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Tuesday, Dec. 2, 2008 | There were executives at Alvarado Hospital and Peregrine Systems. San Diego city councilmen and pension officials. And the most remarkable of them all — the most corrupt congressman ever caught, Randy “Duke” Cunningham.
All were high-profile defendants prosecuted under former U.S. Attorney Carol Lam, who was dumped in February 2007 by the Bush Administration for making a priority of such cases at the expense of immigration prosecutions.
Things have changed significantly since then.
“There’s been a precipitous decline in white-collar investigations and prosecutions over the last two years,” said Michael Attanasio, a former federal prosecutor who now specializes in defending clients accused of white-collar crime.
It’s possible there are white-collar or public-corruption cases pending that have yet to be made public, Attanasio said, but “it certainly appears that there’s been a change in emphasis from those types of cases to border crimes, gun offenses, and the like.”
Lam’s tenure turned out to be glory days for the FBI’s financial crime squads, for federal prosecutors working major frauds and for dream-team defense attorneys whose clients made headlines around the country.
When Karen Hewitt took over 22 months ago, controversy raged over what was perceived by some as politically motivated firings of Lam and seven other U.S. attorneys around the country. At the time, Justice Department officials defended the firings, citing Lam’s lack of immigration and gun prosecutions in a city with the world’s busiest international border.
Lam, a healthcare fraud specialist, had branded herself a champion of these high-impact corporate and public corruption cases. As for border crime, she bypassed the small players and went after leaders of large drug- and human-smuggling rings and corrupt border officials.
That strategy did not win friends in the White House, Justice Department or among some members of Congress, such as Darrell Issa, R-Vista, who lobbied for change and got it.
When Hewitt, a Republican, took over from Lam, an independent, she had a clear mandate to do what Lam was unwilling to do. It was obvious to Hewitt’s troops, the defense community and her counterparts at other federal agencies that priorities were about to shift.
And so they have, rather dramatically. Criminal prosecutions in fiscal 2008, Hewitt’s first full year in office, have increased 54 percent since Carol Lam’s first year in office, fiscal 2003, according to the Transactional Records Access Clearinghouse, which monitors federal prosecution statistics. Comparing the same five-year period, immigration cases in the Southern District of California are up 88 percent.
Also during that span, prosecutions of white-collar cases referred by the San Diego FBI are down 74 percent, from 78 cases in 2003 to 18 cases in 2008, the lowest level in two decades. And public corruption cases are down 71 percent, from seven cases to two. Under Lam, the number of such cases had reached the highest levels in two decades, hitting 12 in 2004, TRAC found.
“She’s very aware of the reasons her predecessor was axed,” criminal defense attorney Bob Rose said of Hewitt. “I really doubt she would like that to happen to her.”
Hewitt declined to comment about her prosecutorial priorities. In an interview with The San Diego Union-Tribune seven months into her tenure, Hewitt attributed the sharp increase in overall cases in part to more attorneys. Since she took over in February 2007, the office has added 30 assistant U.S. attorneys, bringing the total to 135.
Still, until a few weeks ago, the major frauds unit was at its lowest staffing levels in years — a decline that began toward the end of Lam’s 4.5-year tenure as resources dwindled. Four junior attorneys were assigned to the unit recently, bringing the number to about 11, lawyers in the office said. That appears to be in step with a national trend to crackdown on mortgage fraud and other financial crimes associated with the nation’s economic meltdown.
Hewitt’s office declined to provide statistics or answer questions, but said from 2007 to 2008, immigration cases were up 48 percent, gun cases were up 17 percent, child pornography cases were up 60 percent, and frauds were up 71 percent. Hewitt was interim U.S. attorney for eight months of fiscal 2007.
The debate over what cases should take priority rages on within political circles, the law enforcement and legal communities and beyond.
Hewitt’s supporters — and she has many — are proud of the increased caseload, and most federal agencies that submit cases for prosecution, particularly within the Department of Homeland Security, are turned away less often and are much happier under Hewitt.
Within Hewitt’s own office, some prosecutors said the white-collar unit is as busy as ever, but with less-sexy mortgage fraud cases and other frauds that don’t capture the attention of the news media. And, these types of investigations are complex and time-consuming and can take years before the public sees any results.
The U.S. Attorney’s office under Hewitt certainly is not ignoring corruption and fraud cases altogether. Although grand jury matters are secret, sources have indicated there are at least a handful of white-collar cases under grand jury scrutiny that are likely to receive press attention if indictments are handed up.
“I think it’s more the natural ebb and flow” of cases, said former fraud prosecutor Sanjay Bhandari, who left the San Diego office about a year ago for a corporate job in Los Angeles. “San Diego is a smaller business community than L.A. or New York so it’s going to be less frequent you’re going to have a gigantic white collar case.
“I don’t think it’s a reflection of different prosecutorial priorities. It’s clear Karen is bringing more cases on the immigration front but I don’t think that’s been at the expense of fraud cases.”
Hewitt is almost universally well-liked in law enforcement circles, at least on a personal level, so even critics of her policies are loathe to attack her publicly. Even her own lawyers are divided, as are FBI agents, about what the office’s priorities should be.
The U.S. Attorney’s Office prosecutes criminal cases brought by federal agencies such as the FBI, the Secret Service, the Department of Homeland Security and the Drug Enforcement Agency. Each of the nation’s 93 U.S. attorney offices has wide discretion over which cases are prosecuted and which are rejected.
Former FBI chief Bill Gore, now the undersheriff, raved about Hewitt while introducing her as speaker at a Rotary Club meeting in October, calling her a “team player.”
“It doesn’t do a bit of good for (federal agencies) to investigate and waste all that time, if this lady is not going to prosecute them, so it’s critical that she clearly articulate to all these agency heads what her prosecutorial priorities are and not just come down from on high with an edict, ‘Here’s what I’m going to prosecute,’” Gore said. Hewitt explains herself and works with counterparts, he said. “I don’t think anybody’s done it better than Karen Hewitt has.”
Mike Unzueta, head of San Diego’s Immigration and Customs Enforcement, a division within the Department of Homeland Security, noted that various federal agencies are always vying for attention from the U.S. Attorney’s Office, but it’s impossible for prosecutors to pursue every case from each agency. These days, ICE is faring better, in part because the Justice Department has made the southwest border a national priority for prosecutors.
“Right now the priorities within the U.S. Attorney’s Office match very well the priorities in my organization,” Unzueta said. “For the time being we’re getting a lot of cases.”
In fact, the vast majority of cases prosecuted by Hewitt’s troops comes from Customs and Border Protection (73 percent) and Immigration and Customs Enforcement (17 percent), both part of the Department of Homeland Security. Only about 2 percent of the U.S. attorney’s cases are referrals for prosecution by the San Diego FBI, according to TRAC, which analyzes Justice Department data.
Some FBI agents said Hewitt’s office welcomes any fraud or corruption cases offered for prosecution; other agents said they are frustrated that their cases are no longer the priority. None wanted to be quoted in this story because they are not authorized to speak to the media.
San Diego FBI chief Keith Slotter, a certified public accountant who spent the majority of his FBI career investigating white-collar criminal matters, and who implemented the FBI’s national white-collar crime strategy, declined to comment for this story.
FBI Director Robert Mueller recently testified before Congress that the bureau had shifted nearly one-third of its agents from criminal investigations to national security matters after the Sept. 11, 2001 attacks.
That means the bureau has struggled to find resources to investigate white-collar and public corruption cases, particularly as the country slips further into financial chaos. According to Mueller, the bureau’s white-collar crime program has been slashed by 36 percent since 2001, from 1,722 agents to 1,097.
Federal sources said the San Diego office has mirrored that trend, siphoning agents for counterterrorism efforts, particularly because two of the hijackers lived here. As a result, some FBI agents and prosecutors said, their agencies are playing catch-up, focusing now on mortgage fraud cases.
The federal government reported filing 151 criminal mortgage fraud prosecutions in the first 10 months of FY 2008, 10 of which are in the Southern District of California, which includes San Diego and Imperial counties, according to data obtained by TRAC.
The 151 federal mortgage fraud prosecutions so far reported for fiscal 2008 were clustered in only 10 judicial districts, with Florida South (Miami) the most active with 69 cases, followed by Western Pennsylvania (Pittsburgh) with 26 prosecutions. San Diego was tied for third with 10, sharing that distinction with Northern Georgia.
In its analysis of the data, the TRAC report said: “Given the broad troubles now confronting the economy of the United States, and the role that mortgage fraud may have played in these problems, the relatively small number of cases in this area is somewhat surprising. For example, during the same period U.S. attorney offices criminally prosecuted 554 individuals for simple drug possession, 399 cases for environmental wildlife protection and 405 for child pornography.”
There are mixed feelings among defense attorneys about priorities in the U.S. Attorney’s Office. Some said Lam and Hewitt are on opposite sides of the spectrum and the office needs to come back to middle ground.
“My personal perception is there’s been a marked shift in priorities and I think you could legitimately take issue with doing white-collar cases to the exclusion of border-related cases and vice versa,” said former San Diego U.S. Attorney Charles La Bella, now a defense attorney. “The balance is somewhere in the middle where you address both issues.”
One defense attorney said Hewitt appears to be more discriminating than Lam when it comes to deciding which cases to pursue.
“The fact that there aren’t as many corruption cases being filed likely is the result of the fact that the U.S. Attorney’s Office again has returned to a responsible and critical examination of whether or not an investigation should lead to charges as opposed to just rubber stamping whatever case had been brought to them,” said criminal defense attorney Geoffrey C. Morrison, who represented a target of a public corruption prosecution under Lam.
In that case, prosecutors won convictions against two San Diego city councilmen for taking bribes from a strip club owner, but a judge reversed one of the guilty verdicts and appeals are pending.
Lam had a big success with the Cunningham bribery case — he pleaded guilty to conspiracy and tax evasion charges, admitting he accepted more than $2.4 million in bribes from defense contractors.
But she had mixed results on other cases — in particular the one she personally prosecuted against Alvarado officials after the first trial ended in a hung jury. She got the same result. Likewise, there were two hung juries in the fraud case against Peregrine Systems executives. In the still-pending pension case, the judge has voiced skepticism about the government’s theory.
Hewitt, a Republican and avid sports fan, joined the San Diego U.S. Attorney’s Office in 2000 and prosecuted civil fraud cases before Lam appointed her as third in command — executive assistant U.S. attorney — in 2006. Before coming to San Diego, she was a lawyer in the Justice Department’s civil division in Washington, D.C., where she specialized in constitutional law and civil rights cases for about eight years. She has kept a low profile since becoming interim U.S. attorney.
With the election of Democrat Barack Obama to the White House, Hewitt almost certainly will be stepping down, and priorities are likely to shift again with the unnamed new appointee. The position is a political appointment, and incoming presidents typically choose their own U.S. attorneys. But that process could take up to a year.
Beyond the philosophical debate, the additional cases under Hewitt have had a significant impact on workload for the U.S. District Court, the clerk’s office, court-appointed defense lawyers and the jails and prisons.
Federal Defenders of San Diego Inc. has been forced to increase the number of staff lawyers by 25 percent in the last year to handle the caseload. “There’ve been points in the year when everybody’s been just absolutely under water,” said Reuben C. Cahn, executive director. “Everyone can work 80 hours a week for a couple months at a time but they just can’t do it longer than that without the quality of work eroding or without burning out. It’s been a very difficult year for us.”
Cahn said the numbers tell the story. His office handled 892 immigration cases in FY 2006, then 1,240 in 2007 when Hewitt first took over, and 1,660 in 2008. “That’s essentially doubled in two years,” he said.
So, the prominent white-collar defense lawyers are doing a lot of civil cases now. There have been no new high-profile corruption cases like Cunningham, who is serving more than eight years in prison.
An Office of the Inspector General report has concluded that Lam’s firing, while mishandled, did not appear to be an effort by the Bush Administration to derail Lam’s pursuit of Cunningham and spinoff cases targeting GOP colleagues. Her firing was about failing to prosecute border crimes, a Justice Department priority, the report said.
Hewitt, in rare public comments on the subject, insisted her office is free from Washington meddling since she took over. “As a career prosecutor I can tell you that we maintain absolute impartiality in all we do, that’s the most important thing is that we not be influenced in any way by politics,” Hewitt said in answer to a question from the audience at the Rotary meeting.
“Obviously there was a recent very sad episode with the department where we’re still recovering from that and there’s an ongoing investigation,” she continued. “We watched that first hand, we watched it unfold as people working with Carol and for Carol Lam here in San Diego. It was incredibly troubling. I can tell you my time in office, and maybe because of the sad way that that played out, that we have been completely left alone in terms of any political interference. I see none of it.”
Kelly Thornton is a San Diego-based freelance writer. Please contact her directly at email@example.com with your thoughts, ideas, personal stories or tips. Or set the tone of the debate with a letter to the editor.