2d Circuit Overturns Terrorism Convictions

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.

Law Students and the Wall Street Credit Crisis

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.

Travelers' Privacy Protection Act

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.

Congressional Clerkship Program

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.

Politics and the Pulpit

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:

Corporations . . . organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition . . . or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation . . . and which does not participate in, or intervene in . . . any political campaign on behalf of (or in opposition to) any candidate for public office.

The ban dates to 1954 when Sen. Lyndon Johnson proposed it in the 83rd Congress without any legislative history. A bill in the 110th Congress, H.R. 2275, seeks to “restore the Free Speech and First Amendment rights of churches and exempt organizations by repealing the 1954 Johnson Amendment”.

There is also an effort, today, September 28, by the Alliance Defense Fund (ADF) called the "Pulpit Initiative" (explained in an ADF Executive Summary) to challenge restrictions on the ability of churches to endorse or oppose political candidates. Pulpit Freedom Sunday directly challenge IRS regulations prohibiting political activity by churches and seeks to “reclaim pastors’ constitutional right to speak freely and truthfully from the pulpit”.

This year, the IRS has published a FAQ on the ban on political activity by 501(c)(3) organizations. The ban was upheld in Branch Ministries v. Rossotti, 211 F.3d 137 (D.C.Cir.2000) where a church in Binghamton, NY published a letter challenging candidate Bill Clinton's stance on abortion, homosexuality and sexual abstinence outside of marriage. After investigating, the IRS revoked the tax-exempt status of the church. The church sued the IRS but the district court ruled that the IRS had the authority to revoke the church's tax-exempt status. The Circuit Court upheld the lower court ruling.

The Pulpit Initiative faces opposition as three former IRS officials have sent a letter calling for an IRS investigation of the ADF attorneys under the professional standards for tax attorneys.

The BLS Library has reading on the topic. See A Voice for Nonprofits by Jeffrey M. Berry (Call # HD2769.2.U6 B47 2003).

Student Voting

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.

Enthusiasm for a candidate does not automatically result in the casting of an actual vote. Often, there are barriers preventing students from voting. Several states require voters to apply in person for absentee ballots, a requirement that is difficult for students who live away from home. Other states have limited access to absentee ballots to only those who are ill, pregnant, or otherwise unable to reach polling stations. An article in the Chronicle of Education, Members of Congress Worry That Students Are Being Misled About Voting Rights, raises concerns that students get conflicting information on where they should register to vote, whether at a university address or at a home address and what effects that decision has on issues like scholarships, health or car insurance and driver's licenses. Different state laws on absentee voting add more confusion. And there's the question whether election officials actually include absentee ballots in final voting results. See US News & World Report’s article Confusing Voter Registration Laws Could Affect Presidential Election.

Organizations such as Rock the Vote and Student Association for Voter Empowerment (SAVE) have been active in getting students to register to vote and leading advocates for youth election protection. This past summer, student members of SAVE worked with members of Congress to introduce the Student VOTER Act of 2008 that will require states to designate federally funded institutions of higher education as agencies for the registration of voters in federal elections and to provide mail voter registration application forms to students when they register for their courses.

Project Vote Smart: the Voter's Self-Defense System is a useful resource more information about voting. Another useful site is NYU Law’s Brennan Center on Student Voting Rights. Links are also included here for state by state voter laws and registration deadlines and absentee and early voting laws. New York State's law sets the registration deadline 25 days before the election so that October 10 is the last day to register for the General Election.

Wall Street Bailout: Back to Basics

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.