McDonnell v. United States and Arthur Andersen v. United States are remarkably similar Supreme Court reversals. In both cases, aggressive federal prosecutors pushed obviously dubious jury instructions on all-too-willing federal district judges. In Arthur Andersen, Enron Task Force prosecutors convinced Judge Melinda Harmon to alter her initial jury charge, defining the term "corruptly." Judge Harmon's charge was right out of the form book, based on the approved Fifth Circuit Pattern Criminal Jury Instruction. The Government's definition allowed conviction if the jury found that Andersen knowingly impeded governmental fact-finding in advising Enron's employees to follow Enron's document retention policy. The 5th Circuit Pattern's requirement that the defendant must have acted "dishonestly" was deleted by Judge Harmon and the jury was allowed to convict based on impeding alone. Thus, at the government's insistence, knowingly impeding the fact-finding function replaced knowingly and dishonestly subverting or undermining the fact-finding function. This effectively gutted the scienter element in contravention of the standard Pattern definition. Local observers were not surprised by Judge Harman's ruling. Her responses to government requests are typically described as Pavlovian. Judge James Spencer, the trial judge in McDonnell, is also an old pro-government hand. Generally well regarded, he was a military judge and career federal prosecutor prior to ascending the judicial throne. In McDonnell, the government's proposed jury instructions regarding "official act" flew in the face of the Supreme Court's Sun Diamond dicta. They were ridiculously expansive, with the potential to criminalize vast swaths of American political behavior. In both cases, Andersen and McDonnell, the Supreme Court unanimously reversed. In both cases, careful attention to the law, even-handedness, and a willingness to stand up to the government would have saved taxpayer dollars and prevented human suffering. Careful attention to the law, even-handedness, and a backbone. That's what we expect from an independent federal judiciary.
Tag: Enron
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In the wake of the Schuelke/Shields report and the introduction of new discovery legislation, one has to wonder whether the Supreme Court will take a case that raises a Brady discovery issue. At their doorsteps is the case of James A. Brown, a case from the Enron days. As previously noted (here) Brown, is a former Merrill Lynch executive who "was convicted of perjury and obstruction of justice for his testimony before the Enron grand jury about a transaction between Merrill and Enron in late 1999." There are important issues here like the appropriate standard of review for Brady cases. Should it be "clear error" or should it be de novo. (see here) The case also examines "materiality," a term that has created some confusion. What must a prosecutor provide to the defense counsel. And isn't it odd that the adversary in the process is making the determination for what the defense is entitled to receive. The case looks at summaries being provided to defense counsel. Bottom line – summaries are not the same as the real thing.
In the reply brief recently filed, they argue-
"Here, as in Stevens, many exculpatory statements appear only in raw notes of government interviews of key players. In Brown, the Enron Task Force actually yellow-highlighted these notes before trial – along with prior testimony and FBI 302s – indicating that the information met the requirements of Brady and was material, but suppressed them anyway. While continuing to deny that any evidence fell within Brady, new prosecutors recently disclosed 6,300 pages including much (but still not all) of the evidence suppressed by the Task Force." (Reply Brief – Download FILED REPLY ON CERT.)
The government's brief sees things differently – Download SG OPP32312.
This case is distributed for conference on April 20th.
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The cert petition in James A. Brown v. United States (11-783) raises interesting questions regarding Brady. Brown, a former Merrill Lynch executive "was convicted of perjury and obstruction of justice for his testimony before the Enron grand jury about a transaction between Merrill and Enron in late 1999." This case was part of the "Enron barge transaction" investigation. The cert petition states that "prosecutors steadfastly denied that they possessed any Brady evidence and claimed that their production of nineteen pages of court-ordered 'summaries' exceeded their constitutional obligations." The Fifth Circuit later found the "evidence was exculpatory and 'plainly suppressed,' but 'not material.'" This was despite the fact that items had been "yellow-highlighted" by prosecutors as "selected exculpatory statements in the evidence they submitted for the district judge's pretrial in camera review." Years after the trial "new prosecutors disclosed thousands of pages of actual notes, 302s, and testimony." This cases raises the issue of what is the correct standard of review under Brady and Kyles.
The petition asks the Court to "establish three clear rules to enforce the crucial constitutional protections established in Brady v. Maryland." It states:
"First, consistent with the majority of Circuits, this Court should establish that Brady decisions must be reviewed de novo. Second, this Court should reject the Fifth Circuit's novel and dangerous approach to determining materiality, and thereby refine and reinforce the Kyles test. Third, this Court should adopt and mandate the majority rule that exculpatory evidence is material per se if the government corrupts the adversary process by providing deficient summaries or affirmatively capitalizing on its suppression at trial."
Discovery issues need to be examined by the Court. This is a good case for the Court to stress the importance of defendants receiving timely discovery to allow for a fair and proper defense to the charges.
Petition for Cert – Download 2011 CERT PETITION FILED
See also Brady posts of co-bloggers Lawrence Goldman here and Solomon Wisenberg here.
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The Fifth Circuit Court of Appeals affirmed the James A Brown case (U.S. v. Brown), in which a "managing director at Merrill Lynch and the head of its Strategic Asset and Lease Finance group" had been indicted in the Nigerian Barge case coming from the Enron events. The indictment was for "short-cut" offenses of perjury and obstruction of justice and the convictions had previously been affirmed by a three judge panel. Brown was now challenging his conviction on the basis that "the government violated his rights to due process by withholding materially favorable evidence that it possessed pre-trial."Specifically that it failed to disclose three pieces of evidence which included "1) The FBI notes of its interview with Fastow, 2) Senate investigators' notes of their interview with McMahon, and 3) transcripts of Zrike's pretrial testimony before the grand jury and the SEC." Although some of this evidence was shown to the court in camera before Brown's trial, the government admitted "that it did not submit the Fastow notes to the district court for in camera review." The Court takes the position that the government "did not suppress favorable evidence and that, even if it did, it was not material."
As noted by the defense in its en banc petition request and rehearing request, the court uses a standard other than de novo in reviewing part of this Brady violation claim. This presents an interesting question for an en banc or later Supreme Court to examine.
Brown En Banc Petition –Download 10-20621 Brown En Banc Petition FILED COPY
Brown Rehearing Petition –Download 10-20621 Brown Panel Rehearing FILED COPY
These events are also a perfect reason why there needs to be a statutory change in the discovery rules. NACDL has a proposal that would assist in making certain that favorable evidence is provided to the defense (see here) and hopefully Congress will take up this issue. Examining these issues after the fact only creates added issues.
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As noted here, the 5th Circuit entered its remand decision in the Skilling case, following the Supreme Court's ruling that honest services would be limited to bribery and kickbacks. Jeffrey Skilling had won the issue of honest services in the United States Supreme Court, but this highest court had sent it back for the lower court to determine if the error was harmless and how far it extended – did it affect other crimes he was convicted upon.
There was never any issue of Skilling being involved in bribery of kickbacks, the only aspect of honest services that remained after this Supreme Court decision. So, it was clear that the lower decision had erred. But merely having error is not enough these days. The error also has to be either a fundamental one or not harmless error in order for a defendant to receive relief.
This remand decision is a most interesting decision for several reasons:
- Justice Ginsberg wrote the Supreme Court's decision in the Skilling case. One of the issues before the Court pertained to the honest services statute. Justice Ginsburg wrote that it was clear that "Skilling did not commit honest-services fraud." She also wrote that "Skilling's conviction is flawed." She then cites to the case of Hedgpeth v. Pulido, which held that when you have alternative theories of guilt and the jury is given a general verdict, you use harmless error to determine the viability of the conviction. Justice Ginsburg in Skilling noted that the "[t]he parties vigorously dispute whether the error was harmless." She says that she "leave[s] this dispute for resolution on remand."
- Footnote 46 will go down in history as important in the Supreme Court decision in Skilling, as it is in this footnote that she says that the Fifth Circuit's prior statement that the conviction needs to be set aside if any of the objects of the conspiracy count are set aside, is incorrect. She tells the 5th Circuit that the Pulido case is not limited to cases on collateral review, but includes cases on direct appeal. And so the Skilling case was remanded to the 5th circuit which initially said if the court took out the honest services aspect of the case, the conspiracy count had to fall.
- But before we move onto looking at the remanded 5th circuit decision that just came down, one side note to look even further back in constitutional jurisprudence and examine the Pulido decision. This was a per curiam decision. But, guess who dissented – Justice Stevens, Souter and Ginsburg. The jury could have applied the instructions in an "unconstitutional way," they said. There was no need to remand the case, they said, the district court and court of appeals already examined the harmless-error issue. The majority, however, in Pulido remanded the case, and it was sent back to the court of appeals – the ninth circuit in this case. The 9th Circuit then held that "'with fair assurance, after pondering all that happened without stripping the erroneous action from the whole, that the judgment was not substantially swayed' by the instructional errors. Because Pulido did not suffer any actual prejudice, he is not entitled to habeas relief." (citations omitted). And yes, there is a dissent, and of course the dissent cites to the Supreme Court's dissent in Pulido.
- Lets now look at the 5th Circuit decision just entered on the remand from the United States Supreme Court in Skilling. The 5th Circuit states that it now abandons the "impossible to tell" standard. That is, when you have an alternate theory case with an error in one part – and you can't tell whether the error affected the jury decision because the jury entered a general verdict – this used to be reversible error. But now, the test is whether it is harmless error.
- But who gets to decide whether it is harmless error? The Supreme Court didn't want that responsibility. They sent it to the 5th Circuit. But my question is whether this should be a question for the fact-finder court, as opposed to an appellate court? The 5th Circuit does remand it for resentencing, a resentencing premised upon its prior decision.
- Do we really want appellate court's reviewing the nuances of every aspect of a case to try to discern what the jury was thinking and how they might have decided the case. Or do we need to re-evaluate the standard being used in Pulido? Does a jury always rest its decision on an evaluation of all the evidence, or do they sometimes focus on one piece of evidence that they consider important?
- The 5th Circuit Court handling the Skilling remand does not think it important that the government argued "only once" about Skilling and honest services fraud. The times the government referred to Ken Lay and honest services fraud don't count for Skilling, they say. The court states:
"This single reference to Skilling's honest services, in light of the Government's extensive argument on securities fraud, merely permitted the jury to decide the case on the wrong theory. It did not force or urge it to do so, and therefore, it shows only that an alternative-theory error occurred, not that the error was not harmless."
- Some cases can go on for a long time, and sometimes this is necessary as a part of our judicial process.
See also Doug Berman, Sentencing Law & Policy, Fifth Circuit makes former Enron CEO Skilling's SCOTUS victory Pyrrhic
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The Fifth Circuit issued its decision on the Skilling remand here.
The US Supreme Court had "invalidated one of the objects of the conspiracy charge – honest-services" and sent it back to the 5th Circuit to determine if the error was harmless. The 5th Circuit ruling today found it to be harmless error, and they now sent the case back to the trial court for resentencing.
The 16-page decision commences with a review of how to analyze harmlessness of an alternative-theory error. The court concludes that "based on [its] own thorough examination of the considerable record in this case, we find that the jury was presented with overwhelming evidence that Skilling conspired to commit securities fraud, and thus we conclude beyond a reasonable doubt that the verdict would have been the same absent the alternative-theory error." The court later states that because it finds "that the alternative-instruction error in this case was harmless with respect to the conspiracy conviction, it follows that Skilling has no basis on which to challenge the remaining convictions."
More later.
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Following the Kohring Catastrophe (see here, here, and here), one has to start looking closely at other cases with alleged Brady violations. One such case is the Brown case pending in the 5th Circuit. Counsel for James A. Brown (Daniel K. Hedges, Sidney Powell, and Torrence E. Lewis) filed an extensive brief in the 5th Circuit that argues that exculpatory Brady material was not provided to the defense. (Brief- Download BROWN BRIEF FILED 122010). Jim Brown, a former Merrill Lynch executive was convicted of perjury and obstruction and is contesting these charges on several grounds. The case has had an interesting turn of events. It seems that the government filed a brief claiming that the defense failed to file a timely notice of appeal. Mind you this is after the government was given an extension of time to file its responsive brief by the defense. But it seems that the government had some mathematical computation problems, and on review they realized that Labor Day was in fact a federal holiday and the defense acted timely. The government, when notified, recognized its error and corrected it by requesting to file a corrected brief, not a confession of error. (See Motion here – Download Brown's OppositionToGMforLeave.) The important question here is whether there was a Brady violation. Did a thousand pages of evidence not get revealed until 2010 and if so, why?
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As a result of the Skilling decision see here, here, here, here, and here, many questions are left for consideration by lower courts and perhaps Congress and the Supreme Court in future cases. What are some of these questions:
- Can Congress rewrite a statute that would pass constitutional muster? (but perhaps they should think twice about doing this – see here)
- Did the Court engage in interpretation or invention?
- What cases will require reversal as a result of the holding in Skilling (e.g., Will Governor Ryan's conviction stand?)
- Are there other available statutes to prosecute conflicts of interest and self-dealing?
- When does harmless error require a reversal of a case that alleged honest services?
- The Court in footnote 37 notes the disagreement of lower courts on whether one has to violate state law, is this now an irrelevant question?
- The Court limits "bribery and kickbacks" to the "core of the pre-McNally case law. What does this include?
- Does the Rule of Lenity only apply after the Court has made its interpretive (inventive) decision?
- The Court states that its definition only covers "serious culpable conduct." Does this mean that minor frauds cannot be prosecuted under the honest services provisions?
- Does the Court really set up a "uniform national standard" for honest services, and therefore can state law not be used to determine whether it is a bribery or kickback?
- If the Court says you use pre-McNally caselaw on bribery and kickbacks, how do you interpret conflicting opinions by lower courts?
- What does bribery mean? The Court references 201 (b) and not (c), so is bribery limited?
- In footnote 46 the Court refers to state and local corruption – but what statutes get included here?
- Has the Court redefined what constitutes vagueness for purposes of statutory interpretation?
- In adopting a position expressed by a law professor in an amicus brief, is the Court saying that law professors should focus on writing amici briefs and not law review articles?
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It was a Thanksgiving Day turkey carving by the Court, and they left a lot more meat on the bones then many imagined.
Will We See More Government Stretching? The Court says, "[a]s to arbitrary prosecutions, we perceive no significant risk that the honest-services statute, as we interpret it today, will be stretched out of shape." Gosh I hope they are correct. Based upon the DOJ's track record, that has not been the case. They started the ball rolling with intangible rights well before the Supreme Court knocked it out in 1987. And even when raised as an issue in these three cases, the government argued for more to be included in the statute's sphere.
Should Congress Rewrite the Statute? The Court said – ""The 'vast majority' of the honest-services cases involved offenders who, in violation of a fiduciary duty, participated in bribery or kickback schemes." - This should be a statement Congress should look at when and if the government takes up the Court's second invitation to rewrite the statute.
What happens now? We saw that after the McNally case crushed the government's intangible rights theory, many cases required interpretation to see if they deserved to be tossed, or whether they could survive the holding. In the next few weeks and months, we are likely to see a good number of these type of arguments being made.
Will DOJ learn from this? They have bribery, they have mail fraud and wire fraud with money or property, and they have section 666 for the state/local officials. The government has plenty of tools to prosecute crime. The question is whether they will be happy with what they have, or instead decide that they want to try for more.
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Check out the prior posts of Solomon Wisenberg here, here, and here, that include summary and links to the three decisions. Looking at Skilling specifically, here are some important items to note from the decision-
1. As discussed by Attorney Tim O'Toole in an NACDL press conference – the Court rejects the government's attempt to include a third category beyond bribery and kickbacks, that category being "undisclosed self-dealing by a public official or private employee."
2. The Court states – "The 'vast majority' of the honest-services cases involved offenders who, in violation of a fiduciary duty, participated in bribery or kickback schemes."
3. The Court states – "Reading the statute to proscribe a wider range of offensive conduct, we acknowledge, would raise the due process concerns underlying the vagueness doctrine."
4. Is it judicial legislating when the Court states in footnote 43 – "Apprised that a broader reading of §1346 could render the statute impermissibly vague, Congress, we believe, would have drawn the honest-services line, as we do now, at bribery and kickback schemes."
5.Footnote 45 – the Court tells Congress if it really wants to include "self-dealing" there needs to be a whole lot of questions examined first.
6. The Court says, "Its prohibition on bribes and kickbacks draws content not only from the pre-McNally case law, but also from federal statutes proscribing—and defining—similar crimes. See, e.g., 18 U. S. C. §§201(b), 666(a)(2); 41 U. S. C. §52(2)." John D. Cline noted in the NACDL Press Conference how the Court used section (b) of the bribery statute, but did not include (c) which is the gratuities section.
7. The Court says in footnote 46 that "[o]verlap with other federal statutes does not render s1346 superfluous." The Court then notes how section 201 only applies to federal public officials. What about section 666, a section they mentioned previously (see note above)
Concurring opinion of Scalia, Thomas and Kennedy –
1. They say – " in transforming the prohibition of honest services into a prohibition of 'bribery and kickbacks" it is wielding a power we long ago abjured: the power to define new federal crimes."
2. In speaking to the Court's allowing bribery and kickbacks to remain within the statute, the three justices state that "arriving at that conclusion requires not interpretation, but invention." They later remark – "the Court today adds to our functions the prescription of criminal law." They also state "that is a dish the Court cooked up all on its own."
(esp)(blogging from Lisbon, Portugal)
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