Sunday, November 1, 2015

More Stinging News Regarding Stingray Devices

#Stingrays can apparently record calls as well? According to documents obtained by the ACLU, indeed they can:

http://www.wired.com/2015/10/stingray-government-spy-tools-can-record-calls-new-documents-confirm/

This is the world we live in! 

In better news, Jayne Law Group has some great case results.

Wednesday, September 9, 2015

California Supreme Court Rules that Conduct Alone is Insufficient to Support Finding of Ties between Subsets of Criminal Street Gang


The California Supreme Court held last month in People v. Prunty, S210234, that when the prosecution seeks to prove the street gang enhancement (Pen. Code, sec. 186.22(b))by showing a defendant committed a felony to benefit a given gang, but establishes the commission of the required predicate offenses with evidence of crimes committed by members of the gang’s alleged subsets, it must prove a connection between the gang and the subsets. This is a good decision when dealing with gang subsets and the STEP Act and sets forth what the prosecution must show to establish a defendant acted for the benefit of a gang.  

The case is at: 
http://www.courts.ca.gov/opinions/documents/S210234.PDF

Monday, August 31, 2015

Criminal Justice Reform: A New Hope?

Introduction

The public, legislators, prison officials, judges, and historians alike are all waking up to the fact that the United States’ criminal justice system is clearly in dire need of reform. And finally, it appears that the words criminal justice + reform are gaining momentum to reveal that the status quo of an inefficient and expensive system is unacceptable in this country.

As it stands, with about 5% of the world’s total population, the U.S. houses almost a quarter of the world’s total prisoners, which is equivalent to 2.23 million behind bars, four times as many incarcerated than four decades ago. However, the difference in incarceration rates is not due to the U.S. having a considerably higher rate of crime in comparison to the rest of the world. In the 1980s, incarceration rates began their sharp rise, coinciding with the advent of the war on drugs, mandatory minimum sentences, and three-strikes laws. 

Today, one can find numerous federal prisoners serving life sentences without parole for nonviolent offenses, resulting in a de facto death sentence. The United States’ reliance on excessive punitive sentencing over the past three decades has destroyed individual lives, families, and communities as well as put an enormous strain on federal spending and prison population capacities. The criminal justice system has blatantly forgotten that “how much time prisoners spend behind bars is no less important than that of whether only the guilty are being locked up.” (Honorable Alex Kozinski, Criminal Law 2.0.

However, major changes are finally in motion to address this costly and outdated federal sentencing and corrections system. For example, on June 25, 2015, Representatives Jim Sensenbrenner (R-WI) and Bobby Scott (D-VA), backed by the American Civil Liberties Union and Koch Industries, unveiled the bipartisan Safe, Accountable, Fair and Effective (SAFE) Justice Act (H.R. 2944). Arguably one of the most significant bills on the table, its provisions would reserve drug trafficking life sentences and other major penalties for high-level drug bosses rather than low-level dealers, provide sentencing flexibility to judges, and focus federal resources away from drug possession enforcement. The act is aimed at addressing over-criminalization in the federal criminal justice system and to bring it into greater alignment with state-level sentencing. The SAFE Justice Act would also create specialized courts for drug crimes and the mentally ill, and put a much greater emphasis on prison programming. Just weeks later on July 16, 2015, President Obama became first sitting president to tour a federal prison, meeting with six El Reno inmates, in their medium-security Oklahoma Federal Prison. With numerous politicians eager to leave their mark on historical reform, what was once a bleak outlook for those convicted of federal drug offenses, now potentially face a more just legal system.

History of Legislation

The current prison crisis is the result of two important legislative and historical events leading up to their implementation. The first was the Comprehensive Crime Control Act of 1984, signed into law by President Ronald Reagan, the first comprehensive revision to the U.S. criminal code since the early 1900s. Among its integral provisions was the Sentencing Reform Act, which established the United States Sentencing Commission, an independent agency of the judicial branch responsible for articulating Federal Sentencing Guidelines for all U.S. federal courts. The Guidelines determine sentences based on two primarily factors: the conduct associated with the offense and the offender’s criminal history. The Guidelines rely on a rigid sentencing table that is broken into four sentencing zones. These Guidelines were modified in 2010 as part of the Fair Sentencing Act signed into law by President Obama. The Fair Sentencing Act was an effort to reduce the disparity between the amount of crack cocaine and powder cocaine possessed by an individual needed to trigger certain U.S. federal criminal penalties, from a 100:1 weight ratio to an 18:1 weight ratio and eliminated the five-year mandatory minimum sentence for simple possession of crack cocaine, among other provisions.
           
The second, and most influential act, was the Violent Crime Control and Law Enforcement Act of 1994 (“1994 Act”), representing the largest crime bill in the history of the United States. Driven into law by public sentiment following the 101 California Street shootings, the 1993 Waco siege, and other high-profile instances of violent crime, the 1994 Act expanded federal law in several ways. First, the Act created a variety of new crimes relating to immigration law, hate crimes, sex crimes, and gang-related crime, simultaneously increasing penalties for many of these newly defined crimes. The 1994 Act also increased the number of federal crimes punishable by death and established procedures whereby the death penalty might be enforced. It contained a “three strikes” provision requiring a sentence of life imprisonment for violent three-time federal offenders. Finally, the Act imposed tough mandatory criminal penalties on defendants, incentivized states to build more jails and prisons, and barred inmates from being awarded grants to pursue education. (H.R.3355 - Violent Crime Control and Law Enforcement Act of 1994 - 103rd Congress (1993-1994))

Impact

As a result of these two Acts and other measures, the U.S. prison and jail population has reached an all-time high, with over 2.23 million individuals behind bars, a 795% increase and the highest rate of prisoners per population in the world. The number of people on probation and parole has also doubled. (International Centre for Prison Studies.) 

In addition to changes in mandatory sentencing, crimes themselves have been wholly created where there previously were none. Between 1980 and 2013, the federal criminal code added approximately 2,000 additional crimes, often written in vague and sweeping language. The result has been a legal environment that tolerates over-criminalization and often disproportionately lengthy sentences. Since the passage of the above legislation, courts have routinely sentenced defendants to severe prison terms which arguably do not fit to the crime. For example, an individual convicted of burglary in the U.S. serves on average of 16 months in prison, compared to five months in Canada and seven months in England. Similar discrepancies exist for assault charges, with an average sentence of 60 months in the US compared to just less than 20 months in England. (U.S. Prison Population Dwarfs That of Other Nations, N.Y. Times April 23,
2008)
           
Not only has this resulted in strained prison capacities, but incarceration is enormously expensive for taxpayers as well. The average cost of housing a single prisoner for one year is approximately $30,000, with longer terms, such as a 20 year sentence, averaging around $600,000.  Federal spending on prisons has soared from $970 million to more than $6.7 billion in the past three decades, mostly due to the mandatory sentencing of nonviolent, low-level drug offenders. A closer look at which communities are most heavily impacted by mass incarceration reveals stark racial and ethnic disparities in U.S. incarceration rates in every region of the country. African Americans have a 1 in 3 chance of spending some time in jail, those of Latino decent have a 1 in 6 chance, while those of Caucasian decent have a 1 in 17 chance. (E. Ann Carson, Ph.D., Bureau of Justice Statistics.)  Eliminating the racial disparities inherent to the U.S. criminal justice policies and practices must also be part of criminal justice reform.

Conclusion
           
The current administration, with bipartisan support, appears to be embracing criminal justice reform. On July 13, 2015, the President commuted the sentences of 46 nonviolent drug offenders, marking the most commutations a president has issued on a single day in the last four decades. Also, the Clemency Project 2014 is assisting prisoners in seeking commutation and is eligible to those who have already served 10 years, have demonstrated good conduct, have no history of violence prior to or during their term of imprisonment, among other criteria. See https://www.clemencyproject2014.org/

The U.S. Sentencing Commission also held a public meeting on August 7, 2015 to discuss an amendment to the Sentencing Guidelines that would eliminate the residual clause from the Career Offender guideline and address other issues that will take priority in the 2015-2016 amendment cycle. And the “Drugs Minus Two” reform (an Act passed in April 2014) has enabled thousands of prisoners to reduce their prison sentences by petitioning the court the past year. 

In a town where there is rarely a gathering of bipartisan support, it appears that criminal justice reform may be the one issue uniting the nation’s capital. Even last month’s Bipartisan Summit on Fair Justice drew politicians from all sides of the aisle. The goals of criminal justice reform include fair and appropriate treatment of juveniles, reforming mandatory minimum sentences, expanding alternatives to incarceration while reducing recidivism, and enabling prisons to offer programs that allow smoother transitions back into society. Undoubtedly, it will take years to transform a broken criminal justice system, but it appears that the tipping point for reform has finally been reached and it’s a start, as the public, press, and lawmakers are waking up to the long overdue and necessary changes. 

Wednesday, April 1, 2015

Fourth Amendment Update

Fourth Amendment Update: US Supreme Court Rules GPS Trackers are a Form of Search & Seizure: http://www.theatlantic.com/…/supreme-court-if-youre…/389114/

Thursday, February 26, 2015

Latest Developments in Insider Trading


In a landmark decision, the United States Court of Appeals for the Second Circuit, an influential court in securities litigation, provided clarity on the elements required to hold a tippee liable for insider trading. The decision by the Second Circuit on December 10, 2014 to reverse the charges, with prejudice, in United States v. Todd Newman, Anthony Chiasson sets a new definition for who can be held liable for insider trading. Before Newman, insider trading was broadly defined. This decision narrows the scope. The Government now must tangibly prove whether an investment professional knew that information had been disclosed in breach of a fiduciary duty in exchange for a personal benefit. The Government’s impending efforts to combat and thwart those tippees who are alleged to be involved in insider trading activities now must first determine, and later prove, whether the material nonpublic information was obtained from a friend with benefits.

Background

Todd Newman and Anthony Chiasson, hedge-fund portfolio managers, were accused of involvement in the exchange and disclosure of material non-public information. The Government in the 2012 six-week trial presented evidence that company insiders at Dell and NVIDIA had disclosed non-public earnings numbers with a group of financial analysts, who then allegedly passed the inside information on to their portfolio managers, which included Todd Newman and Anthony Chaisson. Those portfolio managers subsequently executed equity trades in Dell and NVIDIA, earning millions of dollars in profits. As a result of these trades, Todd Newman and Anthony Chiasson were convicted on December 17, 2012 of securities fraud in violation of sections 10(b) and 32 of the Securities Exchange Act of 1934, Securities and Exchange Commission (SEC) Rules 10(b)(5) and 10(b)(5)(2), and conspiracy to commit securities fraud in violation of 18 U.S.C. § 371. 

The Second Circuit, however, overturned the convictions on December 10, 2014. The Court ruled that in order to convict these portfolio managers, or tippees, there had to be proof beyond a reasonable doubt that an insider breached his or her fiduciary duty to shareholders by disclosing material nonpublic information in exchange for a “personal benefit.”  Providing further clarification, the Court stated that “personal benefit” must be “objective, consequential, and represent[ing] at least a potential gain of pecuniary or similarly valuable nature” eliminating the mere “fact of a friendship, particularly of a casual or social nature.” Specifically, the Court of Appeals held that the government must prove each of the following elements beyond a reasonable doubt to convict a tippee of insider trading: “that (1) the corporate insider was entrusted with a fiduciary duty; (2) the corporate insider breached his fiduciary duty by (a) disclosing confidential information to a tippee (b) in exchange for a personal benefit; (3) the tippee knew of the tipper’s breach, that is, he knew the information was confidential and divulged for personal benefit; and (4) the tippee still used that information to trade in a security or tip another individual for personal benefit.”

Newman and Chiasson, as it stood, were several steps removed from the corporate insiders who initially disclosed the information. Thus, the Government failed to present evidence that either defendant was aware of the source of the inside information or that they received a personal benefit, as defined by the Second Circuit.

Prior Rulings and Historical Background

Three Supreme Court decisions, as well as recent SEC rules, precisely influenced and shaped insider trading law and the Newman decision. The first was Chiarella v. United States, which gave the “classical theory” of insider trading liability, limiting the scope of liability to corporate insiders or those who work directly for a company, such as its lawyers and investment bankers. Defendants only violate that law if they violate their duty of trust and confidence to the company whose shares were traded by misusing information material non-public information. Expanding the definitions of liability and giving us the “misappropriation theory,” the Court in United States v. O’Hagan ruled anyone who obtains information from their employer and trades the information in any stock, can be found guilty of insider trading, so long as they have been entrusted with the information in confidence. Finally, the Supreme Court affirmed in its ruling in Dirks v. Securities Exchange Commission that a tippee holds a fiduciary duty to the shareholders. That duty arises “when a insider has breached his fiduciary duty to the shareholders by disclosing the information to the tippee and the tippee knows or should know there has been a breach.” Dirks, 463 U.S. at 660. The Courts are left with the discretion to determine whether the tipper received a personal benefit to determine if the tipper breached a fiduciary duty, and if the tippee knew of this breach of fiduciary duty.

The SEC also adopted three new rules in October of 2000: 1.) Regulation Fair Disclosure addressing the selective disclosure by issuers of material nonpublic information; 2.) Rule 10(b)(5)(1) regarding when insider trading liability arises in connection with a trader’s “use” or “knowing possession” of material nonpublic information; and most importantly in Newman, 3.) Rule 10(b)(5)(2), when the breach of a family or other non-business relationship may give rise to liability under the misappropriation theory of insider trading. These were important in the effort to help set the standard for those who could be found guilty of illegal insider trading.

The Court ruled in United States v. Todd Newman, Anthony Chiasson, based on the holding in Dirks, that “the exchange of confidential information for personal benefit is not separate from an insider’s fiduciary breach; it is the fiduciary breach that triggers liability for securities fraud under Rule 10(b)(5). For purposes of insider trading liability, the insider’s disclosure of confidential information, standing alone, is not a breach.” 

Conclusion

This redefining of what terms the Government can hold tippees liable for illegal insider trading will have a vast impact on many of the recent prosecutions which have been brought against investment professions removed from the source of the information. Though only time will tell the magnitude this decision will have on prosecuting those involved in securities fraud, the decision could have an immediate impact on both the Department of Justice and the Securities and Exchange Commission (SEC). Last month in California, however, a federal judge denied a motion to dismiss insider trading charges based on Newman. James Mazzo, the CEO and Chairman of the Board of a medical device company, was accused of having provided material non-public information about potential mergers to a friend, former Baltimore Orioles player Doug DeCinces, who traded on the information. Central District Court Judge Andrew Guilford denied the motion to dismiss.

On the other hand, following Newman, four guilty pleas in the Southern District of New York were vacated in United States v. Durant. In that case, the judge ruled that the Newman decision and its heightened standard for tippee liability applies to insider trading cases based on misappropriation cases in addition to cases based on the classical theory of insider trading. Because the defendants, in their guilty pleas, had not admitted to knowledge that the tipper received a personal benefit, the court vacated the pleas.

We will likely continue to see in the near future the Courts with pending litigation involving illegal insider trading reevaluate whether an investment professional knew that information had been disclosed in breach of a fiduciary duty in exchange for a personal benefit, and of course, prosecutors reconsider whether to bring charges against certain tippees.

Though only time can fully reveal the impacts the Newman holding will have on the securities trade industry, the grounds are already shifting. Most likely in future litigation, the Government will have more difficultly convicting those removed from the source of the information unless there is proof of knowledge of a specific personal benefit to the tipper. If the tippees, those individuals such as Todd Newman and Anthony Chiasson, had no prior knowledge of the personal benefit gained from the leaked information, then similarly situated tippees should not be held to a standard to act solely in the shareholder’s interest.  Newman narrowed the scope of liability for those who can be held accountable for insider trading, making it more difficult to convict those without proof that the tippee was involved in a situation of friends with benefits.