not because he admitted to criminal activity. Is Goodling taking the Fifth because if she testifies under oath she would lie and face perjury charges rather than tell the truth? If so, that's not a valid basis for the privilege. See, e.g,, United States v. Seewald, 450 F.2d 1159 (2d Cir. 1971). Or perhaps she is taking the Fifth because she lied before, and her testifying truthfully this time will reveal her earlier lies? UPDATE: According to the first page of the letter Goodling's counsel sent to the Senate, the rationale for taking the Fifth seems to be that Congress isn't being very open-minded and Democrats don't trust the Bush Administration. That's a new one; I don't think I've ever come across that one before. (Maybe there is more on the other pages of the letter not yet available?)   ANOTHER UPDATE: A few courts have discussed the theoretical possibility that there is some kind of "perjury trap" defense that might apply when a witness is hauled before a tribunal just to see if the witness can be tricked into comitting perjury. Courts have hinted that setting such a perjury trap might violate the Due Process clause. However, I don't think any court has ever actually found a perjury trap; courts invariably find a government interest that allows the testimony, and generally do not need to reach whether such a defense exists. See, e.g., Wheel v. Robinson, 34 F.3d 60, 67-68 (2d Cir. 1994). Perhaps that's what Goodling's lawyer has in mind?   YET ANOTHER UPDATE: The link to the letter now includes the entire letter, which in turn relies heavily on Ohio v Reiner. I don't see how Reiner is helpful. That case just says that a person can both claim that they are innocent of any offense and yet also claim the Fifth Amendment privilege. Well of course; a person can say whataver they want about their culpability without changing whether they have a privilege. But the Fifth Amendment issue is whether a person has substantial reason to fear that their truthful testimony will help lead to them being prosecuted. Goodling's letter doesn't give a legally valid reason for that fear, at least as far as I can tell.

On the other hand, White Collar Crime blog reminds us:

Now if this had taken place in a corporation that was under investigation, legal counsel for the corporation would be calling the parties in and asking the employees to answer questions. Either internal or external counsel would be investigating to determine if there was wrongdoing involved in the activities.  In all likelihood the individual would have no attorney-client privilege in a world where deferred prosecution agreements allow the corporation to act as mini-prosecutors and turn over evidence of the individuals to the government.  And if the individual refused to speak with counsel - the result would be - you're fired.  Will that happen here? And perhaps, more importantly, should that happen here?  What it is important to remember here is that we are all entitled to exercise constitutional rights, even those who work at the Department of Justice.

By the way, if you're looking for a way to track the emerging developments regarding the U.S. Attorney firings, check out the new blog, Gonzales Watch.

Posted by Carolyn Elefant on March 27, 2007 at 12:07 PM | Permalink | Comments (0)

Supreme Court Considers Liability for Secondary Actors in Securities Fraud

Investment banks and law firms that handle corporate transactions will be watching the Supreme Court closely next term as it addresses the question of whether "secondary actors" like law firms, which facilitate fraudulent transactions, can be sued for securities fraud. Yesterday, the Supreme Court announced that it accepted review of Stoneridge Investment v. Scientific Atlanta, an 8th Circuit decision where the court held that civil liability for damages does not lie against defendants who merely "aid and abet" securities fraud unless those defendants actually made a mistatement. The 8th Circuit decision conflicts with the 9th Circuit's decision in Simpson v. AOL Time Warner, Inc., et al., 452 F.3d 1040 (9th Cir. 2006), which held that secondary actor can be held liable if some if its conduct had "the principal purpose and effect of creating a false appearance of fact" in support of a scheme to defraud."  (For a good overview of these issues, see this article, Expanded Liability Under Section 10[b]).

What's interesting, however, is that what may have finally nudged the Supreme Court to accept review of Stoneridge isn't the split between the 8th and 9th Circuits alone but, rather, a recently issued 5th Circuit decision in an Enron-related case. As Lyle Denniston discussed in this analysis at SCOTUSBlog, the 5th Circuit threw out a class action against various banks and brokerage firms for transactions related to Enron's defrauding of investors, finding that "the banks and brokerage firms had not engaged in a "deceptive act" under securities fraud law. From Denniston's post:

The Fifth Circuit said that the "banks [and brokerage firms) owed no duty to the [investors] other than the general duty not to engage in fraudulent schemes or acts (that is, the duty not to break the law)." Thus, it concluded, investors could not have relied upon the banks and brokers' failure to disclose publicly the nature of the Enron scheme in which they allegedly took part...Making third parties liable in the circumstance in this case, the Circuit Court said, "gives rise to confusion about the extent of secondary actors' obligations and invites vague and conflicting standards of proof in divers courts."

Denniston's post, which was written before the Supreme Court's cert grant in Stoneridge, suggested that the 5th Circuit's decision, which aligned with the 8th Circuit, may have minimized the conflict, particularly because the 9th Circuit decision had become moot. But Denniston also noted that the Enron case was headed for the Supreme Court, and because of that, the Court might decide to accept review of a case that addresses similar issues already pending review. And apparently, Denniston was right.

Posted by Carolyn Elefant on March 27, 2007 at 12:04 PM | Permalink | Comments (0)

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