U.S. Supreme Court to Take Up Subject of Corporate Honest Services Fraud

11 February 2010 Publication

Imputation – that is, the law surrounding when and under what circumstances an employee's knowledge or intent will be attributed to the corporation – is something every in-house attorney overseeing litigation should understand.

For some time, the law has been relatively clear about how imputation works in civil litigation when the corporation is an alleged wrongdoer or victim, and in criminal cases when the corporation is an alleged wrongdoer. But in a recent article published by Berkeley Law School through its Center for Law, Business and the Economy, Tom Hagemann proposes an answer to this vexing question: How should imputation work in the criminal context when the corporation is an alleged victim?

Mr. Hagemann, a partner in the Houston office of Gardere Wynne Sewell LLP and a former Assistant U.S. Attorney, argues that the absence of a clear "imputation rule" in this context has led to prosecutorial misunderstanding and abuse of the notion of a corporate "victim." He also provides a current analysis of where the law stands regarding corporate (or private-sector) honest services fraud – the broadest and most controversial crime in the white-collar arena today. The U.S. Supreme Court is preparing to take up the subject for the first time in three separate petitions: Black, Skilling, and Weyhrauch.

Mr. Hagemann actually tried the case that led on appeal to the dam breaking against private-sector honest services fraud – United States v. Bayly, et al. (reported at United States v. Brown, 459 F. 3d 509 (5th Cir. 2006)), also known as the Nigerian Barge case. In that case, the first trial from the Enron debacle involving individuals, Mr. Hagemann represented Dan Bayly, the former head of investment banking at Merrill Lynch worldwide.

Mr. Hagemann filed the pretrial motions in the case based on the 2nd U.S. Circuit Court of Appeals' seminal honest services holding in United States v. Rybicki, 354 F. 3d 124 (2d Cir. 2003)(en banc), which would ultimately result in the reversal of the Nigerian Barge defendants' convictions in 2006. The criminal case against Bayly was finally dismissed with prejudice this year. Mr. Hagemann (with the National Association of Criminal Defense Lawyers) and Rybicki have filed amicus briefs with the Supreme Court in Skilling.

For a full examination of these cases and the law of imputation, please review Mr. Hagemann's article: The Sea and the Mirror: Some Reflections on Corporate Honest Services Fraud and the (Hypothetically) Innocent Corporation.

For more information about the material within this alert or for other white-collar criminal matters, please contact Thomas A. Hagemann (thagemann@gardere.com or 713.276.5064).

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