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Paths Back to Professional Work after a Felony Conviction

Client Advisory

November 15, 2007

In March 2007, when I. Lewis "Scooter" Libby was convicted of felony charges related to his grand jury testimony, he faced not only the prospect of years in prison, but also something with even longer-lasting consequences. With a felony conviction, Libby, a lawyer, faced disbarment from his profession, and a prohibition from the very work he had hoped to return to after leaving government. 

In this regard, Libby was just like thousands of other so-called “white collar” defendants caught up in the criminal justice system each year. Most, in fact, plead guilty rather than go to trial, and face little prison time — the median sentence for typical federal “white collar” crimes such as larceny, fraud, embezzlement, and violations of the antitrust laws, are all six months or less, compared to an overall average of more than three years.[1] But professionals with felony convictions often confront a tremendous loss of employment opportunities. The prohibitions can seem especially harsh for professionals whose crimes had nothing to do with their professions, and for those who provided significant assistance to the government to convict the more culpable. Oftentimes, the government prosecutors praise the individual for his or her tremendous assistance, yet employers only see a felony and shut the door on employment opportunities.

Laws differ from state to state, but the list is long for professions for which state or federal law restricts individuals from working if they have a felony conviction:

  • Members of the securities industry
  • Insurance brokers
  • Members of the retail banking industry 
  • Medical doctors and other workers in the health care field
  • Accountants
  • Lawyers
  • Fiduciaries for trusts
  • Real estate brokers and salespersons
  • Architects
  • Psychologists
  • Teachers
  • School administrators[2]

Convicted felons are also often precluded from serving in any public office or on juries, and cannot participate in many business opportunities such as the ability to receive state licenses or bid on government contracts. 

Private employers in unregulated industries may also create barriers for convicted felons to find work. Private employers are legally entitled to ask job applicants whether they have been convicted of a crime, and they routinely do so and run criminal background checks on new hires. And while private employers cannot refuse to hire a person based solely on the criminal conviction, they can refuse to hire a person if there is a “direct relationship” between the conviction and the position.[3] Under New York law, and in many other states, if denied employment or licensure based upon a conviction, the applicant is entitled to a written statement of the reasons for denial.[4]

For many professionals caught up in the criminal justice system, these prohibitions create significant road blocks for their return to meaningful employment in their old line of work, or to seek work in related fields where their skills may apply. But along with the list of prohibitions and bars, professionals with felony convictions have many options to petition to return to their former field or to enter a new profession. Indeed, virtually every industry has some mechanism to allow individuals to plead their special circumstances to seek reinstatement.

The gold standard for relief is what Libby sought but has not (to date) received: a Presidential pardon. The President can pardon any individual convicted of a federal crime. Individuals convicted of state crimes must receive pardons from the appropriate state governor.[5] If President Bush had issued a full pardon, Libby not only would have avoided the 30-month prison sentence the judge had ordered, but all collateral consequences of his conviction. In the end, Bush decided only to commute Libby’s prison sentence, leaving in place the felony conviction and fine, in part because of the collateral consequences. President Bush explained:

My decision to commute his prison sentence leaves in place a harsh punishment for Mr. Libby. The reputation he gained through his years of public service and professional work in the legal community is forever damaged. * * * The consequences of his felony conviction on his former life as a lawyer, public servant, and private citizen will be long-lasting.[6]

The law licensing boards in Washington D.C. and Pennsylvania subsequently suspended Libby’s license because of the felony conviction. 

Of course, pardons are unique political options not available to most individuals. But individuals without such high-powered connections or special cases have other options at their disposal to return to professional work.

The cornerstone of any action is to seek what New York calls a “Certificate of Relief From Disabilities”[7] — something that was once common but has unfortunately fallen out of general use. The Certificate of Relief is issued by a state judge and provides that the individual cannot be automatically barred from any employment because of the felony conviction. With a Certificate of Relief in hand, individuals can at least petition the employer, agency, or state for full consideration of their application, since the felony conviction itself no longer serves as an automatic bar to the position or license. In fact, in New York, private employers are required to consider the Certificate of Relief in making their employment decisions, and the Certificate of Relief creates a “presumption of rehabilitation” of the offense.[8] Certificates of Relief are therefore critical tools for individuals to use when seeking private employment, providing employers with just the level of assurance that they need to hire a person they like but have concerns about because of the criminal history.

In New York and many other states, courts can issue a Certificate of Relief on the date of sentencing or anytime afterward, even years later, although the process can take months to complete. Individuals can seek a Certificate of Relief even if they were convicted out of state or in federal court. Many other states provide similar relief, although federal courts do not have an equivalent procedure.[9] 

Securing a Certificate of Relief is enormously helpful, but not necessary, in seeking reinstatement in the particular field of interest. In the securities industry, for instance, members of the Financial Industry Regulatory Authority (FINRA)[10] can apply to FINRA for permission to employ a person with a felony conviction or who is otherwise prohibited from association in the industry, and submit the Certificate of Relief as part of that application if available.[11] In our experience, FINRA takes a fair and nuanced approach to these so-called “MC-400” applications, and considers the full circumstances surrounding the individual’s past acts.[12] Individuals also may apply to the SEC for consent to associate with an entity in the securities industry that is not a member of FINRA or a stock exchange.[13] Therefore, even individuals who are “permanently barred” from the securities industry have the opportunity to work again in the industry — leading one court to quip: “This is a remarkably porous definition of a permanent bar.”[14]

In the insurance industry, while federal law prohibits felons from working in the field, it also permits the state insurance agency to make exceptions.[15] Similarly, in law, medicine, accounting and other professions, state licensing boards will consider applications that describe the individual circumstances and reasons why the individual should be exempted from the prohibition. Individuals barred from the banking industry have a mechanism to seek reinstatement through the FDIC.[16] 

Fundamental to all of these discretionary decisions is that the individual have a good, compelling story to tell to the entity considering the application. Ideally, the individual can state that the crime was an aberration and was unrelated to the industry in which the individual seeks to work; that the individual took responsibility for his conduct; and that since the incident, the individual has not committed any additional crimes or regulatory infractions. The most common mistake occurs when convicted felons try to hide their criminal background, hoping that the new employer will not learn of the conviction — a critical mistake since Internet searches and criminal background checks are so routine and inexpensive that the conviction will inevitably come to light. The cover-up then becomes worse than the underlying infraction. Indeed, employers in all industries generally like to give individuals a second chance, but employers who may have been sympathetic if presented with the full facts up front, lose all patience for an individual who tried to hide the true facts and then later, once revealed, attempted to seek an exception. Therefore, convicted felons can often get a second chance at work in a professional capacity, so long as they take a direct and honest approach and utilize the full resources available. 


Questions regarding this client advisory may be directed to Kenneth Levine at (212-238-8622, levine@clm.com) or Michael Shapiro (212-238-8676, mshapiro@clm.com).

This article first appeared in substantially the same form in Investment Dealers’ Digest Corporate Edition magazine, October 29, 2007, at page 27, and is reprinted here with permission.


 Endnotes


[1]U.S. Sentencing Commission Preliminary Quarterly Data Report, June 30, 2007, available at http://www.ussc.gov/sc_cases/Quarter_Report_3rd_07.pdf.

[2] See 15 U.S.C. § 78c(a)(39) (securities industry); 15 U.S.C. § 78o-3(g)(2) (securities industry); 18 U.S.C. § 1033(c)(2) (insurance industry); 12 U.S.C. § 1829 (association with FDIC insured banks); 42 U.S.C. § 1320a-7 (medical field); 21 U.S.C. § 335a (generic drug industry); CGS § 20-281a (accountants); NY Surr. Ct. Prod. Act Law §707(1)(d) (fiduciaries); NY Real Prop. Law § 440-a (real estate); CGS §§ 20-316, 20-320 (real estate); CGS § 20-294 (architects); CGS § 20-192 (psychologists); CGS § 10-145b(m)(1) (teachers or school administrators). Many of these regulations prohibit work in industries only if a person is convicted for specifically enumerated crimes, rather than any felony.

[3]See N.Y. Correct. Law § 752; EEOC Compliance Manual, § 604 Appendices.

[4] N.Y. Correct. Law §§ 750-54.

[5]See U.S. Constitution, Article II, Section 2 (the President “shall have power to grant reprieves and pardons for offenses against the United States, except in cases of impeachment”); N.Y. Const. art 4, §4 (power of governor to pardon).

[6] See http://www.whitehouse.gov/news/releases/2007/07/20070702-3.html.

[7] New York Corrections Law Art. 23, §§700-706.

[8] N.Y. Correct. Law § 753(2); see also Bonacorsa v. Lindt, 71 N.Y.2d 605, 611 (1988); Arrocha v. Board of Educ. of City of New York, 93 N.Y.2d 361 (1999). 

[9]See http://sentencingproject.org/PublicationDetails.aspx?PublicationID=486 (state-by-state survey).

[10] Formerly National Association of Securities Dealers, Inc. or NASD.

[11]FINRA By-Laws, art. III, § 3(f); FINRA Procedural Rules 9520-27. http://www.finra.org/RegulatoryEnforcement/Adjudication/NationalAdjudicatoryCouncil(NAC)/TheStatutoryDisqualificationProcess/index.htm. 

[12] The “MC” stands for “Membership Continuation.”  A FINRA member who employed an Associated Person with a statutory disqualification would be liable to lose its membership unless it had gone through an MC-400 and received permission to employ the individual. 

[13]SEC Rule of Practice 193, 17 C.F.R. § 201.193(a).

[14] Rizek v. SEC, 215 F.3d 157, 161 (1st Cir. 2000); see also George Salloum, 52 S.E.C. 208, 217 n.41 (1995) (discussing process whereby person was permitted to associate with broker-dealer notwithstanding statutory disqualification).

[15] 18 U.S.C. § 1033(c)(2).

[16] See Federal Deposit Insurance Act, §19; 12 U.S.C. 1829. See also http://www.fdic.gov/regulations/laws/rules/5000-1300.html.



Carter Ledyard & Milburn LLP uses Client Advisories to inform clients and other interested parties of noteworthy issues, decisions and legislation which may affect them or their businesses. A Client Advisory does not constitute legal advice or an opinion. This document was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. © 2014 Carter Ledyard & Milburn LLP.
© Copyright 2007


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