How To Get A City Hall Job

Transcription

1 When Municipal Officials Are Prosecuted and Qui Tam Henry E. Hockeimer, Jr. Partner, Ballard Spahr LLP Abigail Elias Chief Assistant City Attorney, Ann Arbor 25 th Annual MAMA Advanced Institute April 5, 2011

2 What Issues Are Facing Michigan? Former Village Manager of Stevensville convicted of wire fraud (2010) Abused his authority by misappropriating approximately $270,000 of Village of Stevensville funds for his own use and benefit, including to pay the mortgage on his house, to pay his utilities and dry cleaning bills and to purchase a sport utility vehicle. Former Alcona County Treasurer Charged with Embezzling Public Monies and Pleaded Guilty (2007) Court of Appeals rules that Alcona County cannot collect on bonds purchased to protect against wrong-doing due to the former treasurer s wrong-doing in (2011) Public Integrity Unit Charges Former Highland Park Charter School Treasurer with Embezzling $25,000 (2011) Public Integrity Unit Charges Former River Rouge City Council President With Accepting $5,000 Bribe (2011) 2

3 What s To Come - Michigan Michigan Attorney General Creates Public Integrity Unit To Ramp Up Fight Against Public Corruption (February 2011) The stated purpose of the unit is to ratchet up the fight against corruption in state and local government, protect tax dollars and restore the public's trust in government. 3

4 What s To Come - Federal Public Corruption - It s our top priority among criminal investigations - and for good reason. Currently focused specifically on several major issues: corruption along our national borders; corrupt officials who take advantage of natural disasters or economic crises to divert some of the government s aid into their own pockets; and a myriad of officials who may personally benefit from the economic stimulus funding. n_

5 Allegations of Corruption: Steps to Take Determine the applicable laws Evaluate the need/scope of an internal investigation Consider reporting requirements, i.e., HUD 5

6 Conducting the Internal Investigation Preliminary Review Who is conducting the investigation? What/Who is the source of the allegations? What kind of inquiry is needed? Who should investigate? Consider privilege issues What document retention measures are needed? Hold memorandum 6

7 Beginning the Investigation Determine the nature of the allegations Formulate objective(s) Draft and follow a work plan 7

8 Scope of Investigation Driven by the nature of the allegations Who should be interviewed What documents should be reviewed/requested Is an review required Expensive Time-consuming Reassuring Consider outside counsel 8

9 Preserving the Integrity of the Investigation Issue a records hold order Direct employees to keep the matter confidential Hold interviews in a confidential setting 9

10 What Statutes Apply? 18 U.S.C. 666 Theft Or Bribery Concerning Programs Receiving Federal Funds 18 U.S.C (1341/1343) 18 U.S.C

11 18 U.S.C. 666 Theft Or Bribery Concerning Programs Receiving Federal Funds Makes it a crime for an agent of a state or local organization or agency to corruptly demand, offer, or accept anything of value of $5,000 or more in connection with any business or transaction of the organization or agency, where the organization or agency receives annual benefits in excess of $10,000 under a federal program 18 U.S.C. 666(a)(1)(A): Theft Concerning Federally Funded Programs 18 U.S.C. 666(a)(1)(B): Bribery Concerning Federally Funded Program 18 U.S.C. 666(a)(2): Bribery Of An Agent Of A Program Receiving Federal Funds Elements: Public official Thing of value Corruptly The $5,000 jurisdictional threshold 11

12 18 U.S.C Mail Fraud Elements having devised or intending to devise a scheme to defraud (or to perform specified fraudulent acts), and use of the mail for the purpose of executing, or attempting to execute, the scheme (or specified fraudulent acts). 12

13 18 U.S.C Wire Fraud Elements a scheme to defraud and; the use of, or causing the use of, interstate wire communications to execute the scheme. 13

14 18 U.S.C Scheme or artifice to defraud includes a scheme or artifice to deprive another of the intangible right of honest services. Intangible right of honest services what s the hook? 14

15 18 U.S.C On June 24, 2010, the United States Supreme Court published decisions in three cases challenging the federal honest services fraud statute: Skilling, Black and Weyhrauch. The Court confined 1346 to include only schemes involving bribery and kickbacks. Should have broad implications, both on convictions previously secured on the honest services statutes and on a going-forward basis. 15

16 18 U.S.C Hobbs Act Prohibits actual or attempted robbery or extortion affecting interstate or foreign commerce. The Supreme Court recently held that the Government need only show that a public official has obtained a payment to which he was not entitled, knowing that the payment was made in return for official acts. 16

17 18 U.S.C The Hobbs Act Under color of official right 17

18 The False Claims Act 31 U.S.C. 3729(a) The Civil False Claims Act prohibits: the knowing filing of a false or fraudulent claim for payment to the United States, the knowing use of a false record or statement to get a false or fraudulent claim paid or approved by the government, and conspiracy to defraud the United States by getting a false or fraudulent claim allowed or paid. 18

19 The False Claims and Qui Tam The FCA is the government s primary litigation tool for combating fraud. The FCA empowers both the U.S. Attorney General and private persons to institute civil actions to enforce the Act against anyone that commits fraud by submitting false or fraudulent claims to the federal government. 31 U.S.C

20 Enforcement By the Attorney General of the United States. 31 U.S.C. 3730(a). By private individuals (qui tam relators) in the name of the United States government. 31 U.S.C. 3730(b). 20

21 Qui Tam The number of qui tam suits filed since the 1986 amendments has increased

22 Qui Tam recoveries have exploded $2.3 million 1989 $15 million 1990 $41 million 1991 $71 million 1992 $136 million 1993 $190 million 1994 $382 million 1995 $241 million 1996 $138 million 1997 $628 million 1998 $469 million 1999 $498 million 2000 $1.2 billion 2001 $1.3 billion 2002 $1.1 billion 2003 $1.5 billion 2004 $570 million 2005 $1.2 billon 2006 $1.5 billion 2007 $1.4 billion 2008 $1.0 billion Total recoveries from 1986 to 2008 for qui tam and non qui tam suits exceed $21 billion dollars. 22

23 FCA Elements Claim Materiality Causation Scienter Presentment Original Source (qui tam only) Statute of Limitations 23

24 Statute of Limitations 6 years from the date violation occurred Tolling provision 3 years after material facts were known or reasonably should have been known by government official with responsibility 10 year limit 24

25 Michigan False Claims Act MCL et. seq. Michigan had previously enacted anti- Medicaid fraud statutes, but only the attorney general had a right to sue under those antifraud laws. In 2005, the Michigan FCA was strengthened by adding a qui tam provision and whistleblower protection rights. 25

26 Michigan False Claims Act Retroactivity provision Person may file suit under the Michigan FCA alleging fraudulent conduct that took place before the 2008 amendments (so long as the relator complies with other statute of limitations provisions). 26

27 Filing the Case Relator must provide to the government a written disclosure of all his evidence of fraud. Lawsuit is filed in the circuit court under seal. During the seal period, the government investigates and decides whether the case has sufficient merit to justify intervening and taking over prosecution of the case. 27

28 The City Attorney s Role MRPC 1.7(b) With exceptions, a lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer s responsibility to another client. The city attorney s client is the city. Cannot represent an individual being investigated or prosecuted for acts contrary to the interests of the city. 28

29 Responding to a Grand Jury Subpoena Cooperate, cooperate, cooperate. Do not waive privileges. Attorney-client communications, including minutes of closed sessions to discuss litigation or settlement strategy or other attorney-client communications. Consider a motion to quash or for protective order if needed. 29

30 Attorney-Client Privilege Courts will scrutinize a claim of attorney-client privilege. In re Grand Jury Subpoena, 886 F.2d 135 (6 th Cir. 1989) (privilege would apply to discussion between city attorney and city council in closed session regarding condemnation case; remanded for review whether the privilege applied to the particular communications at issue) 30

31 Attorney-Client Privilege Reed v. Baxter, 134 F.3d 351 (6 th Cir. 1998) (city council members met with city attorney and others; not privileged because council members were investigating how promotion was made and how the lawsuit that arose from the promotion was being handled) Ross v. City of Memphis, 423 F.3d 596 (6 th Cir. 2005), (extends to municipal corporations the Upjohn Co. v. United States, 449 U.S. 383 (1981), analysis of privileged attorney-client communications in an organizational client) 31

32 Attorney-Client Privilege Dzierbicki v. Twp of Oscoda, Case No. 07- CV (E.D. Mich., May 26, 2009) (good discussion of how the attorney-client privilege applies in a municipal organization) 32

33 Attorney-Client Privilege FRE 502(d) allows a federal court to order that the attorney-client privilege or attorney work product protection is not waived by disclosure connected with the litigation pending before the court in which event the disclosure is also not a waiver in any other federal or state proceedings. See Order in United States v. Donald W. Hill, Case No. 3:07-CR289-M (N.D. Texas, August 13, 2009) granting the City of Dallas s motion to protect privileges from waiver. 33

34 Grand Jury Subpoena for Documents Review the documents before they are turned over Be prepared to respond to your client s inquiries; Identify city employees who may be called to testify as witnesses; Be prepared to respond to the media; Determine whether possible discipline, reporting, internal investigation or other action is warranted. 34

35 Voluminous Documents Less of an issue when documents can be scanned and preserved for city use Copy or scan may protect against a claim that all records weren t turned over; also gives the city access to working records if needed 35

36 Voluminous Documents Index if you can t copy the records before (or get copies after) they are turned over, work with the FBI or U.S. Attorney s Office to get an index of the records taken; index should be as detailed as possible Will be an inventory of records taken Will facilitate city access if needed while in FBI/grand jury custody 36

37 Voluminous Documents Whose cost? As a general rule, the cost falls on the party producing the records, including making copies to keep Under FRCRP Rule 17(c)(2) a court may modify the subpoena if compliance would be unreasonable or oppressive, including shifting the cost to the government. In re Grand Jury No (MIA) Subpoena Duces Tecum, 555 F.2d 1306, 1308 (5 th Cir. 1977) 37

38 Grand Jury Secrecy - Federal Grand Jury Secrecy (Federal) FRCRP Rule 6(e)(2)(B), provides: (B) Unless these rules provide otherwise, the following persons must not disclose a matter occurring before the grand jury: (i) a grand juror; (ii) an interpreter; (iii) a court reporter; (iv) an operator of a recording device; (v) a person who transcribes recorded testimony; (vi) an attorney for the government; or (vii) a person to whom disclosure is made under Rule 6(e)(3)(A)(ii) or (iii). 38

39 Grand Jury Secrecy - Federal A witness before a federal grand jury cannot be have an attorney in the room but can leave to consult with his or her attorney so long as it doesn t disrupt the proceedings. Secrecy applies to federal investigators and law enforcement personnel who assist with the case. Rule 6(e)(3)(A)(ii) authorizes disclosure by the prosecutor to state or local government personnel for the purpose of assisting with the case. A person to whom such disclosure is made is subject to the secrecy requirements. 39

40 Grand Jury Secrecy - Federal Other witnesses are free to disclose and discuss their testimony if they choose. However: The purpose of the secrecy is to allow the grand jurors to consider the evidence presented and feel free, without public scrutiny, either to decline or agree to a request for indictment. If witnesses don t talk it will help narrow suspects if someone who was supposed to maintain secrecy doesn t. 40

41 Grand Jury Secrecy - Michigan The grand jury secrecy provisions in MCL f are broader than the federal provisions and apply to witnesses and their attorneys. Violation of the secrecy provision is a misdemeanor. A witness before a Michigan grand jury may be accompanied by and consult with an attorney. MCL e 41

42 Grand Jury Witnesses Representation of grand jury witnesses MRPC 1.7 representation must be consistent with furthering the investigation and the city s interest If a person who is a target of a grand jury investigation is called as a witness, it is U. S. Justice Department practice to advise the person that he or she is a target. At the point that someone is a target, the city attorney should not be representing the person. 42

43 Grand Jury Witnesses Witness immunity Transactional immunity cannot be prosecuted Use immunity testimony cannot be used against the witness; can still be prosecuted if the government has independent evidence Will not grant immunity unless there is evidence the witness engaged in criminal actions and will invoke the 5 th Amendment privilege against self-incrimination 43

44 Prevention Avoid conflicts of interest be aware of regulations that apply to projects funded with federal grant funds Adopt a policy against gifts Checks and balances Use competitive bids when required Deal with any problems promptly and definitively (avoid Alcona County situation) Foster confidence through transparency 44

45 Prevention Adopt an anti-fraud policy Consider putting a fraud tip line in place Complaints can be anonymous, but the tipster will get a report Complaints are investigated Input from others allowed Allows legitimate complaints to be investigated Prevents rumors without basis from escalating 45