More than a year before President Obama nominated federal prosecutor Loretta Lynch to be attorney general, a former federal judge quietly called on Congress to investigate her U.S. attorney’s office for trampling on victims’ rights.

Paul Cassell, a law professor at the University of Utah, said Ms. Lynch’s office, the U.S. Attorney for the Eastern District of New York, never told victims in a major stock fraud case that a culprit had been sentenced — denying them a chance to seek restitution of some $40 million in losses.

Mr. Cassell, in written remarks to a House Judiciary Committee panel in 2013, said if prosecutors were using secretive sentencing procedures to reward criminals for cooperating with them, it could violate the Crime Victims Restitution Act.

“Every day that the office withholds notice from the victims in this case about the continuing proceedings that are occurring in this case is a day in which the office is violating the CVRA,” he wrote, urging the subcommittee to conduct its own inquiry into Ms. Lynch’s office.

The Judiciary Committee acknowledged in an email to The Washington Times that it never followed up to contact Ms. Lynch’s office, but added the panel “has not ruled out sending an inquiry to the U.S. attorney’s office regarding its handling of victims’ rights.”

Ms. Lynch’s nomination to be attorney general will soon come before the Senate Judiciary Committee, now controlled by Republicans, and the case could surface as a topic of inquiry.

“I do think it’s something that the Senate should be investigating as part of the confirmation process,” Mr. Cassell said in an interview.

Meanwhile, a lawyer has filed a Supreme Court petition to force more records in the criminal case to be unsealed, charging that Ms. Lynch’s office has failed to explain secret deals it gives cooperators.

“These deals, indisputably in defiance of mandatory federal forfeiture and restitution laws, allow cooperators to keep the proceeds of their crimes in exchange for their cooperation and keep their reputation intact, hidden behind secret dockets,” said attorney Frederick Oberlander, who has sued the businessman on behalf of fraud victims.

Brian Fallon, a Justice Department spokesman, said in a statement that the Supreme Court petition “raises no claims of any merit.”

“Many of these claims have already been litigated on no fewer than three prior occasions, and each time the courts have rejected them,” he said. “One court went so far as to warn the petitioner against any future frivolous findings or else potentially face court-imposed sanctions.”

The petition isn’t the first time that Mr. Oberlander and his attorney, Richard Lerner, have sought to pry loose sealed records in the long and complicated case of Felix Sater, the businessman at the center of the stock fraud.

Pump and Dump

Sater pleaded guilty in 1998 in a racketeering stock “pump and dump” fraud scheme, but his case remained on a secret docket in federal court in Brooklyn, New York, as he cooperated with the government in other investigations, court records show.

The secrecy surrounding the 1998 criminal case allowed Sater to resume “his old tricks” and defraud new victims of hundreds of millions of dollars, Mr. Oberlander charged in a civil racketeering lawsuit he filed against Sater in recent years. An attorney for Sater disputes that account, saying his client has been a “model citizen.”

When he sued, Mr. Oberlander included leaked copies of Sater’s pre-sentencing report and a copy cooperation deal for the 1998 case, which were under seal. The disclosure set off a fierce and contentious legal battle between federal prosecutors and Mr. Oberlander and his attorney, Richard Lerner, who both have faced a contempt investigation after the disclosure.

Eventually, more than a decade after his guilty plea, Sater was sentenced and fined $25,000 in a hearing that took place without notice to victims shortly before Ms. Lynch took over the U.S. Attorney’s Office for the Eastern District of New York, according to records.

In court papers, Mr. Oberlander and Mr. Lerner noted that Sater faced nearly 20 years in prison and a mandatory $40 million in restitution and $80 million forfeiture, but the sentencing judge imposed no restitution or confinement. And victims weren’t at the hearing to object because they were never told about the sentencing in the first place, according to the attorneys’ Supreme Court petition.

Ms. Lynch wasn’t U.S. attorney during the sentencing hearing, but her office has since fought efforts to unseal records in the case.

Mr. Fallon also said many of the key developments in the case “occurred outside of Ms. Lynch’s stints as U.S. attorney,” first in 1999 and again in 2010. Still, court records show numerous examples of Ms. Lynch’s office pushing to keep details about the case from becoming public.

The government’s arguments for keeping records sealed — many of them redacted or under seal — have been upheld in rulings by the U.S. District Court in Brooklyn and by the Court of Appeals for the Second Circuit despite arguments pushing for more transparency from victims’ rights and press groups.

‘Most serious matters of national security’

Robert Wolf, an attorney for Sater, said his client provided “extraordinary cooperation” after his 1998 guilty plea, including working on “the most serious matters of national security, battling our greatest enemies at tremendous risk to his own life and for the benefits of all citizens of our country.”

In an email, Mr. Wolf called the $25,000 fine Sater was ordered to pay “more than merited” and a “measure of gratitude” for unspecified cooperation that saved “potentially tens of thousands, if not millions, of our citizens’ lives.”

Neither Sater’s lawyer nor the Justice Department would discuss the nature of his cooperation.

Mr. Wolf said Sater has gone on to build a business and has been a “model citizen.”

“From job creation to philanthropy, Mr. Sater has been clear of all legal allegations,” he said.

Mr. Wolf also discounted what he called “sham concerns” about victims’ rights, accusing the attorneys suing Sater of a “legal shakedown” aimed at using the threat of public disclosure to force a lucrative settlement deal.

Mr. Oberlander, however, said in an email that the case provides a troubling example of prosecutors evading federal forfeiture and restitution laws as a reward for cooperation.

“And Ms. Lynch’s office refuses to notify crime victims of their restitution rights when restitution and notice to victims are mandatory under federal law,” he said.

Mr. Lerner said the Sater case was “no mere aberration,” charging that “Ms. Lynch’s success as a prosecutor has been dependent upon her office’s repudiation of constitutional and statutory law.”

The Supreme Court petition filed by Mr. Lerner of behalf of Mr. Oberlander also details the involvement in the Sater case of two other Justice Department officials — Marshall Miller, principal deputy assistant attorney general in the criminal division, and Leslie Caldwell, assistant attorney general in the criminal division.

Mr. Miller was the victims’ rights coordinator for the federal prosecutor’s office in Brooklyn, while Ms. Caldwell, a former prosecutor in the office, later represented Sater at his sentencing.

At the sentencing hearing, Ms. Caldwell said Sater was “really deserving of the full measure of leniency” given the “extraordinary circumstances of his cooperation,” according to transcripts.

Outside concerns

While attorneys debate Sater’s sentencing deal, two outside groups — the Reporters Committee for the Freedom of the Press and the National Organization for Victim Assistance — have filed briefs in recent years pushing for more transparency in Sater’s case and questioning whether the secrecy has limited public oversight and stifled the voice of victims.

In a May letter to judges on the 2nd U.S. Circuit Court of Appeals, attorneys for the Reporters Committee said they first challenged the “super sealing” of the Sater case in 2012.

Some records were later unsealed in March 2013, but the district court left about 25 percent of the records under seal after secret “ex parte” meetings closed to the press, public and the attorneys who were seeking to unseal the documents, according to the committee.

Ms. Lynch’s office argued that Sater’s safety was one consideration for sealing, but the Reporters Committee said the information about his case already was available and the subject of media reports, which undercut that argument.

“When the press and public have no way of holding courts accountable for giving informants special treatment, secret defendants can abuse the system and endanger the public,” Bruce D. Brown, the committee’s executive director, wrote in a letter in May.

In 2012, two years into Ms. Lynch’s tenure at U.S. attorney, Mr. Cassell filed a separate brief on behalf of the National Organization for Victim Assistance. They argued that Ms. Lynch’s office appeared intent on preventing the public from learning anything about how prosecutors treated crime victims in the case.

The victims’ rights group said it had asked Ms. Lynch’s office whether it followed through on restitution for crime victims as the law requires in the case. The group received no explanation other than a brief email to Mr. Cassell saying the office “complied in all aspects of the law.”

“At this point,” the attorneys argued, “the government is using the alleged sealing orders it may (or may not) have obtained in this case not as a legitimate law enforcement tool but rather as an excuse for obscuring what happened.”

Mr. Cassell a year later asked the House Judiciary Committee’s Subcommittee on the Constitution to inquire into the matter. But that didn’t happen.

In a statement, the Judiciary Committee said it incorporated Mr. Cassell’s concerns into legislation improving services for crime victims at all federal prosecutors’ offices. But the House panel never contacted Ms. Lynch’s office directly.

“The committee takes such requests seriously, and the precedent is often to use alternate strategies other than a formal congressional inquiry,” the committee said in an email statement — though the committee said it “is also open to examining this issue further and has not ruled out sending an inquiry to the U.S. attorney’s office regarding its handling of victims’ rights.”

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