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.

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.

Jurors Improper Use of Today’s Technology

August 2, 2009

Jurors are sworn to tell the truth when they are initially examined by the judge and attorneys when they first arrive in the courtroom. This is during voir dire.  If not stricken from that jury for cause or peremptorily, they take a second oath to “well and truly” do their duties, which include following all the dictates of the judge.

Mistrials occur sometimes, but they are much disliked by judges and judicial administrators because they require another trial from beginning to finish. All that time, all that expense.  A jury trial takes a lot of preparation by the lawyers and witnesses. A jury trial is an emotional and planning event that causes high anxiety and great concentration. Nobody wants to do it all over again, but that is what is required when a mistrial takes place.

Mistrials can result from a lot of things: an error committed by one of the attorneys, an error in evidence or law that cannot be fixed during the trial, some unusual event that prevents going forward or that interrupts the appearance of a witness, and sometimes jury misconduct.

Now there is a new way for jurors to misbehave.  Before, a mistrial could be declared if a juror communicated with someone during the trial or during deliberations.  With advances in electronic communications come new ways to communicate improperly.

A few months ago a juror in Florida was doing research on the Internet while sitting as a juror in a federal drug trial. He admitted to the judge he did that in direct violation of the judge’s order.  Just to be safe, the judge inquired of the remaining members of the jury, and eight more admitted doing the same thing.  Shocked, United States District Judge William Zloch declared a mistrial in the case.

The same week, Stoam Holdings, a building products company was seeking a new trial from a judgment entered against them in an Arkansas court for $12.6 million, claiming a juror improperly used Twitter to send updates during the civil trial.  One of the entries from Johnathan Powell, the juror in question, was this: “So Johnathan, what did you do today?  Oh nothing really, I just gave away TWELVE MILLION DOLLARS of somebody else’s money.”

A few days later, defense lawyers in the federal criminal trial of a former Pennsylvania state senator demanded the judge declare a mistrial before the verdict was delivered.  Lawyers for defendant Vincent Fumo, on trial for corruption, said a juror posted updates on the case on Twitter and Facebook and claimed the juror had even told his readers that a “big announcement” was coming on Monday.  The judge decided to allow the deliberations to continue.  The jury found Mr. Fumo guilty, and Mr. Fumo’s lawyers will use the internet postings as grounds for appeal.

Jurors are prohibited from seeking information about the case outside the courtroom.  The judge always instructs them to base their verdict only on the evidence presented to them during the trial, not on anything they may have heard before and certainly not on anything else during the trial.  Some evidence is not allowed to go to the jury, and the jury is admonished not to consider what they think that evidence would have been. But now, using their cellphones, jurors can look up anything on the internet while sitting as jurors. They can also share their opinions or describe trial events with their friends outside, which is also prohibited by routine jury instructions.  Everything involved with a jury and its deliberations is supposed to be secret, private, confidential.

Now attorneys have begun to check the blogs and web sites of prospective jurors and jurors.  Jurors, of course, think they are trying harder to do a good job by investigating on their own. Sometimes there are questions that arise during the trial, and jurors are not allowed to ask questions.  So how are they going to find answers they believe they must have to understand the trial they are to judge?  Why not just Google it?

The rules of evidence, developed over centuries of experience are intended to ensure the facts presented to the jury have been scrutinized by both parties to the lawsuit.  That is how the adversary is designed.  “You lose all that when the jurors go out on their own,” Professor Olin Guy Wellborn, a law professor at the University of Texas, said.

For these reasons, come courts are restricting the possession and use of cellphones during trials.   Some judges confiscate the phones during the days in the courtroom.  Most judges do not.  And no one can know what jurors do at night on their computers.  Computer access would cease only upon the sequestering of the jury, not a common practice except in long or very serious cases.

In the earlier-mentioned federal criminal trial in Florida before U.S. District Judge William Zloch, defense lawyer Peter Raben had fought charges for eight weeks of trial that his client had illegally sold prescription drugs over the internet.  After the entire trial had been completed and the jury was deliberating their verdict, one of the jurors contacted the judge to say another juror had admitted dong outside research on the case over the Internet.

After questioning the juror, the judge considered going forward with the trial without this juror, if the offending juror had not communicated the research to other jurors. That’s when the judge discovered that eight other jurors had done the same thing: looking up newspaper articles, conducting Google searches, reading definitions on Wickipedia, and searching for evidence that had been excluded from the trial by the judge.  “I was curious,” explained one of the jurors.

Judges as Umpires in the Justice System

July 15, 2009

The analogy of judges to umpires is intuitive.  Just as the umpire makes the decision when a dispute arises between members of two teams, be it baseball, football, basketball or any other ball, the judge makes the calls in the courtroom between the two litigants, be they civil plaintiff and defendant or criminal litigants represented by prosecutor and criminal defense lawyer.

“Judges are umpires,” then-Judge John Roberts said in his remarks at his confirmation hearing for the Supreme Court.  “Umpires don’t make the rules; they apply them.  The role of an umpire and a judge is critical.  They make sure everybody plays by the rules.  But it is a limited role.”

This umpire metaphor is sometimes a suggestion of judicial restraint, that judges should be arbiters alone, not to set aside precedent or create new law, but only to decide cases on the basis of established law.  At Judge Roberts’ confirmation hearing, Alabama Republican Senator Jeff Sessions stated, “What we must have – what our legal system demands – is a fair and unbiased umpire, one who calls the game according to the existing rules and does so competently and honestly every day.”

Can a judge be using judicial restraint when he discards precedent rather than judicial activism?  Maybe.  Take the 1954 Supreme Court decision in Brown v. Board of Education as an example. This is the decision that ended the “separate but equal” segregated school system in the United States.  Brown set aside the Plessy v. Ferguson decision from 1896.  Yet, according to now-Chief Justice John Roberts, who acknowledged Brown was groundbreaking, but it did not change “the strike zone” because the Supreme Court relied in Brown on a later precedent, a 1950 case in which the University of Texas Law School. In that 1950 case, the Court decided that separate-but-equal was an unattainable standard in state-supported higher education.  Therefore, Judge Roberts said at his confirmation hearing, Brown was not a departure from established law so much as return to it.

“We all bring our life experiences to the bench,” Judge Roberts said.  Supreme Court justices are “supposed to be doing their best” to interpret the Constitution not according to their own preferences but by the role of law, he said.  “That is the ideal.”

“Activism is when a judge allows his personal views on a policy issue to infect his judgment, “Senator Sessions said at the same hearing.  Life experiences brought to the bench and allowing personal views on a policy issue to infect judgment.  These sound pretty close.

This inquiry will not be revived at  the confirmation hearing of Appeals Court Judge Sonia Sotomayor as Supreme Court Justice. “She certainly has a distinguished career,” Texas Republican Senator John Cornyn, and former Texas Supreme Court justice, said.  “The real question is who she views her role as judge: whether it is to advance causes or groups or whether it is to calls ball and strikes.”  The umpire metaphor.

Are judges like umpires?  There are differences.  “Umpires are eyewitnesses,” major league umpire Jim Evans noted.  He umpired from 1972 to 1999 and now runs a school for umpires in Florida.  “As the umpire you are the eyewitness and the judge.  You make your decision based on your own reportage.”

But in a recent case, the Justices of the Supreme Court were eyewitnesses of sorts.  In the 2007 case of Scott v. Harris, the justices considered the case of a motorist named Victor Harris, who was fleeing from the police and was rendered quadriplegic after a police car rammed him to end the chase. After viewing a videotape of the incident, the justices decided by a vote of 8-1 that Harris was not entitled to sue for civil rights violation on the basis of unreasonable search and seizure.  “No reasonable jury” could fail to see the risk Harris posed to the public, Justice Scalia wrote for the majority.  Confidently, the majority posted the videotape on its web site as substantiation for what it considered the inevitable opinion from viewing the video.

But it was not so obvious to other observers.  A study by Kahan, Hoffman and Braman published in the Harvard Law Review showed it was a very mixed bag.  The study presented this video tape to 1,350 people, who were broken down into groups by race, income, Northeastern, Southern, and Western parts of the country, political liberals and conservatives, Republicans and Democrats.  The different groups varied widely in their perception of the video tape.   Maybe the umpire’s call is not so easy, even for the Supreme Court.