Wednesday, May 5, 2021

The Lion, the Witch Hunt and the Wardrobe

Following the issuance of the Mueller report on Russian interference in the 2016 election, Attorney General William Barr reported to Congress that there was insufficient evidence to charge then-president Trump with obstruction of justice. Trump then declared himself exonerated and that the entire process was a “witch hunt.”

The difficulty from the point of view of Congress and the public at large is that we were asked to simply take their word for it. To the minds of some, the conclusion of exoneration simply did not meet the smell test. Robert Mueller himself stated:

The summary letter the Department sent to Congress and released to the public late in the afternoon of March 24 did not fully capture the context, nature, and substance of this Office’s work and conclusions.

What Barr had done with his report to Congress was brilliant. There were actually two distinct questions to address: whether the president had acted in a way that obstructed justice and, if so, whether the president, by virtue of being president, could be charged. Rather than answering both questions, Barr combined the two to arrive at his conclusion that the evidence was insufficient to charge the president. In other words, if the president, as president, could not be charged, it made no difference what he actually did. Unfortunately, based on Barr’s report and the highly redacted Mueller report, there was no way of determining whether obstruction of justice had actually occurred.

Enter the Freedom of Information Act (FOIA). By federal statute, government agencies may be compelled to release records upon request, subject to documents that fall within nine specific exemptions. In many cases, this requested information helps us understand the conclusions that agencies make.

Citizens for Responsibility and Ethics in Washington (CREW), who describe themselves as “a nonprofit 501(c)(3) and nonpartisan U.S. government ethics and accountability watchdog organization” asked the Justice Department for release of the underlying materials that supported Barr’s conclusions. Much of the information was released, enough to establish a timeline of communications that predated and postdated Barr’s report to Congress.

One critical document that was withheld was the analysis prepared by the Office of Legal Counsel that Barr said supported his conclusions. CREW sued the Justice Department in the Federal District Court to obtain that document.

The Justice Department defended the withholding of this document under one of the exceptions to FOIA, specifically that it was “pre-dispositional” -- “the protections traditionally afforded certain documents pursuant to evidentiary privileges in the civil discovery context, including . . . the executive deliberative process privilege.” Translating that into English, you do not need to release information that was put together to help you reach your decision., especially if that information falls within the attorney-client privilege.

Judge Amy Berman Jackson, under her authority as judge, reviewed all of the documents in private (called an in camera review). This review allowed her develop a timeline of events. What she found was perturbing to her. Even though the Justice Department (and through it Attorney General Barr) said that the Office of Legal Counsel memorandum formed the basis of Barr’s conclusion, it was, in fact, not delivered to the Justice Department until AFTER Barr’s report to Congress. In other words, Barr lied.

After extensive legal analysis, Judge Jackson determined that the document was not part of the decision-making process and did not fall within the exception to the production rules. The Department of Justice was ordered to release the document (subject to further objections and proceedings).

The court’s decision is, of course, more complex than the summary here and I have intentionally omitted portions that do not relate to his specific issue.

Reading between the lines of the opinion, one thing becomes clear. Even though Barr’s report to Congress combined the issues of obstruction of justice and whether a president could be charged, the memorandum apparently unpacks the two. If that is the case, we may finally find out how much evidence there was of obstruction of justice.

One side note: some right-leaning pundits have suggested that CREW may not be as non-partisan as they claim. This is a red herring that obfuscates the true issue. Regardless of the motives underlying the request for information under FOIA, we as the public have a right to information. What we do with it is another matter.

Saturday, April 17, 2021

IRS Leaves No Roger Stone Unturned—and Why His Friends Won’t Bail Him Out.

Roger Stone has a history of underpaying taxes owed to the IRS. That alone does not make him unique. Fortunately for him and many others, the Internal Revenue Code provides a detailed mechanism for making periodic payments. These are called installment agreements which include interest on unpaid amounts and may also include penalties.

Tax debts of under $10,000 qualify almost automatically for installment agreements. Liabilities above that amount usually require an agreement with the IRS that takes into account your income and other assets. When listing your assets for purposes of this kind of agreement, your statements about the property you own are done under oath. Lying about your assets or their value is sufficient to void the agreement and to make the entire amount due immediately. Where appropriate, the IRS may file a lien on your property until the tax liability is resolved.

Generally, all goes well so long as the taxpayers make the monthly payments. Miss one payment, however, and the entire agreement can be voided. That is what happened in the Roger Stone case. Complicating matters for Stone is that he was apparently not truthful about all of his assets. Through the use of what the IRS referred to as a shell company, he was able to hide some of his income and use that money bucket to support what was called a “lavish lifestyle.”

The IRS filed suit against Stone yesterday to recoup the $2 million he owes. As always, the filing of a complaint does not necessarily mean the IRS will win. But Stone has a number of serious issues here. First, the default on the installment agreement, meaning that more than $2 million is immediately due the IRS. Second, the failure to pay income tax on the amount sheltered in the sham company. Third, the fraud he committed by lying about his assets at the time he entered into the installment agreements. Fourth, the fact that this is a civil action by the IRS, meaning that the pardon he was granted by Trump does not relieve him of liability.

Stone immediately responded in the calm and measured manner with which we are all familiar. He called it: “another steaming pile of horseshit from corrupt prosecutors apoplectic about my pardon.” He may be better served by outlining a more defensible position.

Should the IRS be successful, Stone could lose everything, including real estate that he had improperly funneled into his wife’s name. Further, if the IRS fraud allegations are proven, bankruptcy will not protect him.

One possible way out is for one of Stone’s rich friends to pay the amount he owes. Even if these friends are kind and generous souls, it is extremely unlikely that they will bail him out. The reason is the rules about making a gift. Gift recipients almost never owe taxes on the amounts they receive. So far so good.

However, the maker of the gift is limited to a tax-free gift of $15,000 to any individual in any one year (subject to exceptions that include the payment of tuition). Gifts above that amount require the giver to file my favorite tax form, Form 709, the gift tax return. No actual taxes are due at the time the form is filed, but the amount of the gift reduces amount that is exempt from death taxes, currently a little more than $11.5 million per individual. This means that if I made a $2 million gift to Roger Stone to pay his taxes, I would lose a $2 million exemption on my personal estate taxes. Not. Gonna. Happen.

Perhaps Stone’s reference to horseshit is well timed. He is fairly deep in it right now.

A side note since we’re talking about taxes. Occasionally you will see a television ad about “offer and compromise,” where the IRS will settle your debt for a small percentage of what you owe. Although the ads imply that most people qualify, only a tiny percentage of cases do.

Friday, April 9, 2021

We Have Moved from “Release the Kraken” to Buzz Lightyear. Really.

There is a lot to unpack this week in the wonderful world of “release the Kraken” lawyer, Sidney Powell. The week ended with her quoting from Buzz Lightyear in a legal brief. Bear with me as we cut through the legalese while unravelling the recent developments in her cases.

Two weeks ago, Powell moved to dismiss the Dominion Voting Systems’ defamation case against her, arguing among other things that no reasonable person would accept her comments about Dominion at face value. (For more on that, see my prior article: Sidney Powell’s Defamation Defense: No Reasonable Person Would Believe My Election Rigging Claims on FOX.)

The "no reasonable person" statement did not go unnoticed by the Michigan lawyers who are attempting to get Powell sanctioned for filing frivolous post-election lawsuits there. To understand why their ears perked up, you need to know a little about writing legal briefs.

When the court allows you to file a legal brief in support of your case, two things are of utmost importance: you need to file the brief on time, and you need to include everything relevant to the case in that document.  In other words, you have one shot to do the exhaustive research necessary to make your legal case. You do not have the luxury of later saying “Oops, I missed something.” Knowing that this is a one-shot deal is what causes sleepless nights.

There is one exception to the “one shot” rule, and that is when brand new information is revealed after the brief has been filed. If you have new information, you may request that the court accept a “supplemental brief.” This is what the lawyers in the Michigan sanctions case did earlier this week.

In their supplemental brief, the Michigan lawyers said that Powell’s statements in the Dominion case effectively proved that she should be sanctioned in the Michigan case. Her “statement of facts” were, from her own admission, not facts at all. You are not entitled to file a case citing “facts” when you are actually saying “let’s see how this plays out.” In all likelihood, the judge will allow this supplemental brief to be filed. It does not portend well for Ms. Powell.

You might think that the movement in these two cases would be enough drama to last a while in the Powell world. You would be wrong. Michigan is not the only state where sanctions against Powell are being sought. She is also defending against sanctions in Wisconsin.

The argument for sanctions in Wisconsin is similar—that Powell pursued frivolous litigation. Powell’s motion to dismiss in this case is a bit different, however. She is claiming that the original Wisconsin defendants cannot claim sanctions because they waited too long to ask for them. (Technically, the court no longer has jurisdiction to hear a claim for sanctions because the case was dismissed as moot.)

What is most interesting in the Powell’s brief in support of her motion to dismiss is not the case law she cites, as questionable as that is. Rather, what has caught most commentators’ attention is her characteristic, yet extraordinary, use of hyperbole.

Most lawyers would suggest that the Wisconsin defendants simply waited too long to bring their request for sanctions. Not Powell. She argued that allowing the sanctions motion to proceed “could extend the time for filing a sanctions motion ‘to infinity and beyond’ to harass a plaintiff in what amounts to nothing more than political grandstanding.”

That’s right. Powell quoted Buzz Lightyear and even footnoted it (Buzz Lightyear, Toy Story (Pixar 1995).)

The consensus among legal analysts is that there might be more persuasive people to quote than Mr. Lightyear. If Buzz does end up being legally credible, he will probably be quoted in the reply brief as well, something along the lines of “There seems to be no sign of intelligent life anywhere.”

Monday, April 5, 2021

Trump Twitter Case Dismissed as Moot—But That's Not the Interesting Part

Today, the U.S. Supreme Court dismissed the case brought against Donald Trump for blocking people on Twitter with whom he disagreed. The decision was not unexpected. After all, (1) he is no longer president and (2) he had already been permanently barred from Twitter.

Although there was no written opinion accompanying the dismissal, Justice Thomas wrote a 12-page concurring opinion. Thomas agreed that the case should be dismissed as moot but used the opportunity to talk about what may become an issue in the future—to what extent a private company such a Twitter should be allowed to operate outside of First Amendment safeguards.

The main subject of the opinion is not what caught my eye. Rather, it was Thomas’s comment about how Trump had used his Twitter account during his presidency.

Mr. Trump often used the account to speak in his official capacity. And, as a governmental official, he chose to make the comment threads on his account publicly accessible, allowing any Twitter user—other than those whom he blocked—to respond to his posts. [Emphasis added]

This apparently throw-away comment by Justice Thomas is more important than it appears at first blush. We have already seen Trump’s Twitter comments referenced in other legal proceedings. If, as Justice Thomas suggests, these Twitter remarks were often used in an official capacity, it undermines an argument often made by Trump’s lawyers that his Twitter posts should not be taken at face value.

It has been noted in other contexts that Trump’s voluminous Twitter posts could later be problematic for him. When a conservative justice such as Thomas says that Twitter posts have credence as official statements, it gives even deeper meaning to “problematic.”


Wednesday, March 31, 2021

Trump’s Tweets Sink a Non-Disclosure Agreement

Businesses have a legitimate interest in protecting confidential and sensitive information as well as their public reputation. Requiring employees to sign non-disclosure and non-disparagement agreements (NDAs) are one method of ensuring that. These written agreements may also be used with third-party contractors and volunteers (especially to political campaigns).

NDAs may also have the effect of limiting an individual’s free expression rights under the First Amendment. Therefore, the agreements require a delicate balancing of the inherent rights of the two parties.

Jessica Denson was hired by the Trump campaign in 2016 as a Hispanic outreach director. She accused the campaign of sex discrimination. Under the terms of the NDA, an arbitrator was appointed and issued a $50,000 award against her for violating the terms of the agreement. The arbitrator based his ruling only on the terms of the NDA. It was not his role to decide whether the NDA was actually enforceable. That award was later overturned.

Denson then filed suit against Donald J. Trump For President, Inc. in Federal court, claiming that the NDA was so broad in its scope that it was not enforceable and was an unwarranted intrusion on her Constitutional right of free expression.

The Federal District Court judge examined the NDA to see if it was “reasonable in time and area, necessary to protect the employer’s legitimate interests, not harmful to the general public and not unreasonably burdensome to the employee.” Yesterday's ruling said it was clearly not.

For example, the agreement placed NO limits on time and area. It also was incredibly broad as to the people and entities who were “protected” by the agreements.

The provision applies not only to President Trump and his family members – including unnamed spouses, children, and grandchildren – but also to any legal entity ‘that, in whole or in part, was created by or for the benefit of . . . or is controlled or owned by’ President Trump or any of his family members. President Trump himself is affiliated with more than 500 companies, and his family members may be affiliated with yet more.

Showing that the NDA was overly broad was only half of Denson’s battle. She next needed to show that her free expression would likely be infringed by it. In other words, would there be an attempt to enforce it?

In many cases, this would be difficult to prove. Here, Trump did it for her. All the court needed to do was to quote his tweets. Here is one of the many that the court quoted.

[On] August 31, 2019, President Trump tweeted, ‘...Yes, I am currently suing various people for violating their confidentiality agreements. Disgusting and foul mouthed Omarosa is one. I gave her every break, despite the fact that she was despised by everyone, and she went for some cheap money from a book. Numerous others also!”

The court concluded: 

[T]he Campaign has engaged in a pattern of enforcing or threatening to enforce the Employment Agreement’s non-disclosure and non-disparagement provisions against former Campaign employees, including Denson, Newman, Sims, and Johnson. And the primary intended beneficiary of the Employment Agreement – President Trump – has tweeted about his efforts to enforce non-disclosure agreements. Given this record, Denson has demonstrated a “well-founded fear” that the Employment Agreement will be enforced against her.

Trump’s lawyers tried one last gambit. Maybe the court could salvage the good parts of the NDA, something called “blue lining.” The judge said no, that the agreement was not salvageable without a complete rewrite.

To summarize, the NDA attempted to do much more than just protect legitimate business interests and Denson was harmed by it. 

Denson’s win only applies to her own NDA. However, it is likely that others who were required to sign similar agreements may also try to get them declared invalid.

Considering that dozens, if not hundreds, of similar NDAs exist out there, the exposure to the Trump organizations is extensive. Therefore, expect an appeal of this ruling.

Tuesday, March 30, 2021

Trump’s Greatest Vulnerability—the Deposition

Vulnerability is not the same as guilt. I need to emphasize that up front.

Today, New York’s highest state court ruled that Summer Zervos may proceed with her lawsuit against Donald Trump. Zervos claims that Trump sexually assaulted her a number of years ago. He responded by calling her a liar. She filed suit against him for defamation. The litigation was placed on hold, due to Trump’s claim of presidential immunity. In essence, the court today said that since Trump is no longer president, the immunity arguments have disappeared.

Now that the case can continue, Zervos will be entitled to take Trump’s deposition. Why is that so immportant?

Depositions are a formal pre-trial process where an individual answers questions under oath. In a criminal case, a defendant has little to fear by being deposed. The defendant has the right to refuse to answer questions (5th Amendment right to not incriminate yourself). The fact that the defendant has refused to answer questions may not be introduced into evidence at the later trial.

In civil cases (where money damages are the usual goal), you have no 5th amendment rights. There are only three ways to answer a question, and all of these answers may create later problems.

First, you can answer the question. This answer had better be truthful. If is later shown to be a lie, you can be later charged separately for lying under oath (perjury). Even if you are not charged with perjury, the jury can use the lie to help them decide your credibility.

Second, you can refuse to answer the question. That refusal can be entered into evidence at trial, affecting your credibility to the jury. Separately, the other side may go to the judge after the deposition is over and have the judge require you to answer the question.

Third, you can say you do not know the answer or don’t remember. Again, your lack of knowledge or memory may be considered by the jury to determine your credibility.

This is not where deposition problems end. One of the issues that plaintiffs have is that some of the information they need to prove their case may be only known to or available to the defendant.

Answers to deposition questions often reveal the names of other people with knowledge of the circumstances. They may become witnesses later. Perhaps more importantly, depositions may reveal the existence of documents that may be relevant to the case. The plaintiff may follow the deposition by requesting that these documents be produced.

Defendants such as Trump are extremely guarded about written information that they think will make them vulnerable or the names of people with individual knowledge of what happened. The deposition process has the potential to open the door to that evidence.

If there were only one case pending or threatened against Trump, the opened door might not be a big deal. However, once the evidence comes to light, other cases may find a way to make use of it as well. And that is where the true vulnerability lies.

Friday, March 26, 2021

Dominion Sues Fox News Network: Why This Case Is Different

Dominion Voting Systems has already sued a number of individuals for defamation, including attorney Sidney Powell and My Pillow’s Mike Lindell.  These lawsuits all concern post-election statements that questioned the integrity of Dominion’s products and how manipulation affected the presidential election. Today, they also sued Fox News Network (FOX) for $1.6 billion.

What makes this case different?

When you sue an individual for defamation, you are maintaining that the person knowingly made false statements about you (or that the statements were made with reckless disregard for the truth), that they were believable to the audience, and that you can trace your damages to the statements they made.

The defense that individuals offer, even assuming that their statements were wrong, often hinge on the credibility of the person offering the opinion. Remember, for example, that a prior defamation case against Tucker Carlson was thrown out because he was a pundit and not a journalist. As his attorney stated: “No reasonable person” believes his statements to be factual.

Similarly, in the current defamation case against Sidney Powell, her lawyer’s motion to dismiss argued against her own credibility, explaining that much of what she said was (and was understood to be) overstatement and hyperbole. Again, no reasonable person would take what she said at face value.

News organizations are held to a different standard. It is expected that what they report as “news” will be accurately reported. News organizations are therefore generally careful to cover themselves from making false statements by using weasel words in their reporting. That is why their reporting of ongoing investigations so often uses the words “alleged” or “allegedly.” At times it may seem ridiculous to hear news reports talk about an “alleged shooter” when there is video of him, but this is the level of care news organizations take to ensure that they are not misrepresenting facts.

In a splendid move, the Dominion lawsuit against FOX “accuses” them of being a reputable news organization. Dominion notes that FOX has millions of regular viewers and reaches them through a vast variety of media. And, as a huge for-profit company, FOX’s primary concern is its financial bottom line.

Dominion further suggests that FOX, which once touted itself as conservative news outlet that was “fair and balanced”, morphed into an organization that tied its financial well-being to the adulation of Donald Trump and his most ardent supporters.

Seeing its viewership drop precipitously after FOX called the state of Arizona for Biden, and was chided for it by Trump, Dominion alleges that FOX needed to do something to reengage the faithful. They saw Dominion as an easy target to help promote the concept of election fraud.

In painstaking detail, the complaint shows how a variety of FOX news and opinion shows promoted the allegations by Guiliani, Powell, Lindell and others that accused Dominion of wrongdoing, One result, Dominion says, is that FOX reentered the good graces of Trump, recaptured its viewership, and improved its bottom line. The victim in this scenario was Dominion Voting Systems.

FOX cannot claim ignorance of its actions, according to Dominion. Ninety people within the FOX organization regularly received factual updates from Dominion about the security of its voting systems and the fact that it has no relationship to Smartmatic or Hugo Chavez in Venezuela. Numerous requests for retractions were ignored.

All of these allegations suggest that FOX is being held to a different standard than political pundits or individuals who are engaged in self-promotion. FOX has, according to Dominion, violated a public trust to their detriment.

Reminder: the filing of a lawsuit is just the first step in litigation. As always, Dominion will need to prove their allegations and show that the standards for defamation are met.