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CASE PROFILES


Grand Jury's Investigation of Accounting Firm\'s Client     back to top    

     A nationally-known accounting firm provided audit, tax and mergers and acquisition consulting services to an entrepreneur, based in Florida and Idaho, throughout the 1980s.  One of the businesses acquired by the entrepreneur was a dairy in Washington State.  In 1991, a grand jury in the Western District of Washington initiated a wide-ranging investigation into the entrepreneur's activities, with particular emphasis on the dairy transaction, for which the entrepreneur had obtained, and then defaulted on, a $20 million bank loan.  As part of the investigation, grand jury subpoenas were served on the accounting firm and various persons affiliated with it.  The entrepreneur objected to the accounting Firm\'s complying with the subpoenas on the ground that the production of documents and the giving of testimony would violate his attorney-client privilege because the accounting firm had acted as the agent of his attorneys in structuring the acquisition transactions.

     Bentley was retained by the accounting firm to represent it in connection with the grand jury process.  When the entrepreneur moved to quash the subpoenas, Bentley represented the firm, seeking and obtaining the court's guidance for the process of balancing the Firm\'s duty to comply fully with the subpoena, with its duty to respect its former client's legitimate claims of privilege.  Subsequently, over a three-year period, Bentley supervised six further document productions; dealt with press inquiries concerning the investigation from a national financial publication; and assisted 10 individuals currently or formerly affiliated with the firm, who were subpoenaed to testify before the grand jury.

     The investigation ended in 1995 when the entrepreneur waived indictment and entered a plea of guilty to income tax evasion.  The guilty plea attracted little media attention and did not reflect adversely on the accounting Firm\'s tax preparation services. 


State Antitrust Investigation     back to top

     For several years in the late 1980s, fishermen who fished in Bristol Bay, Alaska experienced sharp decreases in the prices they were paid for fresh-caught salmon by firms engaged in freezing and canning the Bristol Bay catch.  In 1991, the Alaska Attorney General responded to the fishermen's concerns by initiating a wide-ranging investigation into industry pricing practices, the thrust of which was to determine whether or not the salmon processing firms were engaging in concerted action to depress the price they would pay for salmon. 

     As part of the investigation, subpoenas were served on 17 processing and packing companies that engaged in the purchase of Bristol Bay salmon.  Bentley, while a member of a prior firm, was retained by one of the companies.  Bentley assisted the client in complying with the subpoena -- reviewing the client's record-keeping systems, analyzing the subpoena and negotiating with the Assistant Attorney General in charge of the investigation to narrow and clarify the subpoena, organizing and tabulating thousands of documents, and arranging to provide the documents to the investigators.  Bentley also represented the corporation in defending depositions of key employees in Canada and the United States and in resisting a private litigant's efforts, under the Alaska Public Disclosure Act, to obtain disclosure of the documents that had been submitted to the authorities. 

     At the conclusion of the investigation, the Attorney General issued a report critical of the industry; but the investigation did not result in legal action against any party. 
 

Uniform Code of Military Justice Matter     back to top

     In July 1994, a Lieutenant who flew EA6-B electronic warfare aircraft based at the Whidbey Island Naval Air Station was summoned to the offices of the Naval Investigative Service and questioned about an allegation that he had committed sexual improprieties a few days earlier with a female enlisted person, while preparing his aircraft for take-off on the flight line at Andrews AFB.  The flier admitted that he had been at Andrews AFB when the alleged misconduct occurred but denied having had sexual contact with the enlisted person.  After making his statement to the investigators, the flier was hospitalized with a mental breakdown.  The flier spent several days at the Naval Hospital in Bremerton and then was discharged.  After being discharged from the hospital, the flier returned to the Naval Investigative Service and admitted committing the sexual acts, while asserting that they were consensual.  The flier was then charged with sexual misconduct, fraternization, violation of a general order against sexual harassment, assault and false official statements.

     Bentley was retained to represent the flier, prior to the Article 32 probable cause hearing.  Bentley supervised an investigation of the complaining witness in Maryland, Tennessee, Florida and Texas, which revealed that the witness had raised claims of sexual harassment in other contexts.  Bentley prepared a detailed written report, discussing the credibility of the complaining witness; reviewing the flier's excellent performance ratings, including his valor in flying more than 30 combat missions during the first Gulf War; and recommending that the flier be permitted to resign rather than face a general court-martial.  Bentley's report was submitted to the Commanding Officer at NAS Whidbey Island and was followed up in a meeting with the Commanding Officer.  The Commanding Officer recommended against granting the resignation request but, in keeping with the regulations, forwarded it to the Bureau of Naval Personnel and the Secretary of the Navy for final decision.

     Bentley prepared for trial of the matter before a general court-martial and engaged in comprehensive negotiations for a pretrial agreement limiting the punishment that would be imposed if the court-martial returned a finding of guilty.  Shortly before the commencement of the court-martial, however, counsel was notified that the Secretary of the Navy had granted the request for resignation, and the criminal charges were dismissed.


Wastewater Disposal Issue     back to top

     The clients in this case were a small (25-employee), closely-held corporation that engaged in photochemical manufacturing (industrial etching) and its president/owner.  In 1990, after experiencing a period of growth that required the expansion of its manufacturing capabilities, the etching company built a new plant, gutting and refitting an existing structure in an urban area in Western Washington.  In response to the local municipality's refusal to grant a permit authorizing discharges of treated wastewater to the sanitary sewer line, the company invested in an advanced wastewater treatment system designed to precipitate and concentrate the heavy metals that build up in rinse-water as metal is etched and rinsed.  Through the use of this sophisticated chemical system, it was thought, the plant would be able to function on a "zero discharge" basis.  When the company began operating at the new plant, however, the wastewater treatment system failed to perform as anticipated.  With the approval of management, and in a struggle for its very survival, the company began surreptitiously discharging treated wastewater to a storm sewer that flowed underground for a mile before discharging into Puget Sound. 

     After receiving a report from a confidential source concerning suspicious activity at the plant, EPA agents instituted a pre-dawn surveillance and observed the unpermitted discharging.  EPA then obtained a warrant authorizing a search of the plant.  The company retained Bentley’s former firm while the search was in progress.  Bentley had an attorney, and an environmental sampling technician, at the plant before the search was completed and thus was able to monitor EPA's water sampling activities and obtain comparable samples. 

     The company and its president were indicted on multiple counts of violating the Clean Water Act and related offenses.  After extensive pretrial motions litigation, Bentley negotiated a plea agreement that provided for guilty pleas, by the company and its president, to a charge of conspiring to violate the Clean Water Act.  In the agreement, the parties stipulated that the application of the federal Sentencing Guidelines would result in a sentencing range of from four to 10 months' incarceration. 

     In arguing at sentencing for the minimum sentence permitted under the Guidelines, Bentley showed that the illegally-discharged wastewater met federal pretreatment standards applicable to the metal finishing point source industry and also met local standards established by the municipality's sewage disposal and drainage regulations.  The relative cleanliness of the discharged water corroborated the company's claim that it had treated the water to remove heavy metals, before discharging it.  Although the sentencing judge was known as one of the harshest sentencing judges in the Western District of Washington, he departed from the Guidelines to place the company's president on probation.


Xylene Spill Reporting Issue     back to top

     The client in this matter was a closely-held corporation that manufactures mastic roofing material.  In 1990, 3000 gallons of xylene, a petroleum by-product that is a component of a reflective roof coating, accidentally spilled at the corporation's plant.  Company employees set to work containing the spill and were successful in recovering much of the spilled material; an unknown quantity of the xylene evaporated, however, and some seeped into the ground.  The amount of xylene spilled exceeded the threshold "reportable quantity" established under the Comprehensive Environmental Cleanup and Liability Act ("CERCLA"), and the corporation was required to make an immediate report of the spill to the National Response Center.  The corporation's president did not to do so, however, in the belief that the report was not required where the spilled material did not leave company property. 

     In 1992, a former employee reported the spill to the EPA, and EPA's criminal investigators used the information to obtain a warrant to search the plant.  Shortly after the warrant was executed, the company retained Bentley to represent the company and its president/owner in the criminal investigation.  Bentley investigated each allegation of wrongdoing contained in the warrant application, with particular focus on the claim that the company's president had failed to file the required report, a felony violation carrying the potential for lengthy incarceration under the federal Sentencing Guidelines.  Evidence gathered by Bentley persuaded the United States Attorney that there were significant questions about whether the corporate president had a correct understanding of CERCLA and whether, in not reporting the spill, he intended to violate the law.  The prosecutors accepted the argument that the president should not be charged personally, even though, as a matter of law, proof of a CERCLA reporting violation may not require a showing of illegal intent.  The case was resolved by the corporation's entry of a plea of guilty to the CERCLA violation and the corporation's payment of a fine.

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