Edward Bennett Williams is purported to have said that when a prosecutor looks through a dirty window, everything he sees is dirty. Sometimes, that includes everyone he sees, too.
I’ve been thinking about that quote since learning about the outcome of the “tipsy tipster” case — that of Robert Schulman, a former Hunton & Williams partner who was alleged to have committed insider trading so that he could profit to the tune of, wait for it, a whopping $15,500.
I am not making this up. As his lawyers noted in their fantastic sentencing memo, that was about as much money as he made in a week.
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Of course, the government cared about more than just what he made. So they charged him with every downstream trade made from the alleged tip, thus increasing the loss amount to $436,800. This is standard operating procedure in insider-trading cases.
But that’s not the most interesting part of the case.
Nor is it that there seems to be a fair amount of evidence that Mr. Schulman was actually innocent. The government and the defense basically agree on the core facts: after having a little too much wine at dinner one night with his wife and his financial advisor (a good friend), Mr. Schulman blurted out something like, “It would be nice to be king for a day.” The “king” was King Pharmaceuticals, which was about to be acquired by Pfizer. And after he said that, he immediately said something like, “But you know, I can’t trade it.”
The government, looking through a dirty window, italicized the “I” — its theory was that Mr. Schulman was saying that he couldn’t trade it, but his financial advisor could do so for him.
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That, of course, makes no sense. Mr. Schulman was not stupid, and he doubtless knew that it would be illegal for his financial advisor to do the trade on his behalf.
A more credible reading is simply this: at dinner with his guard down and too much wine in him, a smart man innocently blurted out a dumb thing — and then the person he said it to and thought he could trust ran with it and ruined his life.
But that, of course, was not the government’s view of things. Dirty windows and all that.
What interests me most about this case isn’t that the government took an overly aggressive view of potentially innocent conduct. It does that all the time.
What interests me is how aggressive they were at sentencing — and how they proceeded to get absolutely spanked by the judge.
The government used a Dragnet approach to sentencing: “Just the Sentencing Guidelines, ma’am.” The government’s aggressive calculation, which could merit a column in and of itself, pegged Mr. Schulman’s sentencing range at 51-64 months and asked the judge to impose something in that range.
Think about that for a minute. The government wanted to incarcerate, potentially for more than five years, a 59-year-old man who 1) had no prior criminal record, 2) made what was, for him, an insignificant profit on an allegedly illegal trade, and 3) jokingly uttered the fatal words while having a boozy dinner with his wife and a good friend.
There is something deeply wrong and broken about that.
But not to the government, of course. Their sentencing memo called his conduct “extremely serious” and spoke, in mournful terms, of “all of the consequences his actions had on Hunton & Williams, his former law firm,” and on Pfizer as well. Oddly, though, they failed to cite to a victim impact statement from either the firm or the company. Maybe it got lost in the mail.
My favorite part of the government’s sentencing memo, though, has to be where they tried to dispute the defense’s argument that Mr. Schulman posed absolutely no risk of recidivism.
This was a golden opportunity for the government to seem reasonable and thus gain credibility with the judge. A thoughtful prosecutor might have said something like this: “While the government agrees that Mr. Schulman does not pose a recidivism risk, that is only one of several factors that the court must weigh at sentencing. The other factors strongly favor a more severe sentence.”
But not this prosecution team. Here is what they said (citations omitted):
The defendant argues that his age makes him an unlikely candidate to commit future crimes…. As an initial matter, the government does not dispute that recidivism rates tend to decrease with a defendant’s age. However, the defendant committed the instant crime when he was already in his 50’s and had been a practicing attorney at the top of his profession for decades with full awareness of his duties and obligations to his clients and repeated training and instruction on the prohibitions of insider trading. The defendant’s age, wisdom, training and expertise did not prevent him from committing the instant crime. It did not prevent him from repeatedly lying to the SEC and the government about his conduct…. Nor, as discussed in more detail above, has the defendant taken any responsibility for his actions to date. All of these factors counsel that the defendant may very well reoffend.
The mind reels. I wish I could have been a fly on the wall when the judge read that last sentence.
Ah, yes, the judge. The whole reason for my writing this column. What did Judge Azrack do, when faced with a draconian request from the government and a probation request from the defense? Did she split the baby and give Mr. Schulman, say, a year and a day — enough time to make him feel it, but little enough that he could report in January and be out by Christmas?
She did not.
Recognizing that he had “already suffered tremendously” and that the case “has been devastating to the defendant,” Judge Azrack — a career prosecutor before becoming a judge — sentenced him to probation and $50,000 fine.
Unlike some federal judges, Judge Azrack apparently understands that the Sentencing Guidelines are, in fact, voluntary — and that a judge is free to impose a sentence that she believes is just. And that is what she did — in a high-profile case in which her former Office was out for blood.
Life tenure or no life tenure, that kind of decision takes real courage.
Fortunately, the government took the sentence in stride and didn’t, say, try to hold Mr. Schulman’s exercise of his constitutional right to trial against him. At least I think that’s what this quote means:
Assistant U.S. Attorney David Pitluck told Judge Azrack, “This is absolutely in no way a punishment for going to trial.”
Justin Dillon is a partner at KaiserDillon PLLC in Washington, DC, where he focuses on white-collar criminal defense and campus disciplinary matters. Before joining the firm, he worked as an Assistant United States Attorney in Washington, DC, and at the Civil Rights Division of the Justice Department. His email is [email protected].