Law Review: Former U.S. prosecutor now on the defense side in federal probe

As a former assistant U.S. attorney in Philadelphia, Michael A. Schwartz was acutely aware of the enormous power a prosecutor wields. But it wasn't until he left the Justice Department and became a white-collar defense lawyer that he truly grasped how a government case can take a terribly wrong turn.

Schwartz, a partner at Center City-based Pepper Hamilton L.L.P., defends pharmaceutical executives and other business figures in criminal investigations that can involve enormous gray areas.

What might in the eyes of an aggressive prosecutor be an indictable offense, say for a pricing decision on a Medicaid-reimbursed pharmaceutical, just as easily could be seen as an innocent business judgment by the executive making the call.

"You are dealing with people . . . who are highly educated, who go to work each day saying that I am going to do the right thing, and occasionally, like all of us, may make mistakes and then come under government scrutiny," said Schwartz, a Yale Law School graduate. "All of a sudden, you are out there in a world where you would never think that what you did on a day-to-day basis would be thought to be criminal."

How odd, then, that Schwartz now finds himself defending a government official - in the face of a government investigation.

It turns out that one of his white-collar clients - and a pro bono one at that - is a member of a prosecution team that blew up its own case by failing to disclose exculpatory evidence to a defense team.

She and other members of the team now are enmeshed in two government investigations aimed at determining whether both Justice Department procedure and criminal laws were breached.

The story is a cautionary tale about how a procedurally flawed investigation can destroy what seemed to be an otherwise solid criminal case, while wreaking havoc in the lives of the prosecution-team members who brought it.

It shows, too, how government officials themselves can feel the lash of a relentless prosecution - itself an injustice sometimes.

But first, a little background.

Schwartz's client is FBI agent Mary Beth Kepner, who after her graduation from the FBI training academy in Quantico, Va., was stationed in the bureau's Philadelphia office in the mid-1990s before transferring to Alaska - first to the Juneau office, then to Anchorage.

There, she began working on the FBI's so-called Polar Pen political-corruption probe and took on the lead investigative role in the criminal case of the late U.S. Sen. Ted Stevens, a Republican.

Stevens - whose brainchild, the notorious $397 million bridge-to-nowhere earmark, won him national disdain - was indicted in July 2008. He was charged with failing to disclose hundreds of thousands of dollars in gifts from a prominent Alaska business figure, including extensive renovations to his home.

Convicted a few months later, he lost his bid for reelection that November. But it took only a few months for the conviction to unravel.

The defense team, headed by Washington lawyer Brendan Sullivan Jr., who made his bones defending Oliver North in the Iran-contra scandal, hammered away at the prosecution's failure to disclose evidence it said would have exonerated its client.

An FBI agent in the Anchorage office filed a whistle-blower memo alleging that the prosecution had improperly withheld information and focused much of his criticism on Kepner, who he alleged had maintained an improper relationship with a key witness, business executive Bill J. Allen.

Some of the whistle-blower's allegations, picked up by the national press, were frankly weird, notably his assertion that Kepner had worn a skirt to the trial one day as a "gift" to Allen - evidence, he said, of the improper relationship.

More substantively, the government eventually turned over copies of notes of an interview with Allen that contradicted his trial testimony - bad news for the government's case.

In a stinging rebuke to the government, U.S. District Judge Emmet Sullivan, sitting in Washington, threw out the conviction in April 2009. Then he appointed a special prosecutor to look into the government's missteps.

It didn't matter that at least one juror came forward to say the disclosures wouldn't have changed his view that Stevens had illegally concealed the gifts. Since then, both the special prosecutor and the Justice Department's Office of Professional Responsibility have been drilling down into the government's conduct.

One of the prosecutors, an up-and-coming public-integrity section lawyer named Nicholas Marsh, committed suicide. The others remain at Justice but have gone on to different assignments. Kepner still is working cases in Alaska. The whistle-blower has left the FBI.

Schwartz said that Kepner did nothing wrong and that the allegations of an improper relationship with Allen simply are off-base. He said she excelled as a young agent in Philadelphia, where she was assigned to the Russian organized-crime squad and was known for her ability to develop sources.

As a former prosecutor, Schwartz knows full well how defense lawyers, especially those representing influential politicians, aim for the jugular. A time-honored technique is the ad hominem attack, questioning the political and personal motives of prosecutors, anything to divert attention.

It's called blowing smoke.

In the U.S. Attorney's Office in Philadelphia, Schwartz supervised the bug probe of the administration of former Mayor John F. Street and had to suffer silently, along with other members of the prosecution team, as critics said the case was a political hit job ordered by Republican Attorney General John Ashcroft.

It was only when the team won convictions that there was a sense of vindication - and that the process had worked.

So, in a sense, he's been there. And that likely is just the kind of lawyer Kepner needs.