The 2d Circuit Court of Appeals, in a 69 page decision, vacated the 75 year prison sentence of a Yemeni cleric (Sheik Mohammed Ali Al-Moayad) and the 45 year prison sentence of his assistant (Mohammed Zayed) imposed in 2005 by the Federal District Court in Brooklyn. The defendants were convicted of violating 18 U.S.C. § 2339B (a) (1), providing material support (primarily financing) to designated terrorist organizations (in this case, Hamas and Al-Qaeda). The Circuit Court’s reversal, stating that the defendants were deprived of a fair trial, detailed inadmissible evidence that the government erroneously presented in its case against the defendants.

The government’s case was based in large part on an FBI sting operation which relied heavily on the assistance of a confidential informant named Mohammed Al-Anssi, a Yemeni national who, in difficult financial circumstance, approached the FBI seeking compensation in exchange for information. According to the opinion:

Al-Anssi initially asked the FBI for 5 million dollars in exchange for his assistance, “hoping that it will go up, no problem.” He also requested United States citizenship and that his family be brought to the United States from Yemen. In describing his motive for seeking compensation, Al-Anssi testified, “the issue was the truth, the whole issue, and after I chase the terrorists and to bring him here to America, I deserve even 10 million dollars.”

Al-Anssi stated that he was paid $100,000 by the FBI for his assistance. However, he believed that he deserved millions, “[a]nd I expect more than that.” Al-Anssi admitted that, because he was upset about his small payment from the FBI, he falsely told the Washington Post that the FBI promised to pay him 5 million dollars. He also testified that in November 2004, in an attempt to coerce the FBI into paying him more money, he set himself on fire in front of the White House. With regard to this incident, Al-Anssi testified that he did not intend to commit suicide, but that he “wanted to put the government and the world on notice,” and that “[i]t is my right to get as much as I can from the FBI.”

Choosing not to call the confidential informant as a witness in its case in chief, the US Attorney instead presented the informant’s written notes and a series of video tapes that he made of the defendant Al-Moayad to prove that he was funding terrorist organizations. One of the tapes was of a speech given by a guest at a wedding in Yemen hosted by Al-Moayad where a Hamas related guest made reference to another wedding ceremony in Tel Aviv on the same day where a terrorist attack occurred.

The government also relied on the testimony of a young Scottish law student named Gideon Black that a suicide bombing occurred on a bus in Tel Aviv that same day. Black was a passenger on the bus along with his cousin Yoni, who was killed in the attack. Over defense objections that it was unrelated to the charges and highly prejudicial, the trial judge permitted Black’s lengthy and detailed testimony about the bombing.

The Circuit Court opinion lists other examples of how the Justice Department undermined its own case with questionable evidence, use of entrapment techniques and other sensational tactics. It implicitly criticized the trial judge, the Hon. Sterling Johnson Jr. saying:

The district court’s cumulated errors in admitting Al-Anssi’s notes and the testimony of Gideon Black and Yahya Goba “cast such a serious doubt on the fairness of the trial” as to warrant reversal of the defendants’ convictions. That doubt is especially grave when we also take into account the district court’s erroneous admission of the mujahidin form, the wedding video, and the Croatian last will and testament, as well as its questionable handling of the derivative entrapment issue.

In reversing the convictions, the appeals court in an unusual directive remanded the case “to the district court for further proceedings consistent with this opinion before a different district court judge”.

See the NY Times article on the ruling.

The failure of the financial sector has implications beyond Wall Street and Congress. For now, the impact on law students may not be immediate. That is because those who have to finance their education through government backed loans can use Graduate PLUS loans that are not subject to fluctations in credit availability that affect private financing. Information on federal loans for BLS students is available on the Financial Aid page here.

Graduating students who need private loans while they study for the bar exam will likely feel the credit crunch. An article in the National Law Journal says:

Many law school graduates rely on private loans to pay their living costs while they study for the bar exam. But because banks are doling out less money to lenders, private loans are getting harder to come by, said New York Law School Dean Richard Matasar, who is also chairman of the board of directors of education lender Access Group. That means it will be more difficult for law school graduates to secure private loans, and graduates will likely pay higher interest rates if they do get a private loan to bridge the gap between graduation and the bar.

The financial crisis will likely result in slow economic growth so that graduates will spend more time in the job search process and will need additional financial assistance. The crisis may also cause many undergraduates to look to higher education during tough economic times and bad employment markets. Increased enrollment in law schools overall could be a positive side effect of the slowing economy, according to Dean Matasar.

Pursuing a JD, as opposed to an MBA, may be a safer career move now compared to a year or two ago when graduates of business schools would get job offers that most law school grads would envy. Given the current meltdown in the financial markets, the era of big bonuses in investment banks may never come back. But there will always be a need for lawyers even more so now. For interesting reading on the net present value of a law degree, read last week’s post at the Conglomerate which analyses whether law school is a good value. Using a median salary of $106,120 for lawyers and thinking of a law degree as an annuity, the article suggests that it is.

It represents a payment stream that lasts for a career (say 40 years) that equals the spread between what you would have earned without your law degree versus what you can with it. Using the median salary numbers, that spread is almost $60,000. Discounted at 8%, the annuity has a present value of over $700,000. The present value of three years of tuition (at $40,000 a year), books and foregone salary (at the median) is about $230,000.

The Financial Aid office will host a workshop for law students on how best to manage loan packages throughout law school and after graduation.

The forum aims to help law students improve their financial knowledge, learn how to limit their debt, improve their credit scores and protect their identity. It will be held on Monday, October 13 at 1pm in the student lounge.

An earlier post on the BLS Library Blog discussed plans by the Transportation Safety Administration (TSA) to search and seize electronic devices at border crossings into the US. Now, Sen. Russ Feingold (D-WI) has introduced in Congress the Travelers’ Privacy Protection Act of 2008 to ensure that American citizens and legal residents returning to the US from overseas are not subject to invasive searches of their laptops or other electronic devices without any suspicion of wrongdoing. The bill has been referred to the Committee on Homeland Security and Governmental Affairs.

The bill, which is in the Congressional Record with Sen. Feingold’s introductory remarks, would require customs agents to have reasonable suspicion before searching the contents of laptops or other electronic equipment and sets a probable cause requirement in order to obtain a warrant, while allowing customs agents to hold on to the equipment pending a ruling on the warrant application. Besides subjecting laptop examinations at border crossings to the judicial process and ending indiscriminate ransacking of data, the legislation would ban profiling based on the traveler’s ethnicity, allow the traveler to witness the process, limit the time that officials can hold the traveler’s equipment and provide for compensation for damages to a traveler’s computer. The bill limits its protection to citizens and legal residents of the US.

New York’s Senators, Charles E. Schumer (D-NY) and Hillary Clinton (D-NY) recently co-sponsored legislation to establish the Daniel Webster Congressional Clerkship Program. The proposed clerkships are named after Daniel Webster, the great American orator, secretary of state, and senator who helped establish constitutional precedents as a lawyer. The House version of the bill passed earlier this month.

If enacted, the program will establish 12 congressional clerkship positions for recent law school graduates to serve an equal number of members in both the House and the Senate. Clerks will receive the same pay and equivalent benefits as a first year law clerk serving in the U.S. District Court for the District of Columbia. Modeled on the federal judicial clerkship program, the congressional internship program will provide new law school graduates with an understanding of the legislative process, judicial appointments and constitutional amendments. House Report 110-831, issued with the House bill, states the background and need for the legislation:

Judicial clerkship programs have long provided the judiciary with access to a pool of exceptional young lawyers at a relatively low cost, while providing these clerks with invaluable insight into the functioning of the court system. Congressional Clerkships would expose young lawyers to the functions and operations of the Federal legislature.

The White House, many administrative agencies of the Executive Branch, the Administrative Office of the United States Courts, the Federal Judicial Center and the United States Sentencing Commission, all operate parallel clerkship or fellowship programs. The Congress is without a similar program.

Users can track this and other bills on Open Congress, a free, open-source, non-profit and non-partisan web resource designed to make Congress more transparent. For more on this resource, see About Open Congress.

Click here for bills sponsored by Sen. Schumer’s, where you can see his bill, which recently became law, designating the US Court House at 225 Cadman Plaza East in Brooklyn as the “Theodore Roosevelt United States Courthouse”. Click here for bills sponsored by Sen. Clinton.

Religious and other non-profit organizations are exempt from federal income taxation under 26 U.S.C.A. § 501(c) (3). The exemption is conditioned on the organization’s nonparticipation in lobbying for or against legislation and on behalf of against any candidate in political campaigns. The law exempts:

This year’s presidential election has seen increased participation by younger voters in the campaigns of Barack Obama, Hillary Clinton and Ron Paul. If younger citizens vote in the general election, there is likely to be a record turnout this year. “In 2004, 20.1 million 18 to 29 year olds voted, a 4.3 million increase over 2000. The additional turnout among the youngest voters was more than double that of any other age group.” So said House Majority Leader Steny Hoyer at a press conference before a hearing “Ensuring the Rights of College Students to Vote” in the Committee on House Administration.

The financial crisis on Wall Street has led to an extraordinary Treasury Department proposal to avert major damage to the financial system and the economy. The press has broadly outlined that proposal focusing mainly on its $1 trillion price tag and the impending calamity that requires prompt action by the Congress. As the details of the plan emerge, critics have voiced objections to the lack of oversight by court or administrative agency as set out in Section 8 of the draft which states:

“Any determination of the Secretary with regard to any particular troubled asset pursuant to this Act shall be final, and shall not be set aside unless such determination is found to be arbitrary, capricious, an abuse of discretion, or not in accordance with the law.”

A report in Jurist discusses alternate proposals including Sen. Dodd’s proposed legislative changes which address transparency of the process, lack of court oversight and the absence of help for homeowners with troubled mortgages.

The current crisis presents challenges to policy makers and to most observers who may have little understanding of why it happened and what it means for everyday people. Understanding the crises requires knowledge of terms like subprime mortgages, mortgage backed securities, collateralized debt obligations, credit default swaps, short-selling, leveraging and other terms unfamiliar to most. Bloomberg Law helps define these terms:

Subprime Mortgage Loan: A first or second lien residential mortgage loan made to a borrower who has a history of delinquency or other credit problems.

Mortgage-Backed Security: A debt instrument with a pool of real estate loans as the underlying collateral. The mortgage payments of the individual real estate assets are used to pay interest and principal on the bonds.

Collateralized Debt Obligation: A structured debt security backed by a portfolio consisting of:
– Secured or unsecured senior or junior bonds issued by a variety of corporate or sovereign obligors.
– Secured or unsecured loans made to a variety of corporate commercial and industrial loan customers of one or more lending banks.

Credit Derivative: An OTC derivative designed to transfer credit risk from one party to another. By synthetically creating or eliminating credit exposures, they allow institutions to more effectively manage credit risks. Most credit derivatives entail two sources of credit exposure: one from the reference asset and the other from possible default by the counterparty to the transaction. Taking many forms, some of the more popular structures for credit derivative products include credit default swaps, total return swaps, and credit-linked notes.

Credit Default Swap: A credit derivative transaction in which two parties enter into an agreement, whereby one party pays the other a fixed periodic coupon for the specified life of the agreement. The other party makes no payments unless a credit event, relating to a predetermined reference asset, occurs. If such an event occurs, the party will then make a payment to the first party, and the swap will terminate. The size of the payment is usually linked to the decline in the reference asset’s market value following the determination of the occurrence of a credit event.

Short Sale: Selling a security that the seller does not own but is committed to repurchase eventually. Investors use short sales to capitalize on an expected decline in the security’s price.

The BLS Library collection has a number of books to help understand the basics of the crisis:

Subprime Mortgage Credit Derivatives by Laurie S. Goodman
Call # G2040.15 .S825 2008

Subprime Mortgages: America’s Latest Boom and Bust by Edward M. Gramlich
Call # HG2040.5.U5 G73 2007

The Handbook of Mortgage-Backed Securities by Frank J. Fabozzi
Call # HG4655 .H36 2006

The Securitization Markets Handbook: Structures and Dynamics of Mortgage- and Asset-Backed Securities by Charles Austin Stone and Anne Zissu
Call # HG4655 .S76 2005

Introduction to Structured Finance by Frank J. Fabozzi
Call # HG4028.A84 F33 2006

Credit Derivatives: a Primer on Credit Risk, Modeling, and Instruments by George Chacko
Call # HG6024.A3 C739 2006

Prof. David Reiss has provided this useful bibliography:

Greed, Fraud and Ignorance: A Subprime Insider’s Look at the Mortgage Collapse by Richard Bitner (LTV Media 2008)

Greenspan’s Bubbles: The Age of Ignorance at the Federal Reserve by William Fleckenstein (McGraw-Hill 2008)

Subprime Mortgages: American’s Latest Boom and Bust by Edward M. Gramlich (Urban Institute Press 2007)

The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash by Charles R. Morris (Public
Affairs 2008)

The Subprime Solution: How Today’s Global Financial Crisis Happened, and What to Do about It by Robert J. Shiller (Princeton, forthcoming August 2008)

Financial Shock: A 360 Degree Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis by Mark Zandi (FT Press forthcoming 2008)

Chain of Blame: How Wall Street Caused the Mortgage and Credit Crisis by Paul Muolo and Mathew Padilla (Wiley 2008).

Prof. Reiss, Associate Dean Michael Gerber, Prof. Edward Janger and Prof. Roberta Karmel will lead the discussion in a Town Hall Meeting “Meltdown, Bailout and Transformation: A Week on Wall Street” on Thursday, Sept. 25, 4:00pm to 5:30pm in the Moot Court room on the 7th floor.

221 years ago, a time when many people in the United States were in debt and states were printing worthless money, the new nation was in crisis. A loose confederacy of States rather than a Federal State, it was a time to unite as one nation in order to survive. Beginning in May of 1787, 55 delegates from 12 of the original 13 states (Rhode Island sent no delegates not wanting the national government to interfere with its affairs) began to gather in Philadelphia to attend the Constitutional Convention. Debate focused on issues that remain part of our current national debate: the meaning of a “national” government as states wanted to retain their sovereignty; the representation of small states and large states in the national government; individual rights versus state rights; and the powers of the head of government. Different plans were proposed. The Virginia Plan, the Large State Plan, called for a bicameral Congress, both houses to be elected with proportional representation. The New Jersey Plan, the Small State Plan, called for one vote per state for equal representation in a Unicameral Legislature. The Connecticut Plan or the “Great Compromise” was the agreement between large and small states that resolved the debate. The Great Compromise also dealt with commerce, taxation and slavery, issues that divided the states in the North and the South. It also addressed nationality requirements and provisions for amending and ratifying the Constitution. Despite lengthy debate, the new Constitution had no Bill of Rights. After four months of debate, on September 17, 1787, the Constitution was finally finished and made public. Only 42 delegates were still present at the convention when it was finished and 39 of them signed the Constitution.

In 2005, Congress passed and the President signed Public Law 108-447 to establish Constitution Day. Section 111(a) of that law reads:

The head of each Federal agency or department shall—
(1) provide each new employee of the agency or department with educational and training materials concerning the United States Constitution as part of the orientation materials provided to the new employee; and

(2) provide educational and training materials concerning the United States Constitution to each employee of the agency or department on September 17 of each year.
(b) Each educational institution that receives Federal funds for a fiscal year shall hold an educational program on the United States Constitution on September 17 of such year for the students served by the educational institution.

Following the law’s passage, the Education Department issued a “Notice of Implementation of Constitution Day and Citizenship Day on September 17 of Each Year,” 70 Fed. Reg. 29727 (May 24, 2005). The notice applies to educational institutions receiving federal funding from the Department of Education. Today’s Proclamation by the President about Constitution Day reminds us “celebrate our Constitution and reaffirm our rights and responsibilities as citizens of this great Nation”.

The debates from the 1787 Constitutional Convention may appear to be historic abstractions. Yet those same issues live on today when once again the nation is in debt, the money being printed continues to lose value, large population centers are at odds with small towns, and unchecked powers are concentrated in a unitary executive. Constitution Day needs to be more than a symbolic gesture to history. It is an opportunity to debate a broad range of contemporary issues that call for great compromise. The CQ Researcher offers some suggestions:

Is the Bipartisan Campaign Reform Act constitutional? (2002, 1st Amendment/Freedom of Speech)
Is the government misusing the USA Patriot Act? (2003, 4th Amendment/Search and Seizure)
Should there be a national moratorium on executions? (2001, 8th Amendment/Cruel and Unusual Punishment)
Should Congress ban so-called partial-birth abortions? (2003, 14th and 9th Amendments)
Should public libraries use filters to block obscenity and pornography on the Internet? (2001, 1st Amendment/Freedom of Speech)
Should the federal government fund faith-based groups as proposed by President Bush? (2001, 1st Amendment/Religion: Establishment Clause)
Should colleges be allowed to use race as a factor in admissions? (2003, 14th Amendment)
Should gay marriage by legally recognized? (2003, Article IV/Privileges and Immunities Clause)
Did the president act responsibly in seeking authority to pre-emptively strike Iraq? (2002, Article I/War Power)

Recent developments in the law concerning health care providers put in contrast the conflict between their professional obligations to provide medical care to patients and their right to refuse to provide such services based on personal and religious beliefs. An article entitled “How Should the Law Respond When Health Care Providers’ Obligations Conflict with Their Religious Beliefs? Two Recent Developments that Illuminate the Issue” presents the conflict in two parts. The first installment deals with the recent decision by the California Supreme Court in North Coast Women’s Care Medical Group, Inc. v. San Diego County Superior Court, 189 P.3d 959, a civil rights lawsuit brought against physicians charged with discriminating against a lesbian patient who sought a fertility treatment. The defendants claimed they were exempt from California’s Unruh Civil Rights Act which prohibits discrimination on the basis of sexual orientation because their refusal to provide fertility treatments to lesbian patients was grounded on their religious convictions. The California Supreme Court affirmed the trial court’s rejection of the defense, holding that neither the federal nor the California Constitution mandates a religious exemption from the Unruh Act’s prohibitions in the context of medical services. The article by Vikram David Amar and Alan Brownstein criticizes the decision for failing to evaluate thoroughly the competing interests at stake, in particular, in failing to address the US Supreme Court case of Employment Division v. Smith, 485 U.S. 660 (1988) that the federal Free Exercise Clause does not protect religious individuals or institutions against neutral laws of general applicability.

The second part of the two part article will address regulations (45 CFR Part 88) proposed by the Department of Health and Human Services (HHS) to protect health care workers from being coerced into violating their religious beliefs by providing medical services that they object to on religious grounds. The proposed regulations seek to set a standard for enforcing “conscience clause” laws enacted in response to Roe v. Wade, 410 U.S. 113 (1973). Congress has enacted several such laws, starting with the 1973 Church amendment (42 U.S.C. 300a7) passed shortly after Roe v. Wade and most recently the 2004 Weldon amendment (Sec. 508(d) of Public Law 110-161, 42 U.S.C. 238n). See the Congressional Research Service Report The History and Effect of Abortion Conscience Clause Laws. The idea of the conscience clause is to protect doctors and other healthcare providers (such as pharmacists) who refuse to perform abortions or fill prescriptions for emergency contraception from discrimination. When first proposed, the regulations had language defining abortion as the termination of a pregnancy from the point of conception so that any form of contraception, including the “morning-after” pill and IUDs, that interfere with the implantation of a fertilized egg would have been categorized as a form of abortion. That language was removed from the proposed regulations which are in a 30-day comment period ending September 25 at consciencecomment@hhs.gov. A public comment submission form is online. Posted comments to the Provider Conscience Regulation are available at regulations.gov, a direct link to the conscience clause comment site.

See the BLS Library catalog for additional reading on emergency contraception including When Sex Counts: Making Babies and Making Law by Sherry F. Colb (Call #KF3760 .C65 2007) and Governments Worldwide Put Emergency Contraception Into Women’s Hands: A Global Review of Laws and Policies by Erica Smock (Call #HQ766.5.U6 G68 2004).

Episode 033 – Conversation with Professor of Law James A. Fanto.mp3

In this conversation, Prof. James Fanto talks about his recent article, A Social Defense of Sarbanes-Oxley, 54 N.Y. L. Sch. L. Rev. 517 (2007), which was part of a symposium called Corporate Governance Five Years After Sarbanes-Oxley: Is There Real Change? Prof. Fanto teaches courses on banking, corporate, and securities law, corporate finance, and comparative and international corporate law and governance. His extensive writings include other articles on Sarbanes-Oxley and many other corporate law topics and are listed on his Selected Works web page.

In this conversation, Prof. Fanto considers the impact of the current financial crisis on public and corporate views of the need for regulation of publicly traded companies and the benefits that have resulted from enactment of the Sarbanes-Oxley Act of 2002. He argues that this legislation is a reassertion of social values of professionalism against a socially destructive ideology of self-interest that marked the corporate world at the turn of the last century.