The dark legacy of disgraced lobbyist Jack Abramoff still haunts Greenberg Traurig four years after they parted ways.
With Abramoff locked in a federal prison in Maryland, a far-off U.S. territory is dragging Greenberg's four-year stint as the notorious lobbyist's employer back into the public eye. But the Miami-based law firm issued a statement Monday, saying, "We are working closely with the Guam attorney general and are near a resolution of this issue."
Greenberg's alleged offense -- billing Guam for services that had nothing to do with the lobbying task Abramoff agreed to undertake.
"There were a lot of things like travel with nothing related to it," said Lewis W. Littlepage, the former Guam prosecutor who indicted the Miami-based firm. "It appeared to be a practice of illegal billing." The firm faces felony counts of unlawful influence, theft by deception and conspiracy. "It should be something every client of Greenberg Traurig should be concerned about," Littlepage said.
The firm issued statements after its indictment saying it was innocent and noting the firm has cooperated with "all investigations into" Abramoff. "Any employee or shareholder who refuses to cooperate with internal or government investigations will be asked to leave the firm" according to one of the firm's statements.
When Greenberg learned it was indicted, the firm issued a statement saying, "Greenberg Traurig was a victim of Abramoff's actions." His plea agreement on charges in Washington involving Indian tribes Abramoff admitted taking some fees directly without notifying Greenberg, which was entitled to a share. The law firm said some of Abramoff's conduct was unknown to the firm until he pleaded guilty in Washington in 2006 to federal charges of aiding and abetting mail fraud, tax evasion and conspiracy for his dealings with American Indian tribes. The next day, he pleaded guilty before U.S. District Judge Paul Huck in Miami to charges tied to an illicit loan to buy SunCruz Casinos and is serving a sentence of almost six years in prison.
A report issued by the Senate Indian Affairs Committee concluded the lobbyist's behavior "required Abramoff to deceive his former employer, Greenberg Traurig." But the Senate report also raised issues about the firm's knowledge of Abramoff's financial arrangements with Michael Scanlon, Abramoff's one-time partner, who pleaded guilty to defrauding tribal clients in 2005. It also called into question the billing practices of two lawyers who worked under Abramoff.
Billing practices also put the firm in the crosshairs of Guam prosecutors last month. In one instance, Greenberg billed the territory $4,000 for one day's travel for lobbying work that had nothing to do with Guam Superior Court, the agency that hired the lobbyist, Littlepage said. Guam Superior Court administrator Anthony Sanchez has been charged along with Abramoff and his former firm.
Less than a week after amending the charges March 11, Littlepage ended an eight-year career as an assistant attorney general in Guam and went into private practice, a switch he said he made for completely personal reasons. "It was time for a change," he said.
Greenberg said it was caught completely off guard by the charges. Littlepage said he didn't see a reason to notify the firm when he amended a 2006 complaint to charge the firm. "You usually don't notify criminals ahead of time," he said.
Guam's investigation of Abramoff and his former employer center on a political fight in Guam's government that broke out after a flawed attempt by Congress to create an appellate court for the territory. The Guam Supreme Court was created in 1996, but the law unintentionally left the territory's high court subordinate to the legislative and executive branches of government on the island, according to congressional testimony in 2004.
Until Congress amended the law that year, the Supreme Court was beholden to the other two branches of government -- significant because the Supreme Court was stocked mostly with Democratic judges, and the Guam Superior Court was a Republican stronghold. It also made the island's top appellate court a rival to the island's trial court, which took the position during the feud that any judicial reform in Guam shouldn't be made by Washington lawmakers but should come from within.
Under the direction of Sanchez, Guam Superior Court paid Greenberg for Abramoff's services -- directing him to lobby U.S. Senate contacts to kill off a federal attempt to make the Guam Supreme Court an independent and top appellate court, according to the Guam public auditor, which examined lobbying efforts by Abramoff and payments made to the lobbyist that were suspected to subvert the island's procurement laws.
Guam Superior Court paid almost $500,000 to territorial policy expert Howard Hills, a Los Angeles attorney who would transfer most of that money to Abramoff through Greenberg, according to the auditor's report. Hills was paid in $9,000 installments to avoid the territory's procurement laws, the auditor said.
Littlepage said Greenberg also billed for work that it was not hired to do, including a totally unrelated open-skies initiative to lobby for additional flights by foreign carriers to the U.S. mainland through Guam.
The original 2006 indictment charged Abramoff, Sanchez and Hills. When Littlepage amended the charges last month, he dropped Hills as a defendant and added Greenberg. The amended charges do not necessarily free Hills from criminal prosecution, Littlepage said. He noted Hills is cooperating with the investigation.
Hills deferred comment to his attorney, Carol Elders Bruce, a partner with Bracewell & Giuliani in Washington. "He has cooperated fully with the Guam attorney general's office, and they have concluded that he's not culpable," she said. "He's innocent, and they recognize that now."
Greenberg has retained Kevin Downey, a partner with Williams & Connolly in Washington, to defend the firm. Downey did not return calls seeking comment before deadline.
Criminal charges against a law firm -- or any corporation -- are unusual. The potential penalties are financial, said Brian Bieber, a white-collar criminal defense attorney with Hirschhorn & Bieber in Coral Gables. "It's quite rare that the government will indict a law firm, and the differences are significant because the bottom line is that an individual is not going to lose his or her freedom," he said. "The government [of Guam] is sending a message to the principals of the law firm and to the legal community as a whole -- if you turn a blind eye to what lobbyists you affiliate yourself with are doing, the government will not tolerate it," Bieber said.
If Greenberg opted for a settlement, Littlepage said it probably would mean paying restitution of about $324,000 plus possible fines. He doubts the law firm will go to trial.
Greenberg hired Abramoff in 2000 after he had made a name for himself as a mover and shaker on K Street while with Preston Gates & Ellis, now part of K&L Gates. Abramoff carried with him a book of business reportedly worth $6 million, mainly from Indian tribes with casino operations and two U.S. territories, Guam and the Northern Mariana Islands. The attorney general's office of both locales did not return calls seeking comment.
"The firm's in a very delicate position," said Peter Henning, a law professor at Wayne State University in Detroit who teaches corporate law and white-collar defense. Henning also said that the investigation into Abramoff's activities in Guam had especially come under the microscope because of the 2005 demotion of Guam U.S. Attorney Frederick A. Black.
According to the Los Angeles Times, the demotion effectively killed a federal grand jury investigation into Abramoff that had been launched in 2002. The demotion sparked an outcry that the Bush administration was trying to contain the fallout from Abramoff's misdeeds. Black's demotion came less than two weeks after he contacted the Justice Department to ask for support in the Abramoff investigation.
"The case has taken on a life of its own because of the allegation of interference," Henning said.
Black, now an Assistant U.S. Attorney in Guam, declined to comment.
Guam and the Northern Mariana Islands comprise a 16-island chain in the South Pacific with a combined population under 300,000. The Marianas are a commonwealth like Puerto Rico, but both territories -- like Indian tribes -- are administered by the Interior Department in Washington. The islands are exempt from some federal laws, differentiating them from other U.S. jurisdictions. One notable example is the exemption in the Marianas from federal wage laws. This has helped build a flourishing garment industry there, which critics charge are sweatshops on U.S. soil. The Marianas paid Abramoff to lobby Congress to keep the wage law exemption, which is still on the books.
According to a report published by the Office of the Public Auditor in the Northern Marianas, the commonwealth paid $9.5 million for lobbying services from 1994 to 2001. Most of that money went to Preston Gates when Abramoff was with the firm. The territory also paid $500,000 to Greenberg Traurig for Abramoff's lobbying services in 2001. The public auditor of the Marianas launched one of the early investigations into Abramoff and issued a report in November 2001. The auditor focused on the effectiveness of his lobbying efforts and focused on his billing and how it related to what he and others were doing on behalf of the Marianas.
After Greenberg's contract with the Marianas expired in October 2001, the territory renewed it for the rest of the year for $300,000 to work on keeping the territory's wage exemption intact.
Jane Moscowitz, a Miami white-collar defense attorney, considers the law firm's indictment a fluke. "With all due respect to Guam, it's an abuse of prosecutorial discretion," she said. "It's not beyond the pale, but I think it's way out there. It's a stretch of corporate criminal liability."
When asked to handicap the chances of whether the charges would stick, she was a bit more cautious. "I think it won't be successful, but that is a hard question. A lot of times things are successful that wouldn't be in my judgment," she said.Wayne State's Henning sees the charges against Greenberg as a cautionary tale. "Based on what Abramoff pleaded guilty to, they probably don't have any defense," he said. "If your employee committed a crime during the time he was working on behalf of the firm, then the firm is liable."
Greenberg has paid settlements to many of Abramoff's victims, and the firm has to face other controversies, including: A Philadelphia of counsel was convicted in a city hall corruption case there involving a waterfront development effort. In August 2006, Leonard N. Ross was sentenced to 2 1/2 years in prison by a federal judge. In 2006 the firm and shareholder Robert L. Grossman agreed to pay $925,000 in fines to settle allegations by federal banking regulators over legal work for Hamilton Bank, which collapsed in one of Miami's biggest bank frauds. The bank was seized by federal regulators, and its three top officers have since been convicted of fraud.
A month before that settlement, Jay Gordon, former chairman of the tax practice at Greenberg Traurig resigned from the New York Bar for taking more than $1.2 million in kickbacks on tax shelters he recommended to wealthy clients.
The firm has negotiated settlements with several of Abramoff's tribal clients. The firm cut a deal with the Alabama-Coushatta Tribe of Texas last year for an undisclosed amount of money. The tribe had sued Abramoff and several others in a federal court in Texas, claiming they took part in a scheme that shut down the tribe's casino. But Greenberg avoided being named in that case.
"In a sense a firm can never protect itself from a rogue agent. It's in the firm's best interest to try to protect itself," Henning said. "It may be that they did everything they could, but the prosecutor is just bent on pursuing them."