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The Weekend Wrap: November 5, 2023
SBF found guilty and Trump appeals his gag order
Welcome to the Weekend Wrap! Here are last week’s white collar highlights:
D.C. Federal Case - January 6 Allegations
Jury Selection: Judge Chutkan continues to signal that she is intent on moving the case along and sticking to the March 4 trial date. Last week she issued an order regarding jury selection procedures. On February 9 she will summon the first panel of prospective jurors to start filling out a jury questionnaire, after the parties and the judge hammer out any disagreements over what that questionnaire should contain.
Gag Order: It’s been on again/off again for the limited gag order Judge Chutkan imposed on Trump to prevent him from threatening and harassing witnesses, prosecutors, and court personnel. Last Sunday evening Judge Chutkan lifted her temporary stay of the order and put it back in place, holding that it was still necessary and reasonable. On Thursday, Trump appealed that order to the D.C. Circuit. He has vowed to take the issue to the Supreme Court if necessary.
On Friday, the D.C. Circuit issued an administrative stay, suspending the gag order once again while it considers the issue. It set an expedited briefing schedule and will hear arguments on November 20. So for now the order is lifted again and Trump is free to rant on social media with no constraints.
This kind of administrative stay, to preserve the status quo, is pretty routine. It doesn’t signal anything about how the court of appeals will rule on the merits. As we’ve discussed before, I think the limited gag order is reasonable and justified and should be upheld. We’ll see what the D.C. Circuit thinks. It will also be interesting to see if Trump is able to restrain himself or if he will post more social media attacks that will demonstrate to the court of appeals why the order is needed.
It’s also encouraging to note the expedited schedule set by the appeals court. As we’ve discussed before, Trump is probably entitled to appeal the expected denial of his motion to dismiss based on presidential immunity before the case goes to trial (what’s known as an “interlocutory appeal”). That has the potential to delay the current March trial, potentially by many months. But the schedule on the gag order hearing demonstrates that the appeals courts can move quickly if they want to. There’s no reason an interlocutory appeal on the immunity claim needs to delay the trial. Hopefully the Court of Appeals will recognize the need to move swiftly and get this case tried before the election.
Defense Motion to Delay: Trump’s lawyers also filed a motion last week asking Judge Chutkan to delay the trial until the courts have resolved his motion to dismiss based on presidential immunity. I expect rather than grant that stay, Judge Chutkan will simply deny Trump’s motion and let him take the immunity issue up with the D.C. Circuit. This motion is more significant when coupled with developments in the Florida federal case, as discussed below.
Meadows Immunity: As we discussed last week, there are reports that Jack Smith granted immunity to former White House chief of staff Mark Meadows and that Meadows testified in the grand jury in the D.C. case. His attorney continues to insist that Meadows does not have a deal with prosecutors and is not cooperating. In this post last week I discussed why both things could be true — and what Smith’s decision could mean for Georgia state prosecutors.
Florida Federal Case - Mar-a-Lago Documents
The parties in Florida continue to skirmish over the procedures for the defense to review classified materials. We don’t need to go into all the details. I will just note that Judge Cannon issued an opinion on the subject this week that was unusually snarky and critical of the prosecutors for proposing procedures that have been routinely accepted in other courts.
During a hearing this week, Cannon signaled that she intends to make “reasonable adjustments” to the schedule that currently has the case going to trial in May. She repeatedly expressed concern that the trial could overlap with the trial in D.C., currently set to begin on March 4. Trump’s attorneys expressed a similar concern while urging Cannon to further delay the Florida trial, arguing that they and Trump could not be in two places at once.
What Trump’s lawyers didn’t tell the judge, however, is that later that same day (as noted above) they filed a motion before Judge Chutkan in D.C. asking her to delay her trial pending the resolution of the presidential immunity issue. In other words, Trump’s Florida lawyers pointed to the impending D.C. trial as a reason for the Florida judge to delay her case, without telling that judge they were also asking the D.C. judge to postpone her trial – which would eliminate any conflict with the Florida date.
The special counsel pointed this out to Judge Cannon in an early morning filing the day after the hearing. Prosecutors argued that the defense’s deceptive maneuvering revealed Trump’s true motive: his “overriding interest in delaying both trials at any cost.” They urged the court not to “allow itself to be manipulated in this fashion.”
Judge Cannon responded not by criticizing the defense for deceiving her, but by entering an order admonishing the prosecutors over the form and length of the notice that they filed.
The pattern with Judge Cannon continues. She’s not showing any willingness to move the case along and is very hostile to the prosecution. It is looking less and less likely that this case will get to trial before the November election. Right now the best thing Trump has going for him in the Florida prosecution is the judge assigned to the case.
Georgia State Case - January 6 Allegations
After a flurry of activity in October and four guilty pleas, the Georgia case is now relatively quiet while everyone catches their breath. We are still on watch for likely additional guilty pleas in the coming weeks. We also still don’t have a trial date set for the remaining 15 defendants. Five of those defendants are currently pursuing their claims in the 11th Circuit Court of Appeals that the case should be removed to federal court.
Clark Motion to Dismiss:Former DOJ Attorney Jeffrey Clark filed a motion asking Judge McAffee to throw out the case against him, arguing that Georgia does not have jurisdiction to charge him with a crime. The primary allegation against Clark is that he worked with others to prepare a draft letter to Georgia officials falsely claiming that the Justice Department had uncovered serious irregularities with their election. The purpose was to help lay the groundwork to ask the Georgia legislature to decertify the election results, which could then throw the electoral votes from Georgia into question.
Clark argues that the letter was never sent and that no one in Georgia even knew of its existence until well after the election. He claims that any alleged conspiracy in which he was involved took place entirely in D.C. and did not involve any resident of Georgia or actions in Georgia. As a result, he argues, Due Process does not allow Georgia to assert criminal jurisdiction over him.
Much of his motion is a political screed attacking the prosecution and echoing Trump’s arguments that the defendants are being prosecuted simply for exercising their First Amendment rights to contest the election results. It calls the indictment a “massive and grotesque abuse of prosecutorial power.”
Clark’s underlying argument actually has some surface appeal, given his total lack of contact with Georgia. But because he is charged as part of the overarching RICO conspiracy that includes many who did act in Georgia, his motion likely will fail. The co-conspirators are legally responsible for each other’s actions. That’s one benefit of the RICO charge for the prosecution: the ability to bring all members of a wide-ranging conspiracy into a single courtroom. It’s also one thing that makes RICO controversial.
Election Denial as a Defense: On Friday Judge McAfee held a hearing on a motion by one defendant, Harrison Floyd, who argues he has a right to subpoena voluminous election records from Fulton County and the state of Georgia. The charges against Floyd (and others) stem in part from allegations that they knowingly spread false claims about election fraud in the aftermath of the 2020 election. Floyd wants to defend against those charges by arguing that the claims weren’t false: that there was indeed widespread fraud that cost Trump the election. To try to prove that, he wants access to voting machine records, absentee ballots, and much more.
Georgia courts and government officials - including the Republican Secretary of State - uniformly rejected the allegations of voter fraud in the weeks following the election. There were recounts, investigations, and lawsuits, and nothing was found to undermine the election results. It seems unlikely Judge McAfee will want to let Floyd relitigate all those claims, especially given the burdensome amount of material the state would have to produce, including confidential voter information. But he’s taken the matter under advisement for now.
New York State Case - Hush Money/False Business Records
Another quiet week in the New York state case, with no sign of activity. We are still waiting for the government’s response to Trump’s motion to dismiss the case on multiple grounds. For now, the trial is still set for March 25, 2024.
Other White Collar News
SBF Found Guilty
On Friday a jury in Manhattan found FTX co-founder Sam Bankman-Fried guilty on seven counts of fraud, conspiracy, and money laundering. The jury deliberated less than five hours after a month-long trial, suggesting it found the evidence pretty overwhelming.
SBF Arrives at Court (Credit: Michael M. Santiago/Getty Images)
SBF is the millennial Bernie Madoff, who defrauded depositors in his cryptocurrency exchange, investors, and lenders of nearly $10 billion by misappropriating funds to spend on a lavish lifestyle that included real estate, speculative investments, and illegal political donations.
This was a pretty spectacular fall from grace. Just a couple of years ago SBF was being hailed as the crypto boy wonder and gracing the cover of Forbes magazine, while FTX purchased Super Bowl ads and stadium naming rights and featured high-profile celebrity endorsements. Now he faces decades in prison.
Damian Williams, the U.S. Attorney for the Southern District of New York, summed this case up nicely in a statement: “The cryptocurrency industry might be new; players like Sam Bankman-Fried might be new. But this kind of fraud, this kind of corruption, is as old as time.” That’s exactly right. This case wasn’t really about crypto, it was simply about fraud. Crypto just provided a new vehicle for the oldest scams in the book.
The judge set a sentencing date of March 28.
George Santos Survives Motion to Expel Him from Congress
On Wednesday evening the House of Representatives rejected a motion to expel Rep. George Santos by a vote of 179-213. The motion was brought by some of his fellow New York Republicans, who probably feel they are being dragged down by the scandal. Santos is currently facing 23 felony counts of fraud and related crimes. You can find my breakdown of his indictment here:
Thirty-two Democrats voted with most of the Republicans not to expel Santos. I didn’t agree with that at first, but then I read this explanation from Rep. Jamie Raskin (D-MD), who voted against the measure. Raskin is a smart guy for whom I have a lot of respect, and he convinced me:
I'm a Constitution guy. The House has expelled five people in our history, three for joining the Confederacy as traitors to the Union and two after they were convicted of criminal offenses. Santos has not been criminally convicted yet of the offenses cited in the Resolution nor has he been found guilty of ethics offenses in the House internal process. This would be a terrible precedent to set, expelling people who have not been convicted of a crime and without internal due process.
If and when Santos is convicted of these serious criminal offenses or ethics charges, I will certainly vote to expel. Until then, it's a very risky road to go down and we have to stick by due process and the rule of law, as obvious as the eventual result seems. I can think of four or five Democratic Members the Republicans would like to expel without a conviction or adverse ethics findings. We can't abandon due process and the rule of law in the House of Representatives.
I think Raskin has it right. But he also made it clear that his decision was based on principle, not on any defense of Santos on the merits. Santos wrote a thank-you letter to his colleagues who voted against expulsion, and Raskin’s response was epic. He returned the letter with edits and a note: “I appreciate your note and only wish someone had proofread it first. P.S. It’s not shameful to resign.” Here’s the full response:
If you want to look at this in starkly political terms, keeping Santos around is probably good for the Democrats. He can’t really do any harm by himself, and he is currently set for trial next September. That means the scandal involving a Republican Congressman will be all over the news right before the November election. But it is unfortunate for his constituents, who deserve better representation in Congress and are stuck with him for the next year with no apparent remedy.
Brazilian Attorney Working in D.C. Pleads Guilty to Insider Trading
Finally, here’s an update from a story I noted a couple of months ago about a Brazilian attorney who was arrested for insider trading. Romero Cabral Da Costa Neto was working as a visiting attorney at the D.C. law firm of Gibson, Dunn & Crutcher, LLP. In the course of his work he learned about an upcoming merger involving a firm client, a biotech company. He purchased shares in the company in advance of the merger and made about $40,000.
Last week Costa pleaded guilty to one count of insider trading. Under the terms of his plea deal, he will likely be sentenced to about 12 months in prison and has agreed to leave the country once his prison term is over.
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