DealBook: Criminal Action Is Expected for JPMorgan in Madoff Case

DealBook: JPMorgan Reveals It Faces Criminal and Civil Inquiries

DealBook: SAC Capital Is Arraigned on a Raft of Criminal Charges

Using Mental Illness as a Criminal Defense

In the child sexual abuse criminal trial of Jerry Sandusky, the former assistant coach of the Penn State University football team, the defense made an argument that Sandusky had histrionic personality disorder.

Using Mental Illness as a Criminal Defense

In the child sexual abuse criminal trial of Jerry Sandusky, the former assistant coach of the Penn State University football team, the defense made an argument that Sandusky had histrionic personality disorder.

Using Mental Illness as a Criminal Defense

In the child sexual abuse criminal trial of Jerry Sandusky, the former assistant coach of the Penn State University football team, the defense made an argument that Sandusky had histrionic personality disorder.

Criminal Practice: Lawyer Need Not Advise Client of Plea's Pension Effect

Attorneys cannot be deemed ineffective for failing to advise a defendant that he or she may lose his or her pension if he or she enters a guilty plea to criminal charges, the state Supreme Court has ruled.

Criminal Practice: Justices to Decide Whether Daughter's Rape Allegations Were Hearsay

The state Supreme Court has agreed to hear a case over whether a young girl's videotaped statement that her father sexually abused her should be corroborated to be admitted in court.

Criminal Practice: Defense Counsel Raise Questions About Indicting Grand Juries

With the return of the indicting grand jury to Pennsylvania last week for cases involving witness intimidation, defense attorneys are raising concerns that the grand jury process provides much less protection for defendants, while prosecutors say that indicting grand juries are necessary to protect witnesses facing the threat of harm or even death if they testify about homicides and other serious crimes.

DealBook: Looking Ahead to Civil and Criminal Cases to Come

Carl Court/Agence France-Presse — Getty ImagesInvestigators are said to be looking into the actions of four people who previously worked for JPMorgan Chase in London.

It is not really of question of whether there will be a major white-collar crime that captures the public’s attention in 2013; it’s a question of when and how costly it will be.

If the cases of 2012 can serve as a guide, too many loopholes in the system allow fraud to go undetected.

Take for instance the onetime futures trading firm PFGBest, whose founder confessed to having committed fraud for years at the company, which has about $200 million missing from its accounts. Though futures regulators have spent months wringing their hands on how such a fraud could have gone on for so long, the fact remains that some financiers may keep one step ahead of law enforcement when it comes to white-collar crimes.

Federal prosecutors, however, are likely to remain strongly focused on the insider trading cases. The United States attorney’s office in Manhattan has already racked up an impressive record of winning convictions in every insider trading case that went to trial. They are even winning cases the old-fashioned way by relying primarily on the testimony of cooperating witnesses.

The one black eye that remains for the government is the lack of signature prosecutions emerging from the near collapse of the financial system in 2008. Although the Justice Department and the New York attorney general, Eric T. Schneiderman, have filed civil cases seeking billions in recovery for the sale of questionable securities tied to toxic subprime mortgages, the cases are likely to take years to play out.

Looking ahead to 2013, several major investigations remain open and are likely to bring significant criminal or civil penalties:

Still More to Come on Libor

The investigation of manipulation of the London interbank offered rate, or Libor, had been moving quietly along until the British bank Barclays announced a $450 million settlement in June 2012. The subsequent firestorm in Parliament over the bank’s conduct led to the resignation of its chief executive, Robert E. Diamond Jr., and a push to shift control of the interest rate mechanism into more trustworthy hands.

In hindsight, Barclays got off easily as the first bank to reach a settlement, although it probably did not feel like it in the days after the announcement. UBS has become the new focus of attention for Libor manipulation; it recently paid a $1.5 billion settlement, and its Japanese subsidiary pleaded guilty to fraud.
Other banks caught up in the investigation have to be dreading whether the UBS settlement is the new benchmark. If so, then a billion dollars may be the starting point for any negotiations with the Justice Department and Commodity Futures Trading Commission, which have been leading the investigation in this country. Add to that any penalties assessed by foreign regulators, and the cost of resolving the investigation will be a significant hit to the bottom line of some global banks.

More ominous is the possibility that the Justice Department will demand guilty pleas from banks. That requires an acknowledgement of wrongdoing, which could prove to be useful in the numerous civil lawsuits that have been filed against the banks, meaning more money could be paid out to resolve those cases.

Tackling Bribery and Corruption

As The New York Times has detailed, Wal-Mart is dealing with significant corruption issues in its Mexican subsidiary. The company also acknowledged that it was reviewing its global operations, and had already spent nearly $100 million on its internal investigation.

Though the Foreign Corrupt Practices Act was enacted in 1977, only in the past few years have the Justice Department and Securities and Exchange Commission started to extract significant penalties, often in sectors that had not previously been involved in overseas bribery cases.

For example, among the settlements in 2012 included four companies in the medical field, which all paid significant penalties: Smith & Nephew, $22 million; Biomet, $22.8 million; Pfizer, $60 million; and Eli Lilly, $29 million.

As more companies get caught up in these investigations, it will be interesting to see whether the courts punish repeat offenders more harshly. For instance, I.B.M. reached settlements with the S.E.C. in 2000 and again in 2011 over violations of the Foreign Corrupt Practices Act. A federal district judge in Washington is demanding greater accountability from the company before he will approve the proposed resolution of the case.

Insider Trading in the Cross Hairs

Although insider trading cases have become a staple of federal action in the last three years, the new attention has been on Steven A. Cohen and his hedge fund firm, SAC Capital.

Louis Lanzano/Associated PressThe government has indicted the portfolio manager Mathew Martoma, who worked at SAC Capital.

Prosecutors have charged a number of defendants with ties to SAC, and came close to Mr. Cohen in the insider trading indictment of the portfolio manager Mathew Martoma, Although Mr. Cohen is not named in the charges, prosecutors went out of their way to describe the “Hedge Fund Owner” as someone involved in the trading at issue, a sure sign the government is focusing on him.

Mr. Martoma’s lawyer said his client was innocent, which probably means that he will not cooperate with the government if it pursues a case against Mr. Cohen. Without that path to build a case, an interesting question is whether the S.E.C. will use its authority to hold SAC responsible as a “controlling person” for insider trading by its employees, which could result in a triple penalty being imposed. The firm received a so-called Wells notice stating that the agency is considering civil charges.

If the S.E.C. files such a case, this would be a new front in the fight over insider trading that shifts attention to the hedge funds and investment firms that employ the people who capitalized on confidential information. That could potentially expose firms to enormous liability even if their managers were not specifically aware of any legal violations.

Rogue Traders

Every year seems to bring news of a major trading loss as a result of a breakdown in the internal controls at a major financial institution. In 2011, UBS revealed that actions by Kweku Adoboli, a trader in London, cost the bank about $2.3 billion. In 2012, JPMorgan Chase said that a hedging strategy by traders in London had cost the bank at least $6 billion in losses.

On a smaller scale, the boutique brokerage firm Rochdale Securities suffered a $5 million loss when a trader bought about $1 billion in Apple shares, far beyond what he was permitted to do.

Although many of the outsize losses hurt banks’ shareholders rather than the general public, such actions have drawn public calls for accountability.

Prosecutors in London successfully obtained a conviction against Mr. Adoboli this year, and UBS was fined $47.5 million over failing to prevent the actions.

Olivia Harris/ReutersProsecutors in London successfully obtained a conviction against Kweku Adoboli, a former UBS trader in London.

More cases like these are likely to play out. As DealBook reported in October, investigators are looking into the actions of four people who previously worked for JPMorgan in London.

The nature of the markets may allow for more such blowups. Lightning-fast electronic trading allows huge positions to be built up in minutes, heightening the risk of sizable losses if anything goes awry.

And even when there is no sign of intentional wrongdoing, a small error can easily affect global markets. A software glitch at Knight Capital ended up costing the firm about $460 million, while memories of the 2010 “flash crash” are still fresh.

As the new year comes, white-collar cases will continue to serve up new object lessons of the perils and the pitfalls of the financial system. Some will come as a result of creative maneuverings by financiers, and some may call into question whether regulators are effectively overseeing the markets.

Using Mental Illness as a Criminal Defense

In the child sexual abuse criminal trial of Jerry Sandusky, the former assistant coach of the Penn State University football team, the defense made an argument that Sandusky had histrionic personality disorder.

Using Mental Illness as a Criminal Defense

In the child sexual abuse criminal trial of Jerry Sandusky, the former assistant coach of the Penn State University football team, the defense made an argument that Sandusky had histrionic personality disorder.

Using Mental Illness as a Criminal Defense

In the child sexual abuse criminal trial of Jerry Sandusky, the former assistant coach of the Penn State University football team, the defense made an argument that Sandusky had histrionic personality disorder.

Using Mental Illness as a Criminal Defense

In the child sexual abuse criminal trial of Jerry Sandusky, the former assistant coach of the Penn State University football team, the defense made an argument that Sandusky had histrionic personality disorder.

Using Mental Illness as a Criminal Defense

In the child sexual abuse criminal trial of Jerry Sandusky, the former assistant coach of the Penn State University football team, the defense made an argument that Sandusky had histrionic personality disorder.

Using Mental Illness as a Criminal Defense

In the child sexual abuse criminal trial of Jerry Sandusky, the former assistant coach of the Penn State University football team, the defense made an argument that Sandusky had histrionic personality disorder.

AU Optronics Hit with $500 Million Criminal Fine in LCD Price-Fixing Case

Vanessa Blum covers the California federal courts for The Recorder, an American Lawyer affiliate.

A San Francisco federal judge ordered Taiwanese electronics manufacturer AU Optronics Corp. on Thursday to pay $500 million for its role in a long-running global conspiracy to fix prices for liquid crystal display screens.

The punishment matches the largest fine ever imposed in a criminal antitrust case but falls far below government demands for a historic $1 billion sanction.

U.S. District Judge Susan Illston imposed the sentence before a courtroom crowded with defense attorneys, government lawyers and journalists. She sentenced two AU Optronics executives to each spend three years in prison and pay $200,000 in fines.

Prosecutors persuaded a jury in March that AU Optronics schemed with its rivals at a series of so-called "crystal meetings" to inflate prices for thin-film transistor liquid crystal display screens, known as TFT-LCD screens, in a five-year conspiracy that ended when federal agents raided their offices in 2006.

At Thursday's hearing, government lawyers pushed for the maximum possible penalties, arguing that stiff punishment would send a signal to other price fixers.

In halving the government's requested fine, Illston said she considered that AU Optronics paid nearly $200 million to settle two consumer class actions and faces additional civil lawsuits.

"A $500 million fine is enough but not excessive," said Illston, who presides over the related civil cases against the TFT-LCD screen makers. "The financial ramifications for these defendants have already been massive and they are not over yet."

Heather Tewksbury, a San Francisco-based trial attorney with the Justice Department's Antitrust Division, objected to the sentence, telling Illston a $500 million fine would not be enough to deter other cartels.

AU Optronics was the only screen manufacturer charged in the case to go to trial. Seven rival firms including LG Display Co. and Sharp Corp. agreed to plead guilty and pay more than $890 million in criminal fines.

LG Display alone paid $400 million to resolve criminal allegations in 2008 and then assisted the government, Tewksbury said, calling it unfair that AU Optronics should receive a comparable punishment "without ever providing a shred of cooperation."

"What the defendants are asking you to do is treat them more favorably for having gone to trial and lost," Tewksbury said.

Illston also rejected the government's recommendation of 10-year prison terms and $1 million fines for AU Optronics executives Hsuan Bin Chen and Hui Hsiung, both Taiwanese nationals.

"For a considerable period of time, the defendants thought they were doing the right thing vis-?-vis their company and their industry," Illston said. "I think they did know it was illegal, but there were a lot of business pressures they were responding to. It was bad judgment but there was relatively little personal motivation."

Lawyers for AU Optronics and the individual executives plan to fight their convictions on appeal. Defense lawyers had argued the company should not be fined more than $285 million.

AU Optronics attorney Dennis Riordan of Riordan & Horgan accused government lawyers of trying to bankrupt the company with a draconian fine.

"The government's objective is to kill the corporation," Riordan said.

The company is also represented by attorney Kirk Jenkins, a Chicago-based partner with Sedgwick, and San Francisco lawyer Martha Boersch. Cooley partner Michael Attanasio represents Chen. San Francisco solos William Osterhoudt and Brian Berson represent Hsiung, along with Christopher Handman, a D.C. appellate partner at Hogan Lovells.

The $500 million fine imposed on AU Optronics matches the previous record for an antitrust case--$500 million paid by F. Hoffmann-La Roche Ltd. in 1999 for its part in a vitamin price-fixing scheme.

Illston set a three-year schedule for AU Optronics to come up with the funds after Riordan insisted immediate payment would bring down the company. She also ordered AU Optronics to implement a compliance program, hire an independent monitor and take out ads in U.S. and Taiwanese newspapers publishing the fact of its conviction and punishment.