Watching Corporate Auditors

July 18, 2010

When Enron and WorldCom collapsed after years of uninterrupted flowing audits by accounting firms, Congress enacted the Sarbanes-Oxley Act.  The act created a non-profit commission to regulate auditors.  The Supreme Court has upheld the constitutionality of the Act.

In Free Enterprise Fund v. Public Accounting Oversight Board, the Enterprise Fund attacked the constitutionality of the act on the basis that the board’s setup violated the separation of powers doctrine by giving executive responsibilities to officials beyond presidential control.  The Supreme Court ruled board members were too insulated from removal by the president.  However, instead of throwing out the board or of invalidating the Sarbanes-Oxley Act, the Court struck down only that part of the Act that provided the Securities and Exchange Commission needs good cause to remove board members.  Therefore, the Court ruled, the S.E.C. may remove board members at will, i.e., without regard to good cause.

“The consequence is that the Board to function as before, but its members may be removed at will by Commissioners,” Chief Justice John Roberts wrote.  He was joined by Justices Antonin Scalia, Clarence Thomas, Anthony Kennedy, and Samuel Alito in a 5-4 decision.

The opinion focused on the “unitary executive” theory that proposes Congress should not have the power to protect agencies responsible for executing the law from presidential control.  In this case, the S.E.C., not the president, could remove members of the board and only for cause.  The president can remove S.E.C. commissioners, but only for cause.  The Court ruled that double insulation violated the principle of separation of powers.

“The constitution that makes the president accountable to the people for executing the laws also gives him the power to do so.  That power includes, as a general matter, the authority to remove those who assist him in carrying out his duties.  Without such power, the president could not be held fully accountable for discharging his own responsibilities; the buck would stop somewhere else,” wrote Justice Roberts in the majority opinion.

A dissent written by Justice John Paul Stevens said supervision of the accounting board “violates no separation-of-power principles.”  The dissent went on.   “I still see no way to avoid sweeping hundreds, perhaps thousands of high-level government officials within the scope of the court’s holding, putting their job security and their administrative actions and decisions constitutionally at risk.”  The dissent said among them were the leadership of the Nuclear Regulatory Commission, the Social Security Administration, administrative law judges and military officers.

The Board, although established by Congress, is not a government agency.  It does not have to follow pay schedules, so board members are paid $500,000 a year.

The Sarbanes-Oxley Act requires any auditor who audits a company that sells securities on the public market in the United States be registered.  Some foreign firms are included when they are involved in auditing foreign branches of American firms or audit foreign firms that list securities in the United States.  Certain countries have not consented to allow inspections of auditing firms located in their countries, including China, the European Union and Switzerland.  The board has been able to perform joint inspections in some countries of the European Union, but these ceased last year when sharing information became a problem.  Congress may need to amend the law to allow document sharing with foreign boards.  The financial regulation bill just passed by a joint Senate-House committee provides expansion of the requirement for auditing to include accounting firms which audit registered brokers, regardless whether the firm has public clients.

When the Act was passed, complaints abounded about the expense of companies assessing their management controls and that auditors give their opinion about those controls.  This sentiment has shifted now, thanks to reduction of the costs of the audits by the board.  Many corporate executives believe the benefits of compliance were greater than the costs.

Charging for Public Records

June 7, 2010

Should a businessman be able to obtain a full copy of a public library-full of records for $50-with the intent to sell the records to others, or should the businessman have to pay a price closer to the value of the records?   The Open Records Act would seem to control, and so far that is how district courts in Oklahoma have ruled, and the cost is $50 for a copy of the records.

A California businessman has succeeded in five counties against county assessors in the amount of fees charged for electronic copies of land records.

In March, Pottawatomie County and Canadian County judges sided with Roger Hurlbert after the county assessors had tried to charge him $450 and $500, respectively, for an electronic copy of those records.  The judges found the Open Records Act was clear when it states public offices “may charge a fee only for recovery of the reasonable, direct costs record copying, or mechanical reproduction.”

The Latest Immigration Balloon

May 25, 2010

The latest proposal for immigration legislation stresses border security.  As an indicator in how far the immigration debate has moved, it is New York Democratic Senator Charles Schumer who is one of the sponsors of this latest proposal. It calls for more federal agents and other enforcement at the border with benchmarks before illegal residents can become American citizens.

Senator Harry Reid of Nevada, Senate Majority Leader, Senator Schumer of New York, and Senator Robert Menendez of New Jersey, all Democrats, are sponsoring the legislation.  The benchmarks they proposed are: a) more ICE (Immigration and Customs Enforcement) inspectors at work sites; b) more ICE officers assigned to investigate fraudulent documents and better means to spot fake documents; c) more personnel assigned to find contraband at ports; d) additional resources to prosecute drug and human smugglers, for illegal border crossings, and deportations.

The legislation does not specify the number of agents to be added or the exact increase in resources. It would create a two-tier system for granting citizenship to those here illegally, but before the benchmarks are met, the Department of Homeland Security could begin registering and screening illegal immigrants and considering them for an interim legal status.  These people could begin to apply for legal permanent residence, eight years after backlogs of visas have been cleared for those who have come to the U.S.

The State of Arizona’s new immigration law has prompted new demands that Congress pass a comprehensive immigration bill.  Republican Senator Lindsey Graham of South Carolina said that the drug violence along the Mexico-American border is evidence that the border is not secure.  He said there would be no comprehensive immigration bill this year.

Democrats have been unable so far to lasso a second Republican, in addition to Graham, to join writing a bi-partisan immigration bill.  The Democrat’s proposal floated yesterday appears to be an attempt to invite more Republicans to join them.

The Latest Car Bomber

May 15, 2010

The case of the bungled car bomb parked in Times Square appears solved, at the first level at least, if news accounts are to be believed.  Apparently good detective work,  a frenzy over two days with investigators reviewing film from 48 cameras was credited in a joint statement from the Department of Homeland Security and the United States Attorney for the Eastern District of New York, Preet Bharara.

How ironic, Mr. Bharara, the United States Attorney immigrated with his family from India when he was a child, and now he is United States Attorney in the most prestigious post in the United States for that office.   The suspect is reportedly a  naturalized American citizen, originally from Pakistan, perhaps even from Kashmir.  The suspect may be prosecuted by a naturalized Indian, to wit:  insult to injury.

The bomb suspect, Faisal Shahzad, after his arrest reportedly told investigators that he had received bomb-making training in Waziristan.  This and other facts are recited in the criminal complaint filed, sworn to by F.B.I. agent Andrew Pachtman.  It runs 10 pages, claims he admitted making the car bomb and details his purchase of the car, a 1993 Nissan Pathfinder.  There is a question whether Shahzad was given his Miranda Warning before he was questioned, but there may be sufficient other evidence regardless of his statements.  After obtaining the vehicle identification number from the frame of the Pathfinder, investigators tracked down the registered owner.  He had sold the vehicle, and that person sold it to Shahzad.  There were no papers from the transaction, but the buyer had used an e-mail address.  They showed the seller a group of photos, and the vehicle’s seller picked out a photo of Shahzad.

Shahzad reportedly told investigators he drove to the airport in an Isuzu sport-utility.  Investigators found the vehicle and in it, found a 9-millimeter Kel-Tech automatic pistol with a folding stock and several spare magazines.   At his home in Connecticut in his garage, they found fertilizer and M-88 firecrackers, just as were found in the Pathfinder in Times Square.

Shahzad is not the first Pakistani-American to be involved in terrorist activities in the news lately.  Two months ago David Headley pleaded guilty to helping plan the 2008 bombing in Mumbai.  Headley, the son of a Pakistini diplomat, was a resident of Chicago and retained his ties there even as his ties to militant groups grew.  Reportedly including a coconspirator named Ilyas Kashmiri, a Qaeda member reportedly one of the most dangerous from the tribal regions  of Pakistan.  Headley was arrested in 1998 for heroin smuggling but avoided a lengthy prison sentence by cooperating with police, including volunteering undercover operation in Pakistan for the D.E.A. It was probably while still working for the D.E.A. that he picked up his militant contacts and initial training.

Alternative School Struggling

May 7, 2010

Prisons are full of people who had trouble in school.  Many spent time at an alternative school.  The idea, as criminal defense lawyers know as much as anyone, is that those who attend the alternative school stay out of prison.
Emerson Alternative School is one such school.  Part of the Oklahoma City School District, offers day care for the girls’ babies and serves young men who are at risk.  Built in 1894, the school will be one of the District’s last schools renovated in the MAPS for kids program

The school suffers from a number of problems.  Conditions are cramped and seriously need renovation. The walls are so thin between math and language arts classes that one sitting in one class can hear both lectures.  Two portable buildings at Emerson were damaged in the Murrah Building bombing 15 years ago.  They have leaking ceilings and no temperature control.
When voters approved the MAPS for Kids bond issue assessing a ½ cent tax, $1.8 million was scheduled for renovations to Emerson Alternative School.  On further consideration, officials decided Emerson needed more.  Now, $3.5 million worth of improvements are projected for the school, including a new building addition of 17,500 square feet.

Soon the School Board will vote on whether to increase the budget by transferring money from unallocated MAPS for Kids funds assigned to “alternative schools” to Emerson School.  Construction of the improvements to Emerson are scheduled to begin in the spring of 2011.
About 7,600 babies were born to teen mothers in Oklahoma in 2007, the sixth birth rate in the nation. There are scores of teen mothers in Oklahoma public schools, and 115 of them attend Emerson. If a teen mother has support at home from a family member who can baby sit or the teen mother can afford day care, she can continue her education attending the regular schools.  But for those who do not have such advantages, the teen mother must attend a school like Emerson or just drop out of school.   Emerson offers mothers support that includes day care on-site and social workers.

Emerson also provides a second chance to male and female students who have been kicked out of other schools or are academically far behind.  The two distinct missions are co-located at Emerson but operated independently from each other.

Emerson is located in Midtown, now enjoying a revival. Emerson has partnered with St. Anthony’s Hospital, which itself has invested $200 million in Midtown redevelopment since 2003.  The hospital hopes to reinstitute the health clinic at Emerson, which lost funding in 2009.

Gamblers and Crime in Oklahoma

August 11, 2009

The State of Oklahoma sets aside money from gambling revenues for problem gamblers to get help.  But little of that money is being used.  About one-third of it is unused.  Advocates say it is because of lack of public awareness.

Other states, including Louisiana, are required to place the “gambling help line” on billboards.  “The roadsides are inundated with cassino billboards.  And you know how many  billboards we have in Oklahoma with the gambling help line number? – not one,” said Willey Harwell, executive director of the Oklahoma Association for Problem and Compulsive Gambling.

This is a statewide organization that contracts with the Department of Mental Health and Substances Abuse Services to maintain the 24-hour gambling help line.  It also offers community education and promotes counseling services.  The state of Oklahoma spent $143,000 in 2008 to promote awareness about gambling addiction and treatment.  By law in Oklahoma, casinos, all 110 of them, must have the information available for treatment.

Only 245 people sought help with their gambling last fiscal year.  They went to one of the 12 certified gambling treatment providers who contract with the state.

Cindy Satterfield of Gateway to Prevention and Recovery in Shawnee believes there are many more problem gamblers than have sought help.  Hers is the only service in Pottawatomie County with certified gambling counselors.  She has only seven people in treatment now.  She has put out flyers to advertise her services but cannot compete with the casinos. In the stretch along Interstate 40 between Oklahoma City and Shawnee, there are 20 billboards advertising casinos.  There are none with the gambling help line.

Satterfield said gamblers usually do not seek help until they are in crisis.  Until then, shame keeps them away. When they do finally seek help, they are commonly more than a month behind on their mortgage, car payments and utility bills.

Criminal defense lawyers become acquainted with gamblers when they are eventually charged with a crime.  The crime stems from their trying to get back the money they have gambled away.

Embezzlement is the most common way gamblers get in over their heads.  As they continue to gamble more and more in a never-ending chase to make up their losses, these people, often over a period of years, may embezzle hundreds of thousands of dollars.  They continue to have access to money, and they want to pay back what they have taken, so they continue to  dig deeper and gamble it away, embezzle and gamble forever – until they get caught.  And, of course, then they have nothing left to pay back in restitution.

Mike Mass, former Oklahoma legislator, recently admitted he had a gambling problem that led him to destruction and a federal sentence from the U.S. District Court for the Eastern District of Oklahoma.  Dan Draper, former Speaker of the House in Oklahoma, also admitted having a gambling addiction that got him in trouble.

“I’m not the kind of person to lie about anything, but I would lie about gambling,” a gambling addict said.  “Gambling addicts are master manipulators,, but at some point it catches up with us, and we can’t hide it any longer,” she said. She ran up $70,000 in credit card debt and couldn’t stop.  “Its not about the money.  I’m mesmerized by the machines.”

But, as crushing as her debt is, she won’t be facing prison time.  Of course, some people in this situation, by the time they retain a criminal defense lawyer, they may feel that they deserve prison.  It’s more feeling they need to be punished.

Oklahoma Forensic Anthropologist Analyzes Criminal Evidence in Famous Cases

August 6, 2009

Not often do criminal defense lawyers face expert witnesses in the field of forensic anthropology.  This is a field requiring years of tedious work on just one subject, and there are few people who qualify in the field as experts.  Clyde Snow is one of them, and he lives in the Oklahoma City area.

Snow, whom some call the “father of forensic anthropology,” has confirmed skeletal remains of such well-known figures as Tutankhamun, the king from the Middle Kingdom of Egypt, the victims of the Oklahoma City bombing, Dr. Joseph Mengele of Nazi war-crime infamy, and those of President John F. Kennedy.

Snow served as a consultant on the remains found under the house of John Wayne Gacy, who murdered 33 boys and young men from 1972 to 1979 in suburban Chicago.  He found that all but one of these victims had been suffocated, some with plastic bags over their heads and others with ligature strangulation.

Snow even investigated Kurdish deaths in Iraq and testified in Saddam Hussein’s trial.  In 1991, after the first Gulf War, Snow went to Kurdistan, sponsored by Middle East Watch to document some of the gas attacks Hussein ordered in 1988 and 1989.  With a team of Argentine, Guatemalan and Chilean forensic anthropologists he had trained over the years.  They exhumed some mass graves and examined and documented the skeletons.  They took samples from bomb craters in a village that had undergone a chemical attack on which several people were killed and many injured.

The investigators sent the samples to Porton Down in England for analysis.  They found there were traces of serum gas.  This was important to prove that a complex chemical like serum had persisted long enough to be traced, but no one suspected at that time that this evidence would ever be used in any court proceedings.

Nearly 15 years later Saddam Hussein was brought to trial in Iraq.  Snow was called as a witness for the prosecution and asked to present this evidence. And, unlike any other trial Snow had testified in, the accused himself was allowed to cross-examine Snow.  Saddam immediately challenged Snow.  He said Iraq was full of mass graves and asked how Snow knew that ones I had described were not those of Sumerians from thousands of years ago.

Snow had a powerful answer.  He pointed out that the Sumerians had a rich civilization but not likely so advanced that its people wore digital wristwatches such as those found on the Kurdish skeletons.  Furthermore, it was unlikely that the wristwatches of Sumerians, if that is what they were, would all have stopped on August 28, 1988.  Of course, Saddam Hussein went on meaninglessly after that, and the judge had to have him sit down.

During training of his forensic team some of students he was training in Argentina would break down with emotion at a mass grave or morgue.  Snow had to give them some tough love at that point, insisting they cry at home to allow them to go on with their work, to perform professionally regardless of the obvious human tragedies they were witnessing.  But they can have some fun, as well, like when they searched for bodies of Butch Cassidy and the Sundance Kid.

In the Bolivian village of San Vicente, they found a graveyard where the two were supposed to be buried.  They exhumed two skeletons and took one of them back to the United States.  There they extracted DNA, which excluded either Butch or Sundance on genetic evidence.  It turns out the skeleton was that of a German named Zimmerman, an engineer in a mining company in Bolivia. He had died about the same time by accidental gunshot.

At the age of 81, Snow continues.  Most recently he has been testifying in a trial regarding the alleged extrajudicial executions in 1998 of hostages-takers in the siege in the Japanese Embassy in Lima, Peru. Snow is a true professional, contributing much to the criminal justice system over the years,  and we Oklahomans are proud to claim him as one of our own.