In a long-running challenge to the Bush administration’s Terrorist Surveillance Program, a federal judge ruled on Wednesday that the U.S. government illegally wiretapped two American lawyers and the Islamic charity they represent.

U.S. District Judge Vaughn Walker in the San Francisco found that the plaintiffs – the Ashland, Ore., branch of the Saudi-based Al-Haramain Islamic Foundation and lawyers Wendell Belew and Asim Ghafoor — provided enough evidence to prove they were the subjects of warrantless electronic surveillance.

The Obama administration, like the Bush administration, refused to turn over evidence in the case, insisting that doing so would expose state secrets. But Walker ruled that public documents and statements by government officials showed a violation of the Foreign Intelligence Surveillance Act of 1978. The court has not yet decided the amount of damages to award the lawyers.

Justice Department spokeswoman Tracy Schmaler said the decision is being reviewed.

Click here for the Associated Press story and here for Politico’s. Read Judge Walker’s decision here.

Wednesday’s ruling stems from a 2006 lawsuit in which the plaintiffs claimed that their 2004 phone conversations were wiretapped without warrants after the Treasury Department declared the Oregon branch Al-Haramain Islamic Foundation a supporter of terrorism.

The lawsuit stood out from other challenges to the TSP because the government accidentally disclosed to the charity’s lawyers top-secret evidence — a document – of the alleged wiretaps. The lawyers returned the document and a federal appeals court barred them from using it, or any related testimony, in support of the lawsuit.

Jon Eisenberg, the lead plaintiffs lawyer, told the AP that 45-page ruling holds the Bush administration program was unconstitutional. But over at Politico, Josh Gerstein notes that the “import of the judge’s ruling could be tempered” by the lack of substantive evidence produced by the Justice Department.

Schmaler issued this statement about the DOJ’s position on state secrets, according to Politico:

The Attorney General has instituted key reforms to the Department’s state secrets policy to strike an appropriate balance between rebuilding the public’s trust in the government’s use of this privilege while recognizing the imperative need to protect national security. The Department’s new policy takes significant steps to reform the use of the privilege by ensuring that if it is invoked, it is narrowly tailored and done so following a review by a committee of senior Justice officials and approved by the attorney general.

This process is designed to provide greater accountability for the use of the privilege and to ensure that the Department invokes the privilege only to the extent that it is absolutely necessary to protect national security.

Drug trafficking map (National Drug Threat Assessment).

It’s easier than ever to score heroin, meth, marijuana and ecstasy, but the availability of cocaine in the U.S. is on a decline, according to the 2010 National Drug Threat Assessment released last week.

Produced by the Justice Department’s National Drug Intelligence Center, the report indicates that the government is facing an uphill battle in the war on drugs. It anticipates that in 2010, most drugs will be more widely available than they were in 2009.

But the availability of at least one drug — cocaine — is diminishing. Since 2006, every national indicator — including seizure, price, purity and workplace drug tests — has indicated a decline in availability. The federal government seized half as much cocaine in 2009 than it did in 2008 — less than 20,000 kilograms last year, compared with more than 40,000 kilograms in 2008.

Marijuana is still widely available, in part because of rising production in Mexico. (Main Justice previously reported that the total amount of marijuana seized by the Drug Enforcement Administration nearly doubled from 2008 to 2009.) According to the report, the increase is partly because the military in Mexico has focused on anti-violence measures instead of crop eradication. Meanwhile, in the U.S., eradication efforts nearly doubled from 2004 through 2008.

Among the other conclusions in the report:

• The government expects drug traffickers may turn to the virtual world — where establishing the actual identity of players is challenging for both financial institutions and law enforcement — to launder money.
• The tactics drug traffickers use are adapting, with smugglers using both tunnels and “low-flying small or ultralight aircraft” to smuggle marijuana across the border.  At the same time, the use of commercial airlines to smuggle drugs has been on the decline.
• Asian drug trafficking organizations were to blame for the resurgence in availability of ecstasy, but Mexican drug traffickers continued to represent the single greatest threat.
• Imprisoning drug users affects the entire criminal justice system, and substance abuse within the prison system is widespread.
• Criminal gang structures have strengthened and stabilized the drug supply in local markets, making it more difficult for police to disrupt.

The report concludes that the availability of most drugs will likely increase in 2010, primarily because of increased production south of the border.

A PDF version of the report is embedded below.

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The 2010 Jessup Cup winners and judges. (White & Case LLP)

A team of Australian law students won the top prize at the Philip C. Jessup International Law Moot Court Competition this weekend in Washington, D.C., according to a news release. The students, from Australian National University in Canberra, are Ellen Chapple, Sarah Lynch, Rohan Kapur, Samuel Thorpe and Sneha Rangnath.

This year’s competition, sponsored by White & Case LLP, included 127 teams from 76 countries. This year marked the largest international rounds in the 51-year history of the competition. Students presented written or oral arguments on an international law question dealing with issues of sovereignty, the right to self-determination and the lawfulness of measures taken to protect the economic resources of a state.

The championship round was held at the Capital Hilton in Washington, D.C., on March 27 and judged by Judges Stephen M. Schwebel and Dame Rosalyn Higgins, both former presidents of the International Court of Justice, and Harold Koh, legal adviser to the State Department.

A former federal prosecutor in Seattle, who was one of the nine U.S. Attorneys dismissed in the 2006 U.S. Attorney firing scandal, said Tuesday night that politics is the impetus behind Republican lawsuits challenging the constitutionality of the new health care law, Seattle radio station KIRO reported Wednesday.

John McKay (Seattle University)

John McKay, who was the U.S. Attorney for the Western District of Washington from 2001 to 2006, said the suits brought by mostly Republican state attorneys general, including Washington Attorney General Rob McKenna, don’t have a legal standing.

McKenna, a possible contender for the 2012 GOP gubernatorial nomination, says it is unconstitutional to require people to purchase health insurance beginning in 2014 and to make state Medicaid programs admit more enrollees.

“These are policy questions and they’re political debate,” McKay said, according to the radio station. “Perhaps the filing of these cases is not such a pure exercise and the fact that it’s not going to go so quickly might not concern some of those who filed it.”

The former U.S. Attorney was speaking at the University of Washington during a panel debate on the health care legislation, which President Barack Obama signed into law last week. All of the participants in the debate agreed that the suits don’t have a legal standing, KIRO said.

The Justice Department has vowed to “vigorously defend� the health care law, receiving support from four governors, including Washington Gov. Christine Gregoire (D).

A decade of private antitrust lawsuits for Microsoft Corp. came to a quiet end on Tuesday when a federal judge in Maryland granted Microsoft’s motion for summary judgment and dismissed the last pending suit against the software giant that followed the government’s landmark monopolization case.

David Tulchin (Sullivan & Cromwell)

Around 200 cases followed the 1999 ruling in U.S. v Microsoft that found that Microsoft used its dominance in the operating system market to crush potential rivals.

Microsoft’s general in the battle against the private suits, Sullivan & Cromwell’s David Tulchin, sounded a note of relief as he traveled back to New York from a Philadelphia hearing Wednesday morning.

“It has been a long time,” Tulchin said. “Sometimes the legal system moves a little more slowly than we would like, but all things good and bad must come to an end, and it’s time for this to be over.”

Tulchin reminisced about the good: a half-dozen arguments in the 4th Circuit Court of Appeals, another half dozen in state supreme courts, two state court trials, visits to 40 states and a goldmine of unused frequent flier miles.

He also reflected on the not so good: “I thought we’d probably be done with it within five or so years,” he said.

The suit dismissed on Tuesday was brought by software maker Novell Inc. in November 2004 and involved the word-processing program WordPerfect. Novell acquired the software in 1994 and sold it, at a significant loss, two years later.

In its complaint, Novell accused Microsoft of using its monopoly in the operating system market to hurt WordPerfect and promote its own word-processing software, Microsoft Word. One Microsoft executive told investor Warren Buffet, according to the ruling, “[i]f we own the key ‘franchises’ built on top of the operating system, we dramatically widen the ‘moat’ that protects the operating system”.

In dismissing the case, Judge J. Frederick Motz, of the U.S. District Court for Maryland, said when Novell sold WordPerfect and other products, it also sold the right to any claims on them.

The case took so long to resolve, in part because it was filed several years after most of the others. In 2004, Microsoft and Novell announced a $536 million settlement to resolve some disputes, but couldn’t come to an agreement on the WordPerfect claims.

In his ruling, Motz said: “I find that Novell no longer owns the claims and may not pursue them here.” He also explained how he would rule on the merits of the claims if the 4th Circuit overturned his decision. Of the two remaining counts, one would survive Microsoft’s motion for summary judgment while the other would not, he said.

Novell lawyer R. Bruce Holcomb who is a partner at his own firm Adams Holcomb, did not immediately return a call seeking comment, but did tell Main Justice in an interview last week: ”It has been going on for years, somebody has to be the last.”

That company was asking for hundreds of millions in damages, Tulchin said. After a seven-week trial, the jury returned a verdict of $1 and sided with Microsoft on all the antitrust claims. “That was a great victory,” he said.

Tulchin said that he has visited every state but one — Arkansas — thanks in large part to his work for Microsoft.

“I have to go to Memphis in a month,” he said. “I will walk across the bridge” to Arkansas.

The state of Wisconsin also announced on Tuesday it was collecting $80 million to purchase technology for low-income schools as part of its own 2006 settlement with Microsoft that resolved a related antitrust lawsuit.

A former Drug Enforcement Administration agent who said the CIA spied on him while he was stationed in Burma prevailed on Tuesday in his 16-year legal fight with the government.

A federal judge in the District of Columbia endorsed a $3 million settlement with Richard A. Horn, a former narcotics officer who sued the government in 1994 for allegedly tapping his phone calls illegally, according to McClatchy Newspapers. Horn, who was forced out of his job, said he had a contentious relationship with CIA and State Department officials looking to de-emphasize Burma’s help in an anti-narcotics program.

U.S. District Judge Royce Lamberth expressed frustration over the government’s handling of the case, which had been secret for 15 years.

The lawsuit stayed sealed until last year, shortly before the Justice Department agreed to the $3 million settlement. The government invoked the state secrets privilege, which allowed the government to refrain from any acknowledgment of wrongdoing.

“It does not appear that any government officials have been held accountable for this loss to the taxpayer,” Lamberth wrote in a memo. “This is troubling.”

“[W]hile the government makes no admission of wrongdoing in the settlement, the court is persuaded that the government must have at least found them credible to pay the plaintiff $3 million to settle the case,â€� the judge added. Lamberth asked the DOJ to refer the case to congressional intelligence committees and the departments’ inspectors general. The judge agreed to drop potential disciplinary proceedings against CIA officials, but will not formally do so until he has been assured that the allegations have been referred to congressional intelligence committees and the inspector general offices.

A DOJ spokesman declined to comment to McClatchy Newspapers.

The Justice Department tends to tout its successful prosecutions of tax fraud cases right before April 15 each year, according to a new study set to be published in the Virginia Tax Review.

For the study, Joshua D. Blank of New York University School of Law and Daniel Z. Levin of Rutgers Business School analyzed 782 news releases issued by the Department of Justice Tax Division from 2003 through 2009, in which the DOJ announced a civil or criminal tax enforcement action against a taxpayer.

The study, first reported by The New York Times’ Economix blog, found that DOJ disproportionately issued tax enforcement news releases during the weeks immediately prior to Tax Day — the April 15 deadline day for the filing of most individual tax returns — compared to the rest of the year. According to the authors, the spike is likely by design:

By presenting individual taxpayers with vivid examples in which the I.R.S. has detected tax fraud — whether it involves a popular celebrity’s phony business deductions, a high-profile banker’s offshore bank account or a local tire salesman’s underreporting of gross  income — the government may provide an individual taxpayer with available images that showcase the I.R.S.’s detection capabilities. Because the government consistently provides more of these images to individual taxpayers during the weeks leading up to Tax Day than it does during other times of the year, individual taxpayers may draw upon these available images as they teeter on the decision to claim questionable tax positions on their annual individual tax returns.

Read the full article here.

Southern District of New York U.S. Attorney Preet Bharara has established a Civil Frauds Unit, the Manhattan-based U.S. Attorney’s office announced Wednesday.

Preet Bharara (DOJ)

The Civil Frauds Unit within the office’s Civil Division will prosecute large-scale economic crimes including mortgage and health care fraud. The new fraud unit is designed to serve as a complement to the Complex Frauds Unit, which was formed late last fall in the office’s Criminal Division. The new unit will give SDNY prosecutors more tools to fight economic crimes, including a lower burden of proof than is needed in criminal fraud cases.

The new unit will be led by Assistant U.S. Attorney Sean C. Cenawood, who had previously served as the 0ffice’s affirmative civil enforcement coordinator, health care fraud coordinator and Immigration Unit chief. He has been with the office since 1997.

His deputies will be Assistant U.S. Attorneys Rebecca C. Martin and Lara K. Eshkenazi. Martin, who joined the office in 2001, was the health care fraud coordinator. Eshkenazi, who has been with the office since 2003, served as a line attorney.

They will be assisted by more than two dozen Assistant U.S. Attorneys who will handle cases in the office’s civil and criminal fraud units.

“The Assistant United States Attorneys in the Civil Frauds Unit, working side by side with the prosecutors in our Complex Frauds Unit, will be charged with using every weapon in our diverse arsenal to combat financial fraud and to vindicate its victims,” Bharara said in a statement. “Protecting the public fisc has always been a principal priority of this office, and the formation of this new unit underscores both that long-standing promise and our renewed commitment, in resources and vision, to fighting financial fraud. The bright and dedicated men and women of the Civil Frauds Unit are exceptional public servants deeply committed to this important mission.”

Please send news of moves, promotions and honors to personnelchanges@mainjustice.com.

Charles J. Hynes (gov)

Even though the 2010 election season is far from over and the 2012 cycle has yet to begin, some people in New York have set their sights even farther down the line. Two former federal prosecutors are being mentioned as possible candidates for the 2013 Brooklyn district attorney race, according to an article published online Wednesday by City Hall, a bimonthly publication that covers the New York political scene.

Current Kings County District Attorney Charles J. Hynes has held the top spot since 1987. In his 2009 election bid –  where Hynes had the backing of the Democratic, Republican, Conservative and Working Families parties –  he won all but four of the votes cast, which went to write-ins, according to the Kings County Board of Elections.

In recent months, Hynes, 74, has told close associates he will only leave the district attorney’s office “in a box,� but his next election could prove more difficult because of speculation about his advancing age and his health, as he underwent open-heart surgery last summer.

Zachary Carter (Dorsey & Whitney LLP)

Most believe Hynes will finish his current term, but some think he may face a serious challenge in 2013. Because of the demographic makeup of Brooklyn, a formidable black candidate would have an edge, according to the news Web site.

Two potential candidates mentioned in legal circles include former Brooklyn U.S. Attorneys Zachary Carter and Loretta Lynch, both of whom are black. Carter, who served as the U.S. Attorney for the Eastern District of New York from 1993 to 1999, is currently a partner at Dorsey & Whitney LLP. Lynch, Brooklyn’s U.S. Attorney from June 1999 to May 2001, has been a partner at Hogan & Hartson LLP in New York since January 2002 and has been nominated by President Barack Obama to hold the position again.

Loretta Lynch (Hogan & Hartson)

Carter declined to say whether he was considering running for Brooklyn DA but he did tell City Hall that he would not challenge Hynes. Lynch, even if she is confirmed at U.S. Attorney, would be a more likely candidate if Obama is not re-elected and a Republican president names a replacement for her as U.S. Attorney, the Web site said.

Other possible candidates include Council Member Lew Fidler; Council Member Letitia James; Assembly Member Hakeem Jeffries; Assembly Member James Brennan, state Sen. John Sampson — who unsuccessfully challenged Hynes in 2005; and Taxi and Limousine commissioner David Yassky, the Web site reported.

South Carolina Attorney General Henry McMaster

Former U.S. Attorney Henry McMaster, and now the state’s attorney general, is one of four candidates seeking the Republican nomination for South Carolina governor in the June primary this year. The deadline for major party candidates to file with the South Carolina State Election Commission was Tuesday.

Three Democrats also will vie for their party’s nomination in a separate primary on the same day.

McMaster, who served as the state’s U.S. Attorney from 1981 to 1985, announced his candidacy last August, but did not formally file his candidacy until Tuesday. In the primary, McMaster will face Rep. Gresham Barrett, Lt. Gov. Andre Bauer and state Rep. Nikki Haley.

Hopefuls on the other side of the aisle are state Superintendent of Education Jim Rex and two state senators — Robert Ford and Vincent Sheheen.

The candidates are hoping to fill the open seat currently occupied by Gov. Mark Sanford (R), who is term-limited.