It's not every day that a federal district judge accuses the government of misleading the Court and demands corrective action. But it's happening in the Urbana Division of the Central District of Illinois. I posted here in March regarding the federal case against former Congressman Aaron Schock. Among other items of alleged government misconduct, the defense maintained that prosecutors improperly commented to grand jurors on Schock's failure to testify, in violation of his Fifth Amendment Privilege Against Self-Incrimination. The defense relied in part on an affidavit by a dismissed grand juror. After unequivocally denying the grand juror's allegation, the government clarified the record, more than six months later, admitting that government counsel "commented on or addressed Mr. Schock's testifying or decision not to testify before the grand jury" on eleven occasions. U.S. District Judge Colin Bruce was not amused, and ordered the government to review each of its previous filings "to ensure that no more false or misleading claims were made." Judge Bruce also gave the government 14 days to file a memo "detailing any further misrepresentations or misleading statements." Here is Judge Bruce's Order Requiring Government Memorandum re Misrepresentations. The government responded yesterday, denying that it had misrepresented anything to the Court, asking the Court to reconsider its finding regarding misrepresentation, and representing further that it had not intentionally made any materially misleading statements in its prior filings. Here is the Government's Compliance with the Court's October 3 Order and Motion to Reconsider. Schock, represented by George Terwillliger, Bob Bittman, Benjamin Hatch, Nicholas Lewis, and Christina Egan of McGuire Woods in DC and Chicago and by Jeffrey Lang of Lane & Waterman in Davenport, Iowa, wasted no time, not even a day, in firing back. Here is Schock's Motion to Strike or in the Alternative Leave to File a Response. Here as well is Schock's Proposed Response to Government's Compliance. In a future post, I will examine the nature of the government's comments to the grand jurors.
Category: Judicial Opinions
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The Supreme Court denied cert this morning in Farha v. United States leaving the 11th Circuit decision (Clay) on mens rea standing. For prior discussion of this case see here.
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It is always difficult to predict how someone will opine if they are on the Supreme Court. This is especially true if the prior judicial opinions do not cover a wide span on issues. In the case of the nominee, Judge Gorsuch, we do have some opinions to examine.
It is clear that he has excellent credentials from schooling and prior service on the bench. Interestingly, however, is that Judge Gorsuch's ratings are below those held by Judge Merrick Garland, who never received a hearing on his nomination. (see here) And in many ways Judge Garland had superior experience as the Chief Judge for the District of Columbia. After all, his court saw many cases that involved issues of national concern, like national security, including those dealing with Guantanamo. Further Judge Garland is neither a far liberal nor a conservative, having offered to the bench a centrist that would be more appeasing to an already split nation. Everyone seems to agree that Judge Gorsuch presents a conservative approach. (see here and here)
But looking solely at Judge Gorsuch, and not the unfortunate circumstance of the failure of Judge Garland to have the hearing that Judge Gorsuch will now receive, where does Judge Gorsuch stand on white collar matters is the question.
Typically, those on the right tend to be pro-prosecution on Fourth Amendment and drug crimes. In contrast, the same position is not taken in a white collar case. Professor Kelly Strader in his article The Judicial Politics of White Collar Crime, documents this paradox. Judge Gorsuch has a strong record of supporting the prosecution. (See, e.g., United States v. Mendivil, 208 F. App'x 647 (10th Cir. 2006)(affirming drug related conspiracy). And some of these cases might be considered white collar cases (See, e.g., United States v. Carnagie, 426 F. App'x 640 (10th Cir. 2011)(affirming a sec. 1001 HUD related case).
But if one looks at cases beyond the Fourth Amendment, like a gun-related case – we see him emphasizing a strict statutory interpretation. (See United States v. Games-Perez (dissenting)). Justice Scalia was particularly strong in enforcing strict statutory interpretation in white collar cases (e.g., Skilling (concurring opinion), Sun-Diamond Growers, McCormick (concurring), Santos). Justice Scalia was not shy to use vagueness and the Rule of Lenity to accomplish having a white collar statute strictly construed. And in this regard there is a strong similarity seen with Judge Gorsuch. Judge Gorsuch's opinion in United States v. Renz, 777 F.3d 1105 (10th Cir. 2015) provides a glimpse of his statutory interpretation analysis. He includes in the decision a diagram as he takes apart the elements of the statute in a methodical manner. The opinion itself is well-organized, references precedent, and resorts to the Rule of Lenity when clarity is an issue. He was unwilling to accept the government's interpretation of this firearm statute.
So what can we expect if he joins the Supreme Court? It is somewhat uncertain when examining the white collar area. But it does appear that the government may have some problems if it tries to stretch statutes or if the statutes are not clear.
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An important issue to watch this year is the ongoing battle over access to data collected by companies and stored overseas. This issue heated up last year when Microsoft won its Second Circuit challenge of a 2013 warrant for emails housed in an Irish data center. In the Second Circuit decision from July 2016, the court determined that U.S. law did not allow the enforcement of warrants for customer email content housed overseas, even though Microsoft is a U.S. service provider.
Last week, the Second Circuit denied rehearing the Ireland case by a divided 4-4 vote. The decision contains a number of interesting arguments from the judges and is worth a read for those involved in cases with international data issues.
The Second Circuit decision now sets the case up for a possible Supreme Court challenge by the government. According to Orin Kerr, writing in the Washington Post, however, Senator Sessions indicated during his confirmation hearings that he might seek a legislative remedy to address the Microsoft issue. Either way, this topic is one to keep an eye on in 2017.
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Check out Walter Pavlo, Forbes, Jan. 5, 2017 – providing highlights of some of the white collar cases of interest for 2017 – White Collar Cases To Watch In 2017
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In an unanimous decision, the Supreme Court in Shaw v. United States rejected defendant's argument that section 1344(1) "does not apply to him because he intended to cheat only a bank depositor, not a bank." The Court found that the defendant's scheme to cheat another "was also a scheme to deprive the bank of certain property rights." That said, the Court noted that there is no need to show "that the defendant intend that the victim bank suffer" a financial harm. The Court summed up stating:
"The statute is clear enough that we need not rely on the rule of lenity. As we have said, a deposit account at a bank counts as bank property for purposes of subsection (1). The defendant, in circumstances such as those present here, need not know that the deposit account is, as a legal matter, characterized as bank property. Moreover, in those circumstances, the Government need not prove that the defendant intended that the bank ultimately suffer monetary loss. Finally, the statute as applied here requires a state of mind equivalent to knowledge, not purpose." (citations omitted)
But the Court does leave open one important question – the jury instruction. The defendant argued that the instruction allowed for a guilty finding for one who deceives the bank but not one who "deprive[s]" the bank of anything of value. The Court stated that it is necessary that the "scheme be one to deceive the bank and deprive it of something of value." Sending it back to the 9th Circuit, the Supreme Court instructs the lower court "to determine whether the question was fairly presented to that court and, if so, whether the instruction is lawful, and, if not, whether any error was harmless in this case."
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Salman is in. Newman is out. Justice Alito writes the opinion for an 8-0 Court. Here is the opinion in Salman v. United States.
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Readers of this Blog are no doubt familiar with United States v. Reddy Annappareddy, the District of Maryland case in which a guilty verdict was overturned (and new trial granted) with the grudging, belated concurrence of government prosecutors, because the government presented false testimony to the jury. The indictment was then dismissed with prejudice, over government objection, due to the government's destruction of potentially relevant evidence and the trial court's finding of prosecutorial misconduct. All of this was the result of the tireless and brilliant work of Annappareddy's post-trial attorneys, Josh Greenberg and Mark Schamel of Womble Carlyle. See my prior posts here, here, here, here, and here. Since my last post, the government moved to withdraw its appeal, the Fourth Circuit granted the motion, and the mandate has issued.
Now, Josh Greenberg, who played a key role in devising and implementing the post-trial strategy, has decided to open his own shop, focusing on white collar criminal defense, civil litigation, and appeals. Congratulations to Josh. We wish him the best.
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This week in U.S. v. Free, the Third Circuit sent a sentencing case back to the district court for further proceedings, because the sentencing judge appeared to have based his loss calculations on defendant's harm to "the integrity of the judicial process." Free was convicted after a jury trial on bankruptcy fraud charges. The sentencing court found that Free lied and obstructed justice throughout the bankruptcy court proceedings and hid assets totaling over $1 million. But in the end all creditors were paid in full and it appears that Free filed for bankruptcy for reasons unrelated to defrauding his creditors of the funds he owed them. The Third Circuit held that it is improper to base loss calculations on harm to the integrity of the judicial process, as opposed to real harm inflicted on the actual victims of a bankruptcy fraud. The Third Circuit, however, virtually invited the district court to upwardly vary on remand, based on Free's obstructive conduct.
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I agree with my colleague Prof. Podgor that DOJ made the "right decision" to drop the prosecution of former Virginia governor Robert McDonnell. Under the narrow definition of "official act" given by the Supreme Court a re-prosecution was doomed. I further agree with Prof. Podgor that McDonnell's legal team, led by Hank Asbill and Noel Francisco, deserves plaudits for its determined and outstanding lawyering.
I do not, however, criticize DOJ for bringing this case. McDonnell's acts – accepting $175,000 in money and gifts in exchange for favorable treatment for the donor – although ultimately determined not to be "official acts" and thus not criminal, were unseemly and corrupt. That the Commonwealth of Virginia, in its wisdom or lack of it, chose not to criminalize such activity to me was a reason for federal prosecution, not for abstention. To be sure, the government should have been aware that there was Supreme Court case law arguably undermining its position. On balance, the egregiousness of McDonnell's conduct, I believe, justified a prosecution, even if it "pushed the envelope."
The McDonnell decision will allow federal prosecutions of politicians accepting things of value for favorable votes or actions on legislation or favorable decisions awarding governmental appointments, contracts and benefits, the areas within which most corruption cases fall. It will, however, eliminate or preclude almost any prosecution for payments to officials for access, referrals and introductions, allowing donors an advantage over non-payers. "Pay-for-play" systems do not guarantee winning a contract, but do allow one to be among those considered – a giant and necessary step. Thus, the decision will, like Citizens United, most benefit the rich, powerful and politically-connected.
I, like many others, was surprised by the unanimity of the court. Although I am no expert on Supreme Court internal politicking, I suspect some justices might have gone along with the decision to prevent a broader decision which would have greatly limited, or even eliminated, federal prosecutions of state and local corruption, either by finding the term "official acts" constitutionally void for vagueness, or on federalism grounds. In his opinion, Chief Justice Roberts mentioned, but did not rule on, both considerations.
I cannot dismiss an undiscussed "elephant in the room," alluded to by Prof. Podgor. The American election system commonly allows campaign contributions to be rewarded by at the least access to elected and appointed officials. It is extremely doubtful whether McDonnell would have been prosecuted for accepting campaign contributions and rewarding the donor with access to state officials. It seems to me extremely difficult to make a lawful/unlawful distinction between situations involving gifts to politicians for their personal use, as in McDonnell, and those involving gifts to politicians for campaign purposes. Absent such a distinction, an affirmance of McDonnell might have led to cases concerning campaign contributions, which might have led to an upheaval in campaign financing practices generally accepted in America. Thus, it is not surprising that a host of former Counsels to the President and Attorneys General submitted amicus briefs in support of McDonnell, a fact noted with apparent respect in the opinion.
Lastly, I wonder whether the Court was wary of allowing federal prosecutors expansive power to prosecute political officeholders. There is always a danger – at least theoretical – that a prosecutor will misuse her power to indict political opponents, as is not infrequently done in foreign nations, and perhaps occasionally done in the United States. It may well be that the case should be considered primarily as a limitation of prosecutorial and executive branch power.
MattBray.net 