Litigating against the government seems a daunting task. The government all too often holds most of the cards, and its litigation record is impressive. Nonetheless, the government is far from invincible, and a tough but thoughtful defense strategy can pay handsome rewards.
Indisputably, the government holds the edge at the investigative stage. It possesses the manpower, know-how, and commitment necessary to make its cases, not to mention the power of the subpoena, something defense counsel lacks at the pre-charging stage. The amount of information the government can amass pre-charging is inestimable.
The numbers, not surprisingly, tend to support this advantage. According to a very recent Pew study, fewer than 1% of all federal criminal defendants were acquitted in 2022. The number of SEC investigations that end in settlements is upwards of 90%.
Digging deeper, however, federal criminal defendants prevailed 21% of the time at trial. In 2022, there were 290 acquittals versus 1,379 convictions according to the Pew Data. The SEC’s trial success rate has always been hard to calculate and varies significantly from year to year given the small number of cases that actually go to trial. But even in its best years, the Commission does no better than the criminal authorities, and, in fact, the numbers drop dramatically when factoring in cases where only partial relief is granted.
Indeed, the government has suffered some stunning losses recently, most notably the First Circuit’s reversal of two parents’ convictions in the “Varsity Blues” college admissions bribery cases. See U.S. v. Wilson, 22-1138, and U.S. v. Abdelaziz, 22-1129 (1st Cir. May 10, 2023). In those cases, more than 50 people were charged federally and at least 11 parents pleaded guilty, many involving jail time. The same month, the U.S. Supreme Court reversed convictions in Ciminelli v. U.S., 21-1170 (2023), and Percoco v. U.S., 21-1178 (2023), both involving theft-of-honest-services claims. Even in U.S. v. Blaszczak, 56 F.4th 230 (2d Cir. 2022), the Second Circuit insider trading case involving information about price hikes obtained from the Center for Medicare and Medicaid Services, the jury acquitted on the securities fraud charges and the government only recently dismissed the remaining conspiracy charges.
Ciminelli and Percoco are only the latest in a decades-long string of alleged political corruption cases in which zealous—arguably overzealous—federal prosecutors have secured trial wins that were later reversed by the Supreme Court. The Court’s rulings show its displeasure at the government’s attempt to extend the boundaries of the criminal fraud statutes far beyond their original legislative intent, which was limited to traditional tangible property interests. The Varsity Blues cases and Blaszczak follow suit in nonpolitical factual situations.
The SEC dropped its own bombshell just weeks ago by pulling the plug on its hammer-and-tong slugfest with Ripple Labs, a case in which the defendants pushed back mightily on the government’s attempt to characterize its cryptocurrency as a security. SEC v. Ripple Labs, et al., 20-cv-10832 (S.D.N.Y). The defendants’ no-holds-barred approach kept the Commission consistently on its heels before ultimately crumbling. A split summary judgment decision in July left only aiding and abetting claims pending against Ripple’s co-founder and its CEO. The higher standard of “knowing” participation contributed to the Commission’s unusual decision to axe the remaining litigation claims rather than proceed to trial against Ripple’s executives.
What does all this mean for practitioners? The data strongly suggests that the government is far from monolithic, and, despite its admitted advantages, tactical defense strategies can prevail. To succeed, however, three ingredients are essential. First, it is necessary to have a committed, fiscally sound defendant who is in for the long haul. Second, it is essential that defendants obtain counsel from experts in criminal and civil matters with a track record of litigation success. Finally, a successful defense must be predicated on a highly focused, well-conceived strategy executed with precision. Equipped with these essential ingredients, litigation against the government can lead to hard but achievable victory.
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