Saturday, June 25, 2011

Rigas Claims of Prosecutorial Abuse Rejected (6/25/11)

Most long-term readers will recognize the name Rigas. Rigas family members looted Adelphia Communications Corporation. Those members were prosecuted for their misdeeds. I have previously covered some of the issues in those Rigas prosecutions here.

After being convicted of financial crimes related to their looting of Adelphia, the Rigases were prosecuted for tax crimes. By Memorandum and Order dated June 14, 2011, the District Court rejected the Rigases' claims in the tax prosecutions the their Fifth and Sixth Amendment rights had been violated by the Government's actions in putting pressure on Adelphia to fire the Rigases before the first prosecution. United States v. Rigas, 2011 U.S. Dist. LEXIS 66147 (MD PA 2011). The Rigases sought support in the Stein case where the Court dismissed 13 defendants for prosecutorial abuse of forcing KPMG to withdraw attorney fee support. See United States v. Stein, 435 F. Supp. 2d. 330 (S.D.N.Y. 2006), eventually affirmed United States v. Stein, 541 F.3d 130 (2d Cir. 2008), here.  The Court rejected the Rigases' claims because the constitutional violations, if they occurred, occurred prior to the first prosecution wheter the claims should have been but were not presented.

The Court's opinion is very short, but I will quote the parts I think are key:

Within the Motion to Dismiss, the Defendants argue that their rights to counsel and a fair trial, protected by the Fifth and Sixth Amendments to the United States Constitution, were violated by the Government. In the main, the Defendants' arguments revolve around alleged Government interference with their right to counsel in the New York prosecution [the prior prosecution] by, inter alia, threatening Adelphia with indictment if it supported the Rigases in any fashion, including advancement of legal fees.

At first blush, the arguments raised in the Rigases' Motion to Dismiss give us significant pause inasmuch as we are reminded of the Honorable Lewis A. Kaplan's thoughtful decision in United States v. Stein, 435 F. Supp. 2d. 330 (S.D.N.Y. 2006). In Stein, Judge Kaplan dismissed an indictment against former senior partners at the accounting giant KPMG on Fifth and Sixth Amendment grounds, concluding that "KPMG refused to pay [the defendants' legal expenses] because the government held the proverbial gun to its head. Had that pressure not been brought to bear, KPMG would have paid these defendants' legal expenses." Id. at 336. In rendering his conclusion, Judge Kaplan placed particular emphasis on the Government's adherence to the Holder and Thompson Memoranda n2 in its negotiations with KPMG over the defendants' prosecutions. n3 However, upon closer inspection, the factual differences between what occurred in Stein and the Government's interactions with Adelphia vis-a-vis the Rigas prosecution are revealed, and these salient differences form the basis for distinguishing these two cases.

n2 In June 1999, then U.S. Deputy Attorney General Eric Holder issued a document entitled Federal Prosecution of Corporations (the "Holder Memorandum"). On January 20, 2003, then United States Deputy Attorney General Larry D. Thompson issued a document entitled Principles of Federal Prosecution of Business Organizations (the "Thompson Memorandum"), which was considered a modest revision of the Holder Memorandum.
n3 Judge Kaplan noted that:
The individual prosecutors in the USAO [United States Attorney's Office] acted pursuant to the established policy of the DOJ as expressed in the Thompson Memorandum. They understood, however, that the threat inherent in the Thompson Memorandum, coupled with their own reinforcement of that threat, was likely to produce the exact result that occurred - KPMG's determination to cut off the payment of legal fees for any employees or former employees who were indicted and to limit and condition their payment during the investigative stage. Their actions cannot withstand strict scrutiny under the Due Process Clause [*6] because they too were not narrowly tailored to serving compelling governmental interests.
Id. at 365.>
The Government does not dispute that individuals from United States Attorney's Office for the Southern District of New York met with high-ranking Adelphia officials and, in rather short order, the Rigases were compelled to resign from their positions within the company. Nor does the Government controvert that pressure was put upon the company to cooperate against the Rigases or face potential corporate indictment. However, most critical to our analysis of the pending Motion to Dismiss is that all of the Government's alleged conduct related to Adelphia's non-advancement and/or non-payment of legal fees to the Rigases occurred prior to the New York prosecution. The Defendants have made absolutely no allegation or argument that prosecutors in any way interfered with their Fifth and Sixth Amendment rights in this prosecution.

Thus, when the Rigases were indicted in the instant tax evasion prosecution they had already been convicted of federal securities fraud violations. That Adelphia did not provide them at that point with legal fees to defend themselves in the instant indictment is nothing short of typical business practice. After all, the Rigases' conduct was laid bare in the New York prosecution. This conduct included large-scale self-dealing and breach of fiduciary duties. By the conclusion of the New York prosecution, they had long since lost the reigns at Adelphia. To be clear, there have been no allegations by the Rigases that the United States Attorney's Office for the Middle District of Pennsylvania made any contact with Adelphia officials to ensure that the company did not lend aid to the Rigases in this prosecution. Thus, no evidence has been proffered to show that the Defendants Fifth and Sixth Amendment rights to counsel and a fair trial were directly violated in the matter sub judice.

In the face of the foregoing, the Rigases have presented this Court with what is essentially a layered claim of Fifth and Sixth Amendment violations by arguing that events preceding the New York prosecution compromised their ability to defend themselves in this Court. Significantly however, the Rigases never made these same claims at any point in the New York prosecution, despite the fact that the Rigases ostensibly had opportunities to raise these arguments with Judge Sand when their case was remanded for resentencing on the vacated fraud conviction, or via a separate 28 U.S.C. § 2255 motion filed in that court. It is our view that the validity of the claims made by the Defendants in the instant Motion to Dismiss is not for this Court to decide, and that Adelphia's decision not to aid the Rigases in this prosecution is essentially sanitized from alleged Government interference in the New York prosecution by the Rigases' convictions there, together with their failure to raise a Stein claim in that court. n4

n4 The Rigases' creative but ultimately unavailing argument would compel us to supplant Judge Sand, who presided over their New York trial, by endeavoring to make our own Stein analysis based on facts occurring before the New York trial started and continuing through the pendency of that case. The problems attendant in having us, rather than the presiding Judge Sand do so are obvious, and would essentially require us to constructively vacate the Rigases' New York convictions in the event we found the existence a Stein violation. Accordingly, it is our considered view that by failing to raise this issue with Judge Sand relative to the New York prosecution, the Rigases have, in effect, waived its applicability to the case at bar.
Accordingly, for the foregoing reasons, the Defendants' Motion to Dismiss shall be denied and the Government's Motion for a Protective Order shall be granted to the extent that no further discovery into this issue shall be condoned by this Court.

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