Archive for January, 2013


Tuesday, January 15th, 2013


Problem is, what he said was apparently so funny that you had to be there. Really — the court’s official transcript didn’t catch his words.
What we do know is that Justice Thomas was speaking to a lawyer representing the state of Louisiana. The state was arguing that its five-year failure to fund a lawyer for an indigent defendant facing the death penalty did not undermine the defendant’s constitutional right to a speedy trial.

Before Thomas spoke in Boyer v. Louisiana, Justice Antonin Scalia was asking the state’s attorney about the competency and experience of the lawyers for the capital defendant, Jonathan Edward Boyer. After learning that the lawyers went to Harvard and Yale law schools, Scalia said, “Son of a gun.” Then Thomas spoke.

According to the transcript, he said, “Well — he did not -¬-,” followed by laughter. Louisiana’s lawyer then responded, “I would refute that, Justice Thomas.”
What came between? SCOTUSBlog, which had its reporter in the courtroom, tweeted, “Thomas, J. (Yale, JD), speaks: funny at argument—Yale degree could mean lawyer is incompetent, not competent, capital trial counsel.”
Another person present at the oral argument, law student Billy Freeland, tweeted, “Thomas might have cracked, ‘That’s not effective counsel.’ But hard to hear.”
The Supreme Court will release the audio of Monday’s oral argument on Friday.

The last time Justice Thomas spoke at oral argument was on Feb. 22, 2006.
While his comment from the bench Monday may have been surprising, that he drew laughter should not be. Thomas is widely acknowledged to be a smiling, jovial presence in private and in his public appearances.
Nor should his denigration of his alma mater, Yale Law School, shock those familiar with Thomas’ biography. The law school is repeatedly ranked first in the nation in U.S. News & World Report’s listings, but Thomas has said he believes the value of his education there was “discounted” by his admission under the school’s affirmative action policy. In a 2007 interview with CBS’s “60 Minutes,” Thomas said, “I still have a 15¢ sticker on the frame of my law degree. It’s tainted, so I just leave it in the basement.” He returned to Yale Law School in a detente of sorts in December 2011 to teach a class, attend a reception and speak to the Black Law Student Association.

Compared to his fellow justices, Thomas, who has served on the Supreme Court since 1991, has always been reticent, but until about a decade ago, he used to ask questions more frequently. His most famous line of questioning came in a 2002 case over the the constitutionality of a state ban on cross-burning. While his fellow justices focused on more abstract concerns, Thomas drew on his experience growing up in the segregated South to remind all in the courtroom that the law at issue responded to a racist “reign of terror” and that “the [burning] cross was a symbol of that reign of terror.”


Monday, January 14th, 2013


The dates and locations for the KBA’s 2013 Kentucky Law Update program (KLU) were recently approved by the Supreme Court of Kentucky and are listed below.

September 10-11 Russell (Ashland) – Bellefonte Pavilion
September 26-27 Lexington – Lexington Convention Center
October 9-10 Owensboro – RiverPark Center
October 9-10 Bowling Green – Holiday Inn & Sloan Convention Center
October 24-25 Louisville – Kentucky International Convention Center
October 30-31 Gilbertsville – Kentucky Dam Village State Resort Park
November 7-8 London – London Community Center
November 21-22 Prestonsburg – Jenny Wiley State Resort
December 5-6 Covington – Northern Kentucky Convention Center
Program brochures will be mailed out to all KBA members in late May and program registration will be available shortly thereafter. To check your address on record with the KBA, login and look yourself up on the website using Lawyer Locator under the Membership Menu. The address listed is the one used for mail notifications. If you want to change your address on record, you may use the online address change/update form or fill out and mail/fax a copy of the request for address change/update form as indicated.

As it becomes available, additional information and details will be posted on the KBA website under CLE-Kentucky Law Update. Since its introduction in 1987, attendance at KLU programs has continued to grow. Over 5,000 plus attendees are expected to attend the nine scheduled locations in 2013.

KLU is an exceptional benefit of KBA membership. Note: Kentucky is the only mandatory CLE state that provides its members a way of meeting the annual CLE requirement at no additional cost. For more information on KLU, contact Ben Swartz at or call (502) 564-3795, ext. 270.

New York Times — Trillion Dollar Coin Legal….Could Solve Debt Crisis–This is not a joke

Saturday, January 12th, 2013

January 10, 2013

Coins Against Crazies


So, have you heard the one about the trillion-dollar coin? It may sound like a joke. But if we aren’t ready to mint that coin or take some equivalent action, the joke will be on us — and a very sick joke it will be, too.

Let’s talk for a minute about the vile absurdity of the debt-ceiling confrontation.

Under the Constitution, fiscal decisions rest with Congress, which passes laws specifying tax rates and establishing spending programs. If the revenue brought in by those legally established tax rates falls short of the costs of those legally established programs, the Treasury Department normally borrows the difference.

Lately, revenue has fallen far short of spending, mainly because of the depressed state of the economy. If you don’t like this, there’s a simple remedy: demand that Congress raise taxes or cut back on spending. And if you’re frustrated by Congress’s failure to act, well, democracy means that you can’t always get what you want.

Where does the debt ceiling fit into all this? Actually, it doesn’t. Since Congress already determines revenue and spending, and hence the amount the Treasury needs to borrow, we shouldn’t need another vote empowering that borrowing. But for historical reasons any increase in federal debt must be approved by yet another vote. And now Republicans in the House are threatening to deny that approval unless President Obama makes major policy concessions.

It’s crucial to understand three things about this situation. First, raising the debt ceiling wouldn’t grant the president any new powers; every dollar he spent would still have to be approved by Congress. Second, if the debt ceiling isn’t raised, the president will be forced to break the law, one way or another; either he borrows funds in defiance of Congress, or he fails to spend money Congress has told him to spend.

Finally, just consider the vileness of that G.O.P. threat. If we were to hit the debt ceiling, the U.S. government would end up defaulting on many of its obligations. This would have disastrous effects on financial markets, the economy, and our standing in the world. Yet Republicans are threatening to trigger this disaster unless they get spending cuts that they weren’t able to enact through normal, Constitutional means.

Republicans go wild at this analogy, but it’s unavoidable. This is exactly like someone walking into a crowded room, announcing that he has a bomb strapped to his chest, and threatening to set that bomb off unless his demands are met.

Which brings us to the coin.

As it happens, an obscure legal clause grants the secretary of the Treasury the right to mint and issue platinum coins in any quantity or denomination he chooses. Such coins were, of course, intended to be collectors’ items, struck to commemorate special occasions. But the law is the law — and it offers a simple if strange way out of the crisis.

Here’s how it would work: The Treasury would mint a platinum coin with a face value of $1 trillion (or many coins with smaller values; it doesn’t really matter). This coin would immediately be deposited at the Federal Reserve, which would credit the sum to the government’s account. And the government could then write checks against that account, continuing normal operations without issuing new debt.

In case you’re wondering, no, this wouldn’t be an inflationary exercise in printing money. Aside from the fact that printing money isn’t inflationary under current conditions, the Fed could and would offset the Treasury’s cash withdrawals by selling other assets or borrowing more from banks, so that in reality the U.S. government as a whole (which includes the Fed) would continue to engage in normal borrowing. Basically, this would just be an accounting trick, but that’s a good thing. The debt ceiling is a case of accounting nonsense gone malignant; using an accounting trick to negate it is entirely appropriate.

But wouldn’t the coin trick be undignified? Yes, it would — but better to look slightly silly than to let a financial and Constitutional crisis explode.

Now, the platinum coin may not be the only option. Maybe the president can simply declare that as he understands the Constitution, his duty to carry out Congressional mandates on taxes and spending takes priority over the debt ceiling. Or he might be able to finance government operations by issuing coupons that look like debt and act like debt but that, he insists, aren’t debt and, therefore, don’t count against the ceiling.

Or, best of all, there might be enough sane Republicans that the party will blink and stop making destructive threats.

Unless this last possibility materializes, however, it’s the president’s duty to do whatever it takes, no matter how offbeat or silly it may sound, to defuse this hostage situation. Mint that coin!


Friday, January 11th, 2013

Grant County Case published by Court of Appeals.

Important ruling on limitation of Rule 11 sanctions and application of immunity from claims regarding attorneys use of HIPPA info at trial.
See on LawReader or on Courts Page of Judiciary

The following is a LawReader synopsis of this important new ruling by Judge Stumbo, Judge Kelly Thompson, and Judge Nickell.
** ** ** ** **
STUMBO, JUDGE: These appeals arise from the same action below and were heard together by the Court. The primary issue presented by these appeals is whether, under Kentucky Revised Statute (KRS) 446.070, Donna Yeager has a right of action against the Appellees, both attorneys, who disclosed medical information during the course of a child custody hearing when Yeager alleges a violation of the Health Insurance Portability and Accountability Act of 1996 (HIPAA).
After careful review of the briefs presented and the law, we hold that KRS 446.070 does not give Yeager a right of action where a Federal statute preempts state statutes and does not expressly provide such a right.
Further, the Appellees are not “covered entities” under HIPAA to which its regulations would apply; therefore, the Court affirms the circuit court’s decisions regarding the primary issues.
The circuit court also imposed sanctions on defense counsel pursuant to Kentucky Civil Rule 11. We find these sanctions were inappropriate and we reverse and vacate that award.
During a hearing to determine the guardianship of a minor child, the mother, Stacy Clise, was questioned by Appellee/Defendant attorney Daniel Dickerson(hereinafter “Attorney Dickerson”) who represented her ex-husband, Richard Clise, during the same hearing. Attorney Dickerson was joined by co-counsel and Appellee/Defendant Stephen Dallas (hereinafter “Attorney Dallas”). Attorney Dickerson questioned Ms. Clise pertaining to her medical history and treatment including questions about the type, frequency, and quantity of prescription drugs she was taking. During the course of the examination, Attorney Dallas utilized medical records regarding Ms Clise’s medical history.
The attorneys stated that they received the records from Mr. Clise who found them after Ms. Clise abandoned them at the residence the two shared prior to the divorce.
Ms. Clise’s attorney, Eric Deters, informed the court that his client had not authorized the release of her medical records to Mr. Clise or his attorneys. He also stated, “it was possible they were violating the Health Insurance Portability and Accountability Act.” Appellees admit to disclosing the medical information without Ms. Clise’s authorization or consent.
Whether this Court should reverse the decision of the circuit court depends upon whether Appellees or their former client are among the “covered entities” or “business associates” of covered entities to which HIPAA applies. 42 U.S.C.A. §1320d-1. Covered entities generally include health-care providers, health plans, and health-care clearinghouses and their business associates. Id.
In other jurisdictions, courts have held “covered entities” do not include attorneys unassociated with a “covered entity.” Community Hosp. Group, Inc. v. Blume Goldfaden Berkowitz Donnelly Fried & Forte, P.C., 885 A.2d 18, 22 (N.J. Super.
Ct. App. Div. 2005). With respect to attorneys and disclosures during a judicial proceeding, HIPAA establishes the procedure for which a covered entity may disclose individually identifiable health information to an attorney. 45 C.F.R. §164.512(e).
In that case, the hospital brought an action against opposing counsel in a previous lawsuit claiming a common law right of privacy on behalf of two patients. The patients’ “confidential health information” was obtained by the attorneys through discovery in a pending medical malpractice claim involving the hospital.
The patients, who were not involved in the pending action, complained to their treating physician after receiving letters from the attorneys pertaining to their medical history. The hospital demanded that the attorneys reveal the source of their information, which they refused to do citing an attorney-client privilege. The hospital claimed theyhad standing under HIPAA to bring the action against the attorneys to enforce its privacy regulations and to mitigate any breach of HIPAA, which may have occurred by any employee of the hospital. The court recognized the action was not brought against anyone to whom HIPAA would apply…
Yeager contends that under certain circumstances HIPAA applies to disclosures by attorneys. Yeager relies on a number of cases restricting ex parte communications between healthcare providers and attorneys pertaining to the health information of an individual. In Meek the Court held that any possible HIPAA violation by defendant’s counsel was remedied by the lower court when either party was allowed to question the plaintiff’s treating physician prior to his testimony. Meek v. Vasconez, 2006 WL 1652736 (Ky. App. 2006).
The defense argued that the disclosure was proper because both the treating physician and the defendant were employed with the University of Kentucky Medical Center and under the Insurance Act, the University was required to defend the malpractice suit. Therefore, disclosure was proper because defense counsel was a “business associate” as defined by the statute.
The lower court recognized this as a possible HIPAA violation and ordered that the plaintiff’s counsel could interview the physician prior to his testimony. The Court acknowledged that this remedied the violation, if there was one.
Appellees contend that HIPAA does not apply to attorneys unassociated with a “covered entity.
In the present case, Appellees received the records from their client, Mr. Clise. They then used the records as a basis for questioning during a custody proceeding. The records contained Ms. Clise’s personal health information obtained by her from her treating physician. Mr. Clise came into possession of the records upon his and Ms. Clise’s separation when she left them at their former residence.
Had the Appellees contacted any “covered entity” under HIPAA, then the covered entity’s compliance with HIPAA requires patient consent, court order, or proper subpoena before any disclosures of personally identifiable health information. Therefore, we believe that the Appellees are not “covered entities” to which HIPAA would apply.
“HIPAA does not create a state-based private cause of action for violations of its provisions.” Young v. Carran, 289 S.W.3d 586, 588 (Ky. App. 2008), citing McMillen v. Kentucky Dept. of Corrections, 233 S.W.3d 203, 205 (Ky. App. 2007). Furthermore, “federal courts have uniformly held that HIPAA does not create a private cause of action even at the federal level.” Id.
However, KRS 446.070 provides recovery for individuals injured by violations of “any statute” so long as they are members of the class of persons meant for protection by the statute. Kentucky courts have consistently held that the “any statute” language is limited to state statutes only and does not extend to federal statutes of which congress has not expressly intended to create a private right of action. Id. at 589
Similarly, HIPAA provides for prosecution by the Justice Department and this Court has interpreted HIPPA not to contain a right for an individual to sue. Young, at 588. Therefore, this Court should conclude that even though HIPAA preempts state law in which KRS 446.070 is applicable, the General Assembly did not intend to infer a right under a federal law where Congress has not.
We also find that the judicial proceeding privilege is applicable in the case at hand. “The prevailing rule and the one recognized in this jurisdiction is that statements in pleadings filed in judicial proceedings are absolutely privileged when material, pertinent, and relevant to the subject under inquiry, though it is claimed that they are false and alleged with malice.” Schmitt v. Mann, 291 Ky. 80, 163 S.W.2d 281, 283 (Ky. 1942
Rule 11 Sanctions
The final issue in this case concerns an appeal filed by Yeager and her attorney Eric Deters and a cross-appeal filed by attorneys Dickerson and Dallas.
The issue involves the grant of a motion for sanctions pursuant to Kentucky Civil Rule (CR) 11 against each attorney representing Yeager in this case. The appeal challenges the granting of these fees and the cross-appeal challenges the adequacy of the award.
CR 11. If a signed pleading is filed for an unreasonable purpose, a trial court can sanction the attorney.
Rule 11 sanctions are to be used only in extraordinary circumstances and this Court has previously emphasized that it is not a “vehicle to obtain relief by one who has suffered damages by simple negligence in the filing of a lawsuit or by the filing of a meritless lawsuit.” Id. at 420. It cautioned that even if a case is meritless, the Rule has no “application unless it is demonstrated that a party or his lawyer signed a paper in violation of the Rule.” Id. (quotation and citation omitted).
We believe that the complaint filed by the appellants was well grounded in fact, because the appellees had utilized records subject to HIPAA protection if disclosed by certain entities.
The appellants made good faith arguments for extension, modification, or reversal of existing law; therefore, their complaint was not for improper purposes such as to harass, or to cause unnecessary delay or needless increase in the cost of litigation.
Under the facts and applying a de novo standard of review, the trial court’s conclusion that a Rule 11 violation occurred was erroneous.
The circuit court’s decision is hereby affirmed in part and reversed in part.
Any statements and lines of questioning by the attorneys cannot give rise to action under the Judicial Proceedings Privilege.
However the trial court did err in imposing Rule 11 sanctions; therefore, that award is vacated.
Eric C. Deters
Independence, Kentucky
Ruth Baxter
Carrollton, Kentucky
Donald Stepner
Covington, Kentucky

Benham Sims: Expungement Statutes Prevent Qualified Individuals From Employment To Our Economy

Friday, January 11th, 2013

Expungement Statutes Prevent Qualified Individuals from Employment and Contributing to our Economy

By Louisville Attorney Benham Sims. Benham is a former judge, and is now an expert on expungement law.

A study by the National Employment Law Project
(NELP) estimates that 65 million Americans
have an arrest or conviction record that may
follow them for the rest of their lives. A recent survey found
that 90 percent of companies use criminal background
checks in their hiring process and the Society for Human
Resource Management reports that a criminal record reduces
the likelihood of a callback or offer by nearly 50 percent.
A legislative update by NELP correctly surmises that with
one in four adults in the U.S. having an arrest or conviction
record, “the implications of barring people with criminal
histories from employment are staggering.” In recognition
of this growing concern, U.S. Attorney General Eric Holder
has urged states to evaluate and remove laws that prevent
people from living and working productively.
In this regard, job seekers in Kentucky are at a distinct
disadvantage when compared with those in surrounding
states. Just this year, both Ohio (SB 337) and Tennessee
(T.C.A. 40-32-101) passed significant expungement reform.
These legislatures recognized the importance of expungement
as an avenue of economic development and if Kentucky
is to compete with neighboring job markets and further the
goals of the current administration, we must adopt similar
reforms. Every taxpaying citizen of Kentucky has an interest
in removing the roadblocks keeping otherwise qualified
individuals from gaining employment and contributing to
our economy.
Kentucky Expungement Law
Currently, Kentucky allows for the expungement of
criminal records pursuant to KRS 431.078. The statute requires
that several pre-conditions be met before an individual
may seek expungement. One such condition states that the
applicant must not have been convicted of a “misdemeanor
or violation offense in the five years preceding the conviction
sought to be expunged.” KRS 431.078(4)(c). Another requires
that the person applying must not have been convicted
of a “felony, misdemeanor or violation since the conviction
sought to be expunged.” KRS 431.078(4)(d). Additionally,
no petition may be filed before five years “after the completion
of the person’s sentence or the successful completion of
the person’s probation,” whichever is later. KRS 431.078(2).
Though the existence of this statute demonstrates the
desire of the Kentucky legislature to create an avenue for
deserving citizens to earn a second chance at a clean slate,
the application of this statute has posed some difficulty.
This is due in large part to differing definitions of the term
“violation” codified by pre-existing statutes. KRS 431.060(3)
defines violations as “offenses punishable by a fine only or
by any other penalty not cited herein, whether in combination
with a fine or not[.]” By contrast, KRS 500.080(17)
defines violations as “an offense, other than a traffic infraction,
for which a sentence to a fine only can be imposed[.]”
(emphasis added). These definitions are distinct and their
application produces differing results when used with regard
to the expungement statute. Applying the definition set out in
KRS 431.060(3) would prohibit expungments where traffic
violations had occurred five years before or after the offense
sought to be expunged; conversely, KRS 500.080(17) would
not prohibit expungements where the only violation(s) during
this ten-year period were for a traffic offense.
In addition, many Kentuckians have been charged with
felonies that were later dismissed. The expungement statute
fails to address those citizens who were initially charged with
a felony crime that prosecutors later dismissed or the grand
jury failed to indict. If the case is dismissed without prejudice,
the alleged offender is exiled to a purgatory in which they
do not face criminal charges or a trial but yet are unable to
remove the charges from his or her record.
Jefferson County Attorney’s Change in Policy
Before April 2012, the definition in KRS 500.080(17)
excluding traffic offenses from violations was regularly applied
to expungements. This application makes sense in that the expungement law was created
to promote rehabilitation and award
individuals who effectively demonstrate
that their criminal activity was an isolated
incident. However, in April of 2012,
the Jefferson County Attorney’s Office
changed its policy on expungements
and now seeks to apply the definition in
KRS 431.060(3), which includes traffic
offenses in violations that may preclude
an individual from seeking expungement.
Prosecutors are now uniformly
objecting to applications for expungement
where any violation has occurred
in the five years before or after conviction,
including minor traffic offenses
such as speeding ten miles over the limit
or fishing without a license. If the judge
grants the expungement over the objection
of the prosecutor, the decision is to
be appealed, expending more valuable
time and resources to drag out punishments
in stark contrast to the legislative
intent in drafting KRS 431.060. Mike
Bowling, former chairman of the House
Judiciary Committee and sponsor of
the 1992 expungement law, calls this
“absolutely ridiculous” and states,
“[t]hat’s the whole reason we wrote the
law, to help people move on.”
Not only is this new policy counterintuitive
to the spirit of the expungement
statute, it is arguably inconsistent
with the law in this area. The Kentucky
legislature has prescribed that “all
statutes of this state shall be liberally
construed with a view to promote
their objects and carry out the intent
of the legislature…” KRS 446.080(1).
In addition, the legislature has specifically
directed courts to interpret
the Kentucky Penal Code’s provisions
liberally… “according to the fair import
of their terms, to promote justice,
and to effect the objects of law.” KRS
500.030. Considering the collateral
consequences faced by the one in four
Americans with a record, not only in
regard to employment, but in serving
as volunteers in school or church,
seeking public benefits, applying to
participate in government programs,
requesting credit or insurance, applying
for a professional license and even
in applying for admission to certain
schools, there is a strong argument for
the court’s liberal construction of the
term violation to promote the process
of expungements.
Furthermore, the “fundamental
rule of statutory construction that
where statutes are ‘inconsistent’ the
‘last expression of legislative will pre vails.” Commonwealth v. Schindler, 685
S.W.2d 544. 545 (Ky. 1985) (quoting
Askew v. Schuster, 331 So.2d 297, 300
(Fla. 1976)). Therefore, if two statutes
“cannot be reconciled, the later
statute controls,” and for this purpose
the “later statute” is that which the
legislature has re-enacted more recently.
Ibid. (quoting Butcher v. Adams,
220 S.W.2d 398, 400 (Ky. 1949)). In
regard to the two codifications of “violation,”
the most recent statute is KRS
500.080(17), which the legislature last
re-enacted in 2001. See Act of March
15, 2001, ch. 113 § 7, 2001 Ky. Session
Laws. KRS 431.060 was last re-enacted
in 1980. See Act of July 15, 1980, ch.
309 § 3, 1980 Ky. Session Laws. Thus,
not only does KRS 500.080 (17) best
serve the intent of the legislature, it is
also the last statute to be re-enacted,
and is therefore, the correct definition
to apply in the expungement process.
Model legislation exists to guide
states in reforming expungement statutes
by addressing inconsistent statutes
through policy development. These
reforms incentivize rehabilitation and
strengthen the economy by encouraging
re-entry efforts and removing
roadblocks to gainful employment. It
is important for Kentucky lawyers to
support application of current law to
support the legislative intent in drafting
the expungement statute and for
Kentuckians in general to recognize the
critical importance of reforming policies
to ensure that our state continues
to progress along with the rest of the
— Benham Sims practices in expungement,
DUI, and criminal defense in his
Louisville office. Benham served as a
Judge, trial prosecutor, defense attorney,
special prosecutor and special public
defender. He may be reached at bsims@
The author would like to acknowledge
recent NKU law graduate Hon. Molly
Cassady for her help with the article
and Hon. Michael Mazzoli for his legal

Tennessee seeks to sanction Attorney for Expressing Opinion About a Judge’s Ruling

Friday, January 11th, 2013

LawReader: Note that the lawyer’s comments were apparently made “during the trial”. If this was made outside the courtroom it is highly possible that the bar would be limited in their power…but as long as Kentucky and 45 other states maintain the “truthful but reckless” rule attorneys free speech rights are at risk for anything they say regarding a judge or “a public legal officer”.
Lawyer Suspended 60 Days for Rude Remarks to Judge Not Sorry, Says He’ll Be on Beach If Appeal Loses
Posted Jan 7, 2013 By Martha Neil
A lawyer suspended 60 days for the rude remarks he made to a Tennessee judge during a 2008 medical malpractice trial plans to appeal the legal ethics penalty.
But regardless of what happens, attorney R. Sadler Bailey told the Commercial Appeal, he isn’t sorry he spoke to Circuit Court Judge Karen Williams as he did.
“If I’m unsuccessful on appeal, I will be sitting on a beach for 60 days with a coconut rum and enjoying the time with my children,” said Bailey, “but I will not be remorseful.”
Initially held in criminal contempt by Williams and sentenced to 10 days in jail, Bailey later saw the misdemeanor charge against him dismissed after an appeals court had another judge hear it. Meanwhile, Williams had declared a mistrial in the med-mal case, saying that she had no choice to do so because of Bailey’s rude remarks to her. The case later settled.
Among other comments, Bailey called one of her rulings “crazy” and one of her statements “bizarre.”

Head of Fla. Foreclosure Mill Firm Agrees to Shut Down Law Practice

Friday, January 11th, 2013

Posted Jan 7, 2013
By Martha Neil


The head of one of Florida’s well-known so-called foreclosure mill law firms has agreed to state bar discipline that will require him to close down his law office.

Marshall C. Watson has also agreed to a 91-day suspension, which will require approval by the state supreme court before he can be readmitted to practice, the Palm Beach Post’s Real Time blog reports.

The consent judgment, which must be approved by the state supreme court before it takes effect, says Marshall did not properly supervise his law firm employees and failed “to develop, implement and maintain acceptable policies and operating practices for his firm,” the newspaper reports.

Among other issues, the document says a Watson attorney was paid $1 for each of the 150,000 affidavits in which the lawyer said he had reviewed and attested to the reasonableness of fees charged. However, at least some of the affidavits weren’t signed in the presence of a notary, as they were supposed to be, and “in numerous instances” the lawyer was given only the affidavit’s final page to sign, the Post recounts.

Such “robo-signing” practices were reportedly widespread throughout the country during the deluge of foreclosures that followed the mortgage meltdown of recent years, and Florida, which had more foreclosures than most states, drew criticism over the pace at which such cases were processed, both by law firms and by the courts that oversaw them.

At the height of the foreclosure crisis in 2009, the Watson firm had 66,000 cases, 71 lawyers and nearly 600 support staff, the bar’s consent judgment says.

“This crisis is the lowest point in the Florida Bar’s history,” attorney Roy Oppenheim, who defends homeowners in such cases, said of the way foreclosures have been handled in the state in recent years. “The fact that the Bar is recognizing this is a catharsis and a healing process. It requires all of us to look in

SEC Asked to Do More to Protect Whistleblowers – Kentucky Whistleblower Chris Tobe reports actions of Ky. Retirement Systems to FBI – Ky. Retirement System Hits back — Forbes Magazine

Thursday, January 3rd, 2013

Jan. 3, 2013
Tobe contacted the Federal Bureau of Investigation regarding acts of investment placement agents in Ky. Retirement System Tobe had reason to believe that multiple violations of law had occurred related to certain investments made by KRS, involving the management of hundreds of millions of dollars in KRS assets and in excess of $14 million in undisclosed placement agent fees.
FORBES ARTICLE: The U.S. Securities and Exchange Commission headquarters located at 100 F Street, NE in the Near Northeast neighborhood of Washington, D.C. (Photo credit: Wikipedia)
The Securities and Exchange Commission bends over backwards to assist the companies it regulates comply with the law. I learned as a young attorney with the SEC decades ago that corporations can request from the Commission exemptions, or relief, from the federal securities laws; guidance related to those laws; and even assurance in advance of dicey proposed transactions that the Commission will take “no-action” against them.
In 2011, the SEC established a much-heralded whistleblower program. According to the Office of the Whistleblower, “Assistance and information from a whistleblower who knows of possible securities law violations can be among the most powerful weapons in the law enforcement arsenal of the Securities and Exchange Commission. Through their knowledge of the circumstances and individuals involved, whistleblowers can help the Commission identify possible fraud and other violations much earlier than might otherwise have been possible. That allows the Commission to minimize the harm to investors, better preserve the integrity of the United States‘ capital markets, and more swiftly hold accountable those responsible for unlawful conduct.”
You’d think the SEC would want to offer as much protection as possible to the most powerful weapons in their arsenal, i.e., whistleblowers who put themselves in harm’s way.
Armed with knowledge of how the SEC caters to corporations, it seemed reasonable to me to ask its Office of the Whistleblower to offer a similar helping hand to whistleblowers seeking to assist the Commission in addressing securities law violations.
In August of 2012, I wrote a letter to Sean McKessy, Chief of the Office of the Whistleblower, requesting that the Commission provide guidance to whistleblowers, as well as the general public regarding two new issues that are central to the SEC’s unprecedented whistleblower program. While he acknowledged receipt of my letter, I’m still waiting for an answer. I will post his answer on Forbes once received.
What prompted me to write to McKessy?
In December 2011, I was retained by Christopher Tobe, the sole member of the Board of Trustees of the Kentucky Retirement Systems (“KRS”) with expertise in pension investment matters at that time, to provide independent legal counsel with respect to certain matters involving KRS.
In August 2010, Mr. Tobe had contacted the SEC upon learning of the existence of placement agents involved in certain KRS investments and related undisclosed fees for the first time. Later, in May 2011, Tobe contacted the Federal Bureau of Investigation regarding the matter. Tobe had reason to believe that multiple violations of law had occurred related to certain investments made by KRS, involving the management of hundreds of millions of dollars in KRS assets and in excess of $14 million in undisclosed placement agent fees.
Consistent with his fiduciary duty as a KRS Board member and prior to contacting the SEC and later the FBI, Tobe informed the KRS Board of his original analysis of the facts regarding these suspect investments and undisclosed fees. When the Board failed to take (in his opinion) appropriate action, he contacted the SEC and FBI, in order to protect the assets of KRS. It is our understanding that the information provided by Tobe to the SEC was not already known to the Commission.
As a result, it is my opinion that Mr. Tobe is a “whistleblower” who may be afforded certain protections under federal and state law.
In response to his whistleblower complaint, the SEC is conducting an investigation into some, or all, of the multiple potential violations of law complained of by Tobe, including, but not necessarily limited to, the payment of approximately $14 million in placement agent fees. Both Tobe and I, on his behalf, have assisted the Commission in its investigation of the KRS matter, including providing the Commission with a Report of Independent Counsel to SEC: Placement Agent Abuses at Kentucky Retirement System, a 32 page report dated March 12, 2012. While KRS announced in a press release that it had forwarded a copy of my Report to the SEC to the Commission, KRS didn’t mention in its press release that it had refused to pay the cost related to the preparation of the Report of the Independent Counsel, the findings in which it disputed.
Such are the perils confronted by independent counsels who are truly independent and refuse to be swayed by the parties writing the check.
KRS has retaliated against Mr. Tobe by making disparaging statements regarding, among other things, his status as a whistleblower and his motives for contacting the SEC, including publicly stating on its website currently that “Mr. Tobe is not a source of any original information that might qualify him as a “whistleblower.” Below is the full text of the comments on the KRS website currently regarding Mr. Tobe’s status as a whistleblower.
“Mr. Tobe has made vague assertions of being a “whistleblower.” Under certain circumstances a “whistleblower” can obtain a portion of any recovery by the SEC. Since Mr. Tobe first raised the notion he was a “whistleblower,” KRS has requested that he provide the board or staff with any facts or analysis he possesses about any wrongdoing or potential harm caused to KRS. Although his fiduciary duty requires such disclosure, Mr. Tobe refused to provide any information until he provided the Document prepared by his attorney. The Document raises a host of questions about the internal audit and APA audit process, and recites in a general fashion the issues that can arise with respect to placement agents and outright corruption that has arisen in other States with respect to placement agents. The Document is strikingly absent of any facts or analysis that were not already known to the auditors and therefore KRS and the public.
Although KRS takes seriously any obligations under whistleblower protection statutes, it now seems clear that Mr. Tobe is not a source of any original information that might qualify him as a “whistleblower” in light of the prior placement agent audits. Nor do we believe that whistleblower protection laws can or should apply to a trustee and fiduciary of a retirement system — one who has a fiduciary obligation to disclose pertinent information to KRS so the board and staff can protect the fund.”
Here are the two issues I asked the Chief of the SEC’s Office of the Whistleblower to address:
First, while it is my understanding that the new rules require that any whistleblower submission be considered by the Commission to constitute “original information,” the definition of “original information” includes independent analysis of information which is, in whole or in part, publicly available. See § 240.21F-4, (b) (3) Other Definitions: “Independent analysis means your own analysis, whether done alone or in combination with others. Analysis means your examination and evaluation of information that may be publicly available, but which reveals information that is not generally known or available to the public.”
In other words, information which is publicly available and which potential defendants may maintain does not constitute a violation of the securities laws may, as a result of original analysis prepared by a whistleblower, be considered as an allegation of violation of the securities laws under the SEC whistleblower program. In my opinion, the SEC should clarify that a whistleblower complaint may include certain information that is already public, provided that the analysis of said information is independent or original.
Second, I believe it is in the public interest for the Commission to publicly comment on both (a) retaliatory statements made and actions taken by potential defendants and others related to whistleblowers during the period of an SEC investigation; and (b) potentially misleading statements made to the public by potential defendants and others regarding the rules related to the SEC whistleblower program.
As a former SEC whistleblower I know only-too-well that potential defendants and others who may be culpable will always deny the whistleblower status of individuals alleging violations of law and attempt to discredit them. However, where parties potentially mislead the public as to the requirements of the SEC’s new whistleblower program in connection with retaliating against whistleblowers, I believe it is appropriate for the Commission to intervene and provide clarification to the public. Failure of the Commission to publicly clarify any misinformation circulated by potential defendants regarding the requirements of the new whistleblower program will only ensure that the SEC whistleblower initiative flounders. Given the daunting threats that whistleblowers encounter, they deserve, at a minimum, clarity as to the rules and protections afforded to them.

The l4th. Amendment of the U.S. Constitution passed in 1866, May Allow President Obama to Avoid Congressional Limits on the expansion of Federal Debt Limits

Tuesday, January 1st, 2013

The 14th Amendment to the US Constitution was passed by Congress on June 13, 1866 during Reconstruction. Along with the 13th amendment and the 15th amendment, it is one of the three Reconstruction amendments. Section 2 of the 14th amendment modified Article I, section 2 of the US Constitution. It has had far reaching effects on the relationship between states and the federal government.
In recent years Congress has attempted, by refusal to pass authorizing legislation, to limit the borrowing of funds for the President to pay existing federal debts. Some congressional conservatives assert the President doesn’t have the right to pay federal debts with authorization of Congress. The President has been advised that Section 4 of the l4th. Amendment to the U.S. Constitution authorizes the President to borrow money if necessary to pay debts of the Federal Government which were previously authorized by Congress. If Congress created the debt, the President can prevent a default by borrowing more money to pay off the authorized debts.
Validity of public debt
Section 4 confirmed the legitimacy of all United States public debt appropriated by the Congress. It also confirmed that neither the United States nor any state would pay for the loss of slaves or debts that had been incurred by the Confederacy. For example.., the Supreme Court ruled that under Section 4 voiding a United States government bond “went beyond the congressional power.”[48]
The United States debt-ceiling crisis in 2011 raised the question of what powers Section 4 gives to the President. Legal analyst Jeffrey Rosen has argued that Section 4 gives the President unilateral authority to raise or ignore the national debt ceiling, and that if challenged the Supreme Court would likely rule in favor of expanded executive power or dismiss the case altogether for lack of standing.[49] Erwin Chemerinsky, professor and dean at University of California, Irvine School of Law, has argued that not even in a “dire financial emergency” could the President raise the debt ceiling as “there is no reasonable way to interpret the Constitution that [allows him to do so]“.[50] The issue of what effect Section 4 has regarding the debt ceiling remains unsettled.[51]
US debt ceiling at the end of each year from 1981 to 2010.
Under Article I Section 8 of the United States Constitution, Congress has the sole power to borrow money on the credit of the United States. From the founding of the United States until 1917 Congress directly authorized each individual debt issuance separately. In order to provide more flexibility to finance the United States’ involvement in World War I, Congress modified the method by which it authorizes debt in the Second Liberty Bond Act of 1917.[57] Under this act Congress established an aggregate limit, or “ceiling,” on the total amount of bonds that could be issued.
The current debt ceiling, in which an aggregate limit is applied to nearly all federal debt, was substantially established by Public Debt Acts[58][59] passed in 1939 and 1941. The Treasury is authorized to issue debt needed to fund government operations (as authorized by each federal budget) up to a stated debt ceiling, with some small exceptions.
The process of setting the debt ceiling is separate and distinct from the Federal budget process, and raising the debt ceiling does not have any direct impact on the budget deficit. The U.S. President proposes a federal budget every year. This budget details projected tax collections and outlays and, if there is a budget deficit, the amount of borrowing the President is proposing in that fiscal year. Congress creates specific appropriation bills which authorize spending, which are signed into law by the President.
A vote to increase the debt ceiling is, therefore, usually treated as a formality, needed to continue spending that has already been approved previously by the Congress and the President. The Government Accountability Office (GAO) explains: “The debt limit does not control or limit the ability of the federal government to run deficits or incur obligations. Rather, it is a limit on the ability to pay obligations already incurred.”[60] The apparent redundancy of the debt ceiling has led to suggestions that it should be abolished altogether.[61][62]
Since 1979, the House of Representatives passed a rule to automatically raise the debt ceiling when passing a budget, without the need for a separate vote on the debt ceiling, except when the House votes to waive or repeal this rule. The exception to the rule was invoked in 1995, which resulted in two government shutdowns.[63]
When the debt ceiling is reached, Treasury can declare a debt issuance suspension period and utilize “extraordinary measures” to acquire funds to meet federal obligations but which do not require the issue of new debt. One example is to suspend contributions to certain government pension funds. However, these amounts are not sufficient to cover government operations.[64] Treasury first used these measures on December 16, 2009, to remain within the debt ceiling, and avoid a government shutdown,[65] and also used it during the debt-ceiling crisis of 2011. However, there are limits to how much can be raised by these measures.
The debt ceiling was increased on February 12, 2010, to $14.294 trillion.[66][67][68] On April 15, 2011, Congress finally passed the 2011 United States federal budget, authorizing federal government spending for the remainder of the 2011 fiscal year, which ends on September 30, 2011, with a deficit of $1.48 trillion,[citation needed] without voting to increase the debt ceiling. The two Houses of Congress were unable to agree on a revision of the debt ceiling in mid-2011, resulting in the United States debt-ceiling crisis. The impasse was resolved with the passing on August 2, 2011, the deadline for a default by the U.S. government on its debt, of the Budget Control Act of 2011, which immediately increased the debt ceiling to $14.694 trillion, required a vote on a Balanced Budget Amendment, and established several complex mechanisms to further increase the debt ceiling and reduce federal spending.
On September 8, 2011, one of the complex mechanisms to further increase the debt ceiling took place as the Senate defeated a resolution to block a $500 billion automatic increase. The Senate’s action allowed the debt ceiling to increase to $15.194 trillion, as agreed upon in the Budget Control Act.[69] This was the third increase in the debt ceiling in 19 months, the fifth increase since President Obama took office, and the twelfth increase in 10 years. The August 2 Act also created the United States Congress Joint Select Committee on Deficit Reduction for the purpose of developing a set of proposals by November 23, 2011, to reduce federal spending by $1.2 trillion. The Act requires both houses of Congress to convene an “up-or-down” vote on the proposals as a whole by December 23, 2011. The Joint Select Committee met for the first time on September 8, 2011.
The debt ceiling was raised once more on January 30, 2012, to a new high of $16.394 trillion.
At midnight on Dec. 31, 2012, a major provision of the Budget Control Act of 2011 (BCA) is scheduled to go into effect. The crucial part of the Act provided for a Joint Select Committee of Congressional Democrats and Republicans — the so-called ‘Supercommittee ‘— to produce bipartisan legislation by late November 2012 that would decrease the U.S. deficit by $1.2 trillion over the next 10 years. To do so, the committee agreed to implement by law — if no other deal was reached before Dec. 31 — massive government spending cuts as well as tax increases or a return to tax levels from previous years. These are the elements that make up the ‘United States fiscal cliff.’[70]
See this section of the l4th. Amendment and decide for yourself:
“Section 4.
The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.”