Crime in the Suites: An Analyis of Current Issues in White Collar Defense
Posts Tagged ‘Justice Department’
May 15
2017

DOJ’s New Charging and Sentencing Policy Will Disproportionately Impact Vulnerable Populations

On May 10, 2017, Attorney General Jeff Sessions issued a memorandum that expressly rescinds previous Department of Justice (DOJ) policy and directs federal prosecutors to “charge and pursue the most serious, readily provable offense” against federal defendants.

The likely result of this harsher approach to the enforcement of federal drug laws is a return to mass incarceration, with disparate impacts on communities of color and victims of the opioid epidemic.

In addition to this express directive to charge the most serious offense, the policy also requires prosecutors to disclose to sentencing judges “all facts that impact the sentencing guidelines or mandatory minimum sentences” in a given case. For drug-related crimes, such facts include drug quantity and prior convictions, both of which can trigger minimum sentences that judges must impose.

Sessions’ memorandum does allow for exceptions in limited cases. If prosecutors conclude that strict application of the charging policy is not warranted in a particular case, the prosecutor should consider whether an exception is justified. Any decision to depart from the policy must be approved at the highest levels of the Justice Department and documented in the defendant’s case file.

With respect to sentencing, prosecutors are expected to recommend a guidelines sentence in most cases. Prosecutors may recommend a guidelines departure or variance in certain cases, but the recommendation must be approved and documented in the case file.

During the last election cycle, then-Senator Jeff Sessions campaigned on behalf of the self-described “law and order” candidate, Donald Trump. Therefore, it should come as no surprise that, as Attorney General, Sessions implemented this harsher policy for the charging and sentencing of federal crimes, or that he repudiated the previous administration’s approach.

In expressly rescinding “any inconsistent previous policy” of the DOJ related to charging and sentencing, Sessions’ memo targets the policies of his predecessor, former-Attorney General Eric Holder, concerning mandatory minimum sentences and recidivist enhancements against non-violent drug offenders.

In contrast to Sessions’ approach, the Justice Department under the Obama Administration pursued a “Smart on Crime” initiative that sought to promote fairer enforcement of federal laws and, importantly, alleviate disparate impacts of the criminal justice system—particularly on vulnerable populations.

Federal prosecutors were directed to make charging decisions in drug cases based on case-specific factors, such as the defendant’s conduct and criminal history, circumstances related to the offense, the needs of the community, and federal resources and priorities. They were also directed to avoid charging decisions that would trigger mandatory minimum sentences in the cases of low-level, nonviolent drug offenders. Prosecutors had discretion at sentencing and discouraged recidivist enhancements for low-level, non-violent drug offenders.

The Obama Administration’s clemency initiative applied these same standards, and resulted in the granting of clemency to hundreds of federal inmates serving lengthy sentences for low-level drug crimes.

Holder wanted the Department to be smart on crime, Sessions wants it to be tough. Under the current new policy, federal prosecutors must take a harsher approach to enforcement of federal drug laws. The likely result will be a return to mass incarceration with high costs to the tax payer and disproportionate impacts on communities of color and victims of the opioid epidemic—populations that candidate Trump promised to help.

The Justice Department’s new charging and sentencing policy shifts leverage back to prosecutors. Defendants in drug cases are more likely to negotiate a plea deal than contest federal charges and risk being sentenced to a mandatory minimum. Defendants not subject to a mandatory minimum may be just as likely to contest their charges. If they do, their best hope for leniency will be the sentencing courts; prosecutors now have limited discretion to cut any slack.

Apr 28
2016

Feds Open The Gates and Seize the Domain Names

 

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Does the federal government have the right to seize a domain name without notice? With growing frequency, the feds have seized the domain names of thousands of websites for alleged criminal wrongdoing. The latest example is the seizure earlier this week of 67 website domain names for the alleged illegal sale and distribution of counterfeit and prescription drugs.

There still is little information publicly available on the recent seizure. The Justice Department issued a short new release with a statement from U.S. Attorney Bill Nettles, in which he noted,

It’s important for consumers to understand the significant risks involved in purchasing pharmaceutical drugs from these websites.  The generic versions of these prescription drugs are not approved by the Food and Drug Administration and cannot be distributed in the United States legally.  To be safe and effective, prescription drugs must be taken under the care and supervision of appropriate health care professionals; not purchased off the internet from unknown and unregulated foreign sources.

Whether or not the sites facilitated the alleged criminal behavior remains to be decided by a judicial proceeding (if the case ever gets to that point). Federal agents can obtain a seizure order based merely upon probable cause set forth in an affidavit. That’s a relatively low bar considering the consequences of domain name seizures.

The only recourse for the sites at this point is to file a petition with a federal court to contest the forfeiture. Contesting a forfeiture is an uphill—and oftentimes protracted—battle. In the meantime the businesses operating through those domain names are effectively shut down, if the seized websites were their main channel of business. Once the feds carry out a domain name seizure, the “offending” sites will show a seizure banner notifying any visitors that the domain name has been seized by federal authorities for violations of federal laws. No business can be done on the site and the chances of visitors returning are slim.

So how is it okay for a domain name to be seized based on the allegation of a crime, before proper notice and hearing? The feds are taking advantage of a process known as an in rem proceeding, whereby they can file suit against the offending property itself for its alleged role in facilitating criminal conduct. Typically in rem proceedings are filed against tangible assets like a car involved in a drug deal or a bank account used to funnel illegal funds. But in recent years, in rem proceedings have been used by both state and federal agencies against domain names in order to crack down on alleged criminal behavior carried out through the websites. Examples include (1) the Justice Department’s “In Our Sites” operation in which it seized the domain names of thousands of sites accused of violating U.S. copyright laws and (2) the state of Kentucky’s attempt to seize 141 domain names of online poker sites.

Despite the increasing use of pretrial domain name seizures, the legality is still hotly debated by civil liberties groups, free market advocates, and international organizations. These groups raise constitutional concerns, such as due process and restraint on free speech, as well as jurisdictional concerns, such as federal or state authority to reach domain names owned by foreign individuals or entities. The biggest issue is that an in rem proceeding is inappropriate against domain names because a domain name is not property – it is a contractual right that, as such, should not be subject to seizure. We will discuss these concerns in more detail in a coming post once we learn more about the Justice Department’s recent actions against the 67 pharmaceutical domain names.

Mar 07
2016

Even Bad Guys Have Rights

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This article first appeared February 29, 2016, on FEE.org – you can access this version here.

Remember Martin Shkreli, the “pharma bro” notorious for raising the price of his company’s life-saving drug by some 5,000 percent? Did you know he was recently arrested for securities fraud (completely unrelated to the drug hike)? It didn’t take long for the Justice Department to go after the universally unpopular rapscallion.

Big government gets a bad rap for being inefficient, but it can cut to the chase rather swiftly when it wants to. In order to stop, or at least dramatically curb, behavior that goes against law or policy — or perhaps just opinion — government enforcement agents know how to employ a show of force and to make an example of someone they deem a wrongdoer. The punishment is public and can be severe.

Setting an Example

A recent show of force can be seen in federal actions against the dietary supplement industry. The industry has exploded in recent years, thanks in large part to the public’s growing love for health and homeopathy. The popularity has, predictably, attracted moneymakers of both the scrupulous and unscrupulous kind.

The government wants to rein in the industry, so to set an example it has come down hard on one company. USPlabs was one of more than 100 makers and marketers of dietary supplements against whom the Justice Department announced it was pursuing civil and criminal cases. But the company had the unfortunate luck to become the government’s example of what it can do to wrongdoers. Not only did the DOJ charge the company; it also indicted several of its executives and froze their assets — from investment accounts to homes to automobiles.

Do the Ends Justify the Meanness?

The government’s heavy hand on USPlabs is the kind of crackdown you expect against organized crime or large drug rings. What were the criminal defendants at USPlabs alleged to have done? Not exactly Sopranos-level stuff: importing ingredients with false certificates of analysis and false labeling, misrepresenting the source and nature of product ingredients, selling products without determining safety, and continuing to sell products after they told agents they would stop.

If the allegations are true, the defendants’ actions were wrong. But public arrests and asset seizure are extreme. How often do people accused of false labeling get perp walked? The DOJ’s tactics look like shock-and-awe theater for the benefit of others.

If there is any doubt whether the government wanted to use its hard-line approach against USPlabs as an example for other companies, look no further than this statement by FDA Deputy Commissioner Howard Sklamberg: “The criminal charges against USPlabs should serve as notice to industry that if products are a threat to public health, the FDA will exercise its full authority under the law to bring justice.”

In other words, makers and marketers of dietary supplements: beware!

So What?

You may think the Justice Department performed a public service by coming down so hard on Shkreli and USPlabs. Why should we care if the government crushes some scalawags and discourages others in the process?

What if the government’s show of force comes at the cost of a defendant’s due process rights? Shkreli has said that the feds targeted him because of the drug price hike, looking for anything to stop him. Now he’s been fired and his company has filed for bankruptcy. That’s a pretty high price to pay for being obnoxious.

While deterrence may be an acceptable basis for punishment, it doesn’t justify punishment that exceeds the crime. Arresting executives and seizing their personal bank accounts, homes, and cars in an instance like this is excessive. More commonly in cases like USPlabs, prosecutors will settle with the company, levy a fine against it, require it to institute controls to avoid further wrongdoing, and perhaps require it to be monitored for a while to ensure controls are being observed.

Going after the individual executives as if they were Mafia kingpins goes beyond the pale. Freezing or seizing assets is something that prosecutors more commonly do when those assets are being used to carry out criminal behavior, or when there is a great risk those assets will be disposed of before judicial proceedings. Chances are slim that the executives in the USPlabs matter were planning on liquidating their family homes or cars.

Yet Another Slippery Slope

For those who think the government is on the right side in its show of force, ask yourselves whether the government isn’t pursuing its initiatives (even reasonable initiatives like reining in fraud) a bit brutishly. Making an example of an alleged wrongdoer even before the wrongdoer’s day in court harkens back to techniques used by conquerors in days of old who put heads on pikes to show the subjugated just who was in charge.

And what if the government decides to crack down on behavior not so clearly reprehensible? Say the government decides to put speeding in check by jailing a few folks going modestly over the limit. How many of us would feel safer?

Even when we dislike the targets of prosecutorial zeal, supporting justice is in our self-interest. When the government sets aside due process and proportionality to set an example of other would-be wrongdoers, they are sacrificing justice for the sake of regulatory expediency.

 

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About Ifrah Law

Crime in the Suites is authored by the Ifrah Law Firm, a Washington DC-based law firm specializing in the defense of government investigations and litigation. Our client base spans many regulated industries, particularly e-business, e-commerce, government contracts, gaming and healthcare.

Ifrah Law focuses on federal criminal defense, government contract defense and procurement, health care, and financial services litigation and fraud defense. Further, the firm's E-Commerce attorneys and internet marketing attorneys are leaders in internet advertising, data privacy, online fraud and abuse law, iGaming law.

The commentary and cases included in this blog are contributed by founding partner Jeff Ifrah, partners Michelle Cohen and George Calhoun, counsels Jeff Hamlin and Drew Barnholtz, and associates Rachel Hirsch, Nicole Kardell, Steven Eichorn, David Yellin, and Jessica Feil. These posts are edited by Jeff Ifrah. We look forward to hearing your thoughts and comments!

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