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When the Oklahoma attorney general stunned federal prosecutors by bringing state securities charges in the WorldCom case, he not only junked the deference traditionally paid to federal prosecutors, he may have also ignited a kind of doomsday scenario with state attorneys general racing to indict high-profile corporate defendants, thus undermining cases carefully crafted by the U.S. Department of Justice. In retrospect, one almost wonders why it took so long. Since most state attorneys general are elected officials, it is not surprising that some would be tempted to steal the federal government’s thunder and cast themselves as corporate crime-busters responding to a public increasingly frustrated with the pace of these investigations. Too harsh a judgment? It is difficult to imagine that the Oklahoma attorney general’s office has gathered more compelling evidence of criminal conduct than the DOJ prosecutors who had pored over thousands, if not millions, of pages of complex financial records for more than a year and had already lured four major WorldCom insiders into the prosecution camp. Yet Oklahoma, totally innocent of this evidence, announced state charges in late August without a prior word to the DOJ. Putting aside the evidence issue, simultaneous state and federal prosecutions of the same individuals for the same offenses raise big problems. Recruitment of critical cooperating witnesses becomes almost impossible. Dry financial statements and internal documents are generally not enough to prove criminal intent at the level of chief executive officers or chief financial officers. Skilled defense counsel will find a way to portray even the most damning memorandum or revealing balance sheet as subject to interpretation. Prosecutors need cooperating witnesses whose testimony will take the jury by the hand and lead them through the Byzantine financial transactions page by page. There is nothing more compelling than a prosecution witness — once complicit in the crime — who can look the jury in the eye and lay out the scheme in lurid detail. Four of those indicted by Oklahoma had already struck plea deals with the federal government. Now, thanks to Oklahoma’s go-it-alone strategy, their cooperation in the federal investigation is in peril. Indeed, the mere entry of their pleas to the federal charges can be used by Oklahoma authorities as evidence of their guilt on the state charges. When faced with the ultimate decision of whether to defect to the government or toe the corporate line and stand trial, defendants need to know they are dealing with people who can actually decide their fate. While they get no guarantee that state authorities might not bring charges against them later, it is rare to face both state and federal charges for the same conduct and even rarer for charges to be brought simultaneously. The Oklahoma prosecution will have a chilling effect on all future potential cooperators, who may now feel forced to seek immunity agreements from all 50 states before agreeing to enter a plea in federal court. Another problem is the impairment of testimony when key government witnesses take the stand at multiple trials. Each additional transcript provides fodder for defense attorneys to pick apart the inevitable inconsistencies. Prosecutors fight to keep critical witnesses pristine before trial. If they have never testified, the defense has less time to prepare a cross-examination that will damage their credibility. Multiple trials on the same charges against the same defendants can also result in inconsistent evidentiary rulings. Critical statements or documents may be ruled admissible in one proceeding and not in another because of different court rules and different judges. These scenarios can also pose serious problems for subsequent prosecutions. Although today’s mega-frauds are unprecedented in scope, there is nothing new about overlapping state and federal jurisdictions. It happens every day in environmental crimes, drug cases and organized crime, to name only a few. In virtually every case, prosecutors meet to resolve these territorial conflicts on the basis of resources already devoted to the investigation and the relative abilities of the respective offices to perform a successful prosecution. Typically, complex crimes that sweep in victims from multiple states and involve repeated criminal acts that cross state lines are handled by U.S. attorneys’ offices. They have subpoena power throughout the country and the resources of the FBI and the other federal agencies to follow leads more easily across state lines and even internationally. Cases like WorldCom and Enron require prosecutors at the top of their game. Proving knowledge and criminal intent of chief executive officers has never been easy. With layers of hierarchy insulating upper management from the allegedly criminal acts, the defense can always argue they were misled or misinformed by underlings. Public opinion, on the other hand, wants to see heads roll at the very top of the corporate pyramid. It is this contradiction that entices state attorneys general to assume the image of prosecutorial vigor, in the process hobbling those whose work was most likely to bring convictions. If effective prosecutions are the goal, state attorneys general should stay their hands and let federal prosecutors finish their work. Robert A. Mintz, a former federal prosecutor, heads the government investigations and white collar crime group at McCarter & English of Newark, N.J.

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