September 30, 2011

The Ninth Circuit Holds That Once The Government Is Done Investigating You, You Get To See The Warrant That Let Them Into Your House

If you have had a search warrant executed at your house, you're likely to want to know why. If you committed a crime, perhaps it's obvious why. If not, you'd likely want to see why the government thought you were up to something suspicious.

Christopher Kortlander was in exactly that situation. In 2005 and 2008 the federal government got a warrant and searched his house. He was under investigation, as the Ninth Circuit put it, for unlawfully attempting to sell migratory bird parts and for fraudulently misrepresenting the provenance of historical artifacts for sale."

Ultimately, the government declined to go forward with charges.

Mr. Kortlander wanted to see the search warrant. Federal Rule of Criminal Procedure 41(i) requires that search warrants, and related documents, be kept in the clerk's office of the district court that they are issued from.

So, Mr. Kortlander asked that district court for copies of those documents.

The United States government opposed that request. It argued that the documents contained information that was collected by the grand jury and, therefore, was secret.

Mr. Kortlander pointed out that he had already seen the information, with his lawyer, during the investigation.

The government then removed it's objection and said, instead, that it was ok for Mr. Kortlander to see the documents, but only if Mr. Kortlander agrees to "limit dissemination of the material to Kortlander's personal review and/or for inclusion in any future court filings." In support of this restriction, the government said that "concerns have been raised that information collected by Kortlander may be posted on web sites."

You have to admire the use of the passive voice.

The district court, exercising its independent control over the documents that were in its clerk's office, adopted the government's suggestion without making any findings to support a restriction of Mr. Kortlander's ability to distribute the documents.

Mr. Kortlander appealed, and the Ninth Circuit reversed in United States v. Kortlander.

The court of appeals explained that there are two rights of access to court documents - a right under the common law and a First Amendment right. The appellate court held that the common law right required disclosure without restriction. It did not reach the First Amendment argument.

The Ninth Circuit started by observing that

Whether the common law right of access applies to warrant materials after an investigation has ended is a question of first impression in this circuit. We have held that the common law right of access does not apply to warrant materials "during the pre-indictment stage of an ongoing criminal investigation." Id. at 1221. But we expressly reserved whether the common law right of access applies to warrant materials after "an investigation has been terminated." Id. We answer that question today, and hold that, as the government concedes, the common law right of access applies under these circumstances. In doing so, we join a number of courts that have reached the same conclusion. See, e.g., In re EyeCare Physicians of Am., 100 F.3d 514, 517 (7th Cir. 1996); In re Newsday, Inc., 895 F.2d 74, 79 (2d Cir. 1990); Baltimore Sun Co. v. Goetz, 886 F.2d 60, 62 (4th Cir. 1989); United States v. Wells Fargo Bank Account Number 7986104185, 643 F. Supp. 2d 577, 583-84 (S.D.N.Y. 2009); In re N.Y. Times Co., 585 F. Supp. 2d 83, 92 (D.D.C. 2008); Commonwealth v.Fenstermaker, 530 A.2d 414, 417-19 (Pa. 1987); see also In re Search Warrant for Secretarial Area Outside Office of Gunn, 855 F.2d 569, 575-76 (8th Cir. 1988) (Bowman, J., concurring).

As the Ninth Circuit explained, quoting, at length, from the Fourth Circuit,* when the government is still investigating, there is an interest in not disclosing warrant documents.

Once the investigation is over, that interest is gone, and the public's interest in knowing how it's government requires that the warrant documents be released to the public.

As the Ninth Circuit said, quoting the Eighth Circuit,

public access to documents filed in support of search warrants is important to the public's understanding of the function and operation of the judicial process and the criminal justice system and may operate as a curb on prosecutorial or judicial misconduct.

The court of appeals also ordered the government to pay Mr. Kortlander's costs in the appeal.

* !

September 29, 2011

Bribery in New Jersey. No, really.

Sometimes, the cooperating witness in a case seems a little shadier than the guy who got caught.

Herman Friedman owned an apartment building in West New York, New Jersey. He rented out 16 apartments. One day, a building inspector visited Mr. Friedman's property. He noticed that the building had only 15 legal units - not 16. The inspector issued a Notice of Violation.

To try to sort this out, Mr. Friedman went to meet with a Construction Code Official, Franco Zanardelli. Perhaps like many New Jersey zoning officials, Mr. Zanardelli was working for the FBI. He was trying to get a sentence reduction under 5K1.1 after he was caught taking bribes in a prior investigation.

Mr. Friedman told Mr. Zanardelli that the apartment had 16 legal units when he bought it and that he shouldn't be penalized. Mr. Friedman asked Zanardelli to issue a variance for his 16th unit.

Zanardelli took no official action in response. One can imagine that he shrugged.

Without a resolution from Zanardelli, Mr. Friedman went to Municipal Court. The court told him to try to work things out with Zanardelli because the penalty for having an illegal apartment is $500 a day.

Mr. Friedman called Zanardelli, desperate for help. Zanardelli asked him "What, what do you want to do? You just want to legalize the unit?"

Mr. Friedman indicated that this was exactly what he wanted to do.

They met at the building. Mr. Friedman pointed out that the 16th unit had obviously been there a while. Zanardelli said it wasn't in the tax records. He asked again what Mr. Friedman wanted to do.

Mr. Zanardelli told Mr. Friedman he could go for a variance. That wouldn't solve the $500 a day problem. They had this exchange,


Zanardelli:  [y]ou're gonna have to go for a variance. That's it. I mean, I mean what are you gonna do.

Friedman: "Well, you know what you could do, what you can do?

Zanardelli:  "So what are you suggesting here?

Friedman:  "You tell me . . . Whatever it is."

Zanardelli: "I can't tell you, you tell me."

If you couldn't guess, "whatever it is" was a bribe.

Using hand gestures, the two worked out a bribe of $5,000. Mr. Zanardelli lifted the complaint.

Months passed. Mr. Friedman didn't come through with the money. He avoided Mr. Zanardelli's calls. Mr. Zanardelli pressured him at the direction of the FBI, reissuing the complaint.

Mr. Friedman put the building up for sale. He found a buyer who would buy it only if the building had 16 units. Mr. Friedman, finally, paid $5,000 to Zanardelli. He didn't lift the complaint. The sale fell through.

Close to a year later, Mr. Friedman was indicted.

The Trial

At trial, Mr. Friedman tried to introduce evidence that the records in Mr. Zanardelli's office actually showed that the building had 16 legal apartments. According to a witness from the local zoning office, the best, most recent documents, showed that Mr. Friedman was allowed to have 16 units there.

The trial judge didn't let the evidence in, because it was "a whimsical argument that this is somehow related to entrapment."

Mr. Friedman was convicted.

The Sentencing

At sentencing, the government and Mr. Friedman disagreed about the loss amount from the bribery guidelines.

The bribery guidelines are particularly hard on people convicted of a crime. The loss amount that U.S.S.G. § 2C1.1 aren't based on the amount of the bribe, but, rather, based on "the benefit received or to be received in return for the payment."

So, the loss number shouldn't be $5,000 - the amount of the bribe - but, rather, the amount of money that the city of West New York lost out on.

The government figured that to be a very high number indeed, based on the accumulation of daily penalties. Mr. Friedman disagreed, and said that number was too inchoate.

The sentencing judge split the baby. He declined to find a loss number, or resolve what the right guidelines are. Instead, the sentencing judge said that thought a sentence of 34 months was about right.

A sentence of 34 months was imposed on Mr. Friedman.

The Appeal

The Third Circuit heard a number of challenges to Mr. Friedman's conviction. In United States v. Friedman, it rejected them all.

The court of appeals did, however, vacate his sentence and remand for resentencing. After the guidelines were made nonbinding in Booker, the Supreme Court, and then the courts of appeals, set out a procedure for sentencing in a federal case.

First, the district court has to calculate the guidelines. A district court cannot sentence a person in federal court without first determining the appropriate guidelines.

Since that didn't happen here - the sentencing judge cut to the chase of what it thought a fair sentence is - the court of appeals remanded to do it again.


September 28, 2011

Immigration Fraud and the Sentencing Guidelines Numbers Game

The federal sentencing guidelines love numbers.

Numbers, according to the guidelines, are how you know how bad something is. If the amount of loss from a fraud is higher, the fraud is worse. If there are more drugs, the drug distribution is worse. If there are more victims, or guns, or illicit images, or years of illegal peonage, the crime is always, under the guidelines, worse.

The guidelines like numbers for the same reason that lawyers like rankings - they force a crisp objectivity. Columbia is ranked higher than the University of Chicago - if you're choosing between the two, the decision just got easier.

People crave definite information in difficult decisions, whether they're law students deciding where to go to school or federal judges deciding how to punish a crime.

This focus on numbers may not capture all that we want about how bad a crime is. Maybe a woman who steals $7,000 to pay for insulin for her aging father is less bad than the man who steals $5,000 to buy mint condition Paul Anka LPs.

Maybe she's less bad in more than one way.

As troubling as whether numbers get it right, is how hard it is to get the numbers themselves right.

The Second Circuit,* in United States v. Archer, clarified how these numbers of bad things should be counted when the numbers translate into additional time in prison.

Mr. Archer's Troubles

Mr. Archer was an immigration attorney. He helped people fill out I-687 legalization applications. As it happened, several of the legalization applications he completed for people contained numerous material falsehoods.

The details of how I-687 legalization applications work is complex. I'm going to ignore them. If you're really into these, please read the opinion.

The bottom line is that Mr. Archer completed 171 I-687 applications. At sentencing, there was evidence that four of them contained false statements. If more than 100 contain material false statements, Mr. Archer's guidelines level increases. It's in U.S.S.G. § 2L2.1(b)(2)(C).

The government said that he should get the enhancement for having more than 100 false documents, because all four of the ones the government looked at were false. The sentencing court bit on that argument - the enhancement for more that 100 false documents was imposed.

"Ghost Dope" and Statistics

The Second Circuit was not so keen to use that analysis. As the court of appeals noted, it had previously held that

To sustain quantity-based enhancements for relevant conduct, the court must base its findings on "specific evidence" that the offense involved the requisite quantity of items. This evidence can, however, be circumstantial. United States v. Shonubi ("Shonubi II"), 103 F.3d 1085, 1090 (2d Cir. 1997). This requirement has two parts: (a) there must be evidence regarding the quantity of illicit or fraudulent goods and (b) it has to be specific to the defendant.

Shonubi was a heroin case.

(Quantity-based guidelines enhancements are the great equalizer of the federal sentencing guidelines - the same rule about how to count them applies to a guy who swallowed balloons of heroin to come through JFK as applies to Jeff Skilling or Conrad Black.)

In Shonubi, the person accused of the crime made eight trips to the United States from Nigeria to transport heroin. On the last trip, he was found with 427 grams of heroin. The district court multiplied 427 times eight and sentenced him as though he was caught with that quantity of heroin. In the Bureau of Prisons, I understand that this quantity is referred to as the "Ghost Dope."

The Second Circuit vacated the ghost dope sentence. On remand, the district court had an elaborate hearing, where it heard evidence about how heroin traffickers from Nigeria normally operate. It then imposed the same sentence as before appeal.

The Second Circuit, again, reversed. The court of appeals instructed that a sentencing court has to have some specific evidence relating to the actual person who is being sent to prison, not just folks who are like him or her.

It's an enlightened approach to ghost dope.

Statistics And Mr. Archer

The Second Circuit has noted that in the second Shonubi opinion

In so vacating, our court was careful to point out that "specific" evidence need not be "direct" and, when correctly considered, circumstantial evidence could be sufficient. Id. For example, the court approved of statistical extrapolation to arrive at an estimate of drug quantity when the sample was randomly selected from a known population. Id. at 1092 (approving of the method of testing four randomly selected heroin balloons to estimate the quantity of heroin contained in 103 balloons found inside the defendant's body).

So, if you have a sample that is random and comes from a known population, you can use it to extrapolate for guidelines purposes.

In Mr. Archer's case, the government argued that it had done exactly that. It looked at four of the 171 applications, and found that they all contained false statements. Since, as a matter of statistics, there's only a 10% chance that there would be fewer than 100 false documents from a sample of four (it's worked out in footnote 6 on page 19 of the opinion), that's good enough for government work.

The problem with this analysis, the court of appeals noted, is that these four applications were not randomly selected - rather, the government seems to have picked the very worst applications.

The Government's Other Argument

The government had an alternative argument,

The government notes that 100 percent of the applications involved aliens who claimed to have entered the country illegally, that 96 percent of these aliens allegedly did so in 1981, that 90 percent of the applications claimed travel outside the country between June and October 1987, and that 26 percent involved one or more fill-in-the-blank affidavits.

Based on these remarkable similarities, the government said that these applications simply had to be false.

The Second Circuit was unimpressed with this line of reasoning.

That information is interesting, but without a baseline as to what the national pool of I-687 applications (filed by, we must assume, honest lawyers) looked like to compare it to--and [the government expert] admitted he had no such baseline--the data tell us nothing about the truth or falsity of the applications. It is like saying that Dr. Jones's patients died, on average, a year after their initial visit with her: if most of her patients were healthy people coming for a check-up, this information suggests a finding that Dr. Jones is a terrible physician; if, on the other hand, Dr. Jones is an oncologist, all of whose patients had terminal cancer of a sort that had a national average life expectancy of two months, the same information makes her look very good indeed. Context is essential; but the government did not take the time and make the effort to provide any.

The Second Circuit vacated Mr. Archer's sentence and remanded.


* Two things about the Second Circuit that you may not care about. First, the court's RSS feed is annoying to work with - it doesn't automatically update in my Google Reader Feed for new published opinions for the Federal Circuit Courts (though, at least they aren't the 6th Circuit which doesn't even have an RSS feeder). Second, they issue their opinions in Goudy Old Style, a font I'm really enjoying, and which Matthew Butterick called "generally acceptable" in Typography for Lawyers.

September 28, 2011

The Increasing Number of Ways The Feds Can Prosecute You Troubles The Wall Street Journal

Those tree-huggers over at the Wall Street Journal have published a characteristically liberal piece about how the federal government is throwing more of its citizens in prison for no good reason.

As the article starts,

For centuries, a bedrock principle of criminal law has held that people must know they are doing something wrong before they can be found guilty. The concept is known as mens rea, Latin for a "guilty mind." This legal protection is now being eroded as the U.S. federal criminal code dramatically swells. In recent decades, Congress has repeatedly crafted laws that weaken or disregard the notion of criminal intent. Today not only are there thousands more criminal laws than before, but it is easier to fall afoul of them. As a result, what once might have been considered simply a mistake is now sometimes punishable by jail time.

The article lays the blame squarely on Congress in some pretty funny ways. It's worth a read.

This has me wondering if the problem of overcriminalization (and, yes, if the NACDL and the Heritage Foundation both think something is a problem, then odds are it is) stems from having legislatures, instead of judges, making criminal laws.

If you have a common-law model for when crime is caused, you're much less likely, I think, to have such weak politically-motivated and poorly-conceived crimes for people to run afoul of.

September 27, 2011

Conrad Black Writes About His Prosecution

Over at the Huffington Post, Conrad Black writes, from prison, about his experience with the United States criminal justice system. (Spoiler Alert - he doesn't like it).

Mr. Black was prosecuted for fraud by the United States government. He's on the last few months of a prison sentence. Here are some of his thoughts:

Before this cataract of horrors began, I had known that there were some dodgy aspects to the U.S. legal system, and feared that the plea bargain system was essentially a bazaar for the exchange of inculpatory perjury for reduced sentences or immunities, a traffic that would lead to the disbarment of prosecutors in most serious jurisdictions.

He also notes that the United States has too many people in prison, and that our nation doesn't recognize people's rights:
The United States has six to 12 times as many incarcerated people per capita as other comparable, prosperous and sophisticated democracies: Australia, Canada, France, Germany, Japan, and the United Kingdom. The Fifth, Sixth, and Eighth Amendment guaranties of due process, the grand jury as assurance against capricious prosecution, no seizure of property without fair compensation, access to counsel, an impartial jury, prompt justice, and reasonable bail, (I enjoyed none of these rights), have all been jettisoned while the Supreme Court has been drinking its own bathwater.

Moreover, he is skeptical of how prosecutors use their power and about the efficacy of public defenders:
Prosecutors routinely seize and freeze defendants' assets on the basis of false affidavits to prevent engagement of (avaricious) counsel of choice; there are many catch-all charges apart from the Honest Services statute that the Supreme Court rewrote in our case, that are impossible to defend, and prosecutors attack with unfeasible numbers of counts and have the last word before unsophisticated juries that have to rely on their memories of lengthy and complex proceedings and have been pulled from jury pools that have been softened up by an unanswerable prosecution lynching in the media. The public defenders are Judas Goats of the prosecutors rewarded for the number of victims they load on to the conveyor belt to the prison industry, not for the services they perform.

Finally, Mr. Black is leaving this country as soon as he's released, and he's not planning on returning.

Also, he's publishing a memoir.

September 27, 2011

Retroactivity In The Federal Sentencing Guidelines and The Parol Evidence Rule

One of the hardest things about representing a person charged with a crime in federal court is that the law is often changing. A decision that makes sense based on the law at the time, may not make sense later, if the law moves.

Fortunately, sometimes when the law changes, it changes for the better. And, sometimes when the law changes for the better, a person charged with a crime can benefit from it.

The Sixth Circuit provides a nice example of this in United States v. Cornell Smith.

Mr. Smith was charged with distributing more than a kilogram of crack cocaine. His lawyer negotiated a plea agreement for him under Federal Rule of Criminal Procedure 11(c)(1)(C).

Federal Rule of Criminal Procedure 11(c)(1)(C)

A plea under Rule 11(c)(1)(C) - commonly referred to as "C" plea by those who practice federal criminal law - binds the court at sentencing. Normally, a United States District Judge has complete discretion to impose a sentence up to the statutory maximum, or down to probation if there is no mandatory minimum.*

Under a C plea though, the parties agree either on a specific range or a specific sentence. The sentencing judge then has a choice - she can accept the agreed sentence or reject the plea entirely and the person can go to trial.

Some district court judges routinely reject C pleas because they feel that they encroach on their power too much. Some prosecutors routinely refuse to enter into them because they fear a reaction from the judge.

Mr. Smith's C Plea

Mr. Smith's C plea was to 15 years. Mr. Smith and the prosecutor attached to the plea agreement a sentencing worksheet that said that the guidelines range, as they calculated it, was 168 months to 210 months. Presumably, the guidelines worksheet was there to convince the sentencing court that the C plea should be accepted. In any event, it was a C plea to 15 years.

Trouble Brews

The presentence report, though, found that the guidelines range really should be 210 months to 262 months, because the United States Probation Officer who wrote the presentence report found that a guidelines enhancement applied that the parties thought should not have.**

In response to this calculation, Mr. Smith's attorney wrote to the Probation Officer that:

The Present Report as authored is a firm commitment to the mandatory guidelines. The guidelines are dead. United States v. Booker, 125 S. Ct. 738, 739 2005; United States v. Oliver, 397 F.3d 369 (6th Cir. 2005). [sic] declared the mandatory guidelines unconstitutional. The plea agreement entered into between the United States Attorneys Office [sic] and Defense Counsel was not based on the guidelines and therefore, there is no miscalculation by the attorneys. The plea agreement reached between the attorneys and their clients was based on the fact that a 15 year maximum sentence was sufficient and in the interests of justice. The Presentence Report failed to consider the validity and worthiness of the plea agreement entered into by the parties. The plea agreement was valid and in the interests of justice. Worshiping the dead mandatory guidelines gives honor to the deceased guidelines and gives them more weight and respect than the rulings of the United States Supreme Court and the Sixth Circuit Court of Appeals. The mandatory guidelines should be left in their crypt and not brought above ground level. (emphasis added)

It probably felt good to write.

The Court, in any event, accepted the C plea and sentenced Mr. Smith to 15 years in prison.

The Law Changes

After Mr. Smith was sentenced, the United States Sentencing Commission changed the sentencing guidelines for crack cocaine. The Sentencing Commission decided that the change in the crack guidelines is retroactive.

Normally, once someone is sentenced in a federal court, their case is over, and the sentence cannot be changed. There are a few narrow exceptions to this rule though.

One of them is if the guidelines have changed, and the sentencing commission makes the change retroactive. As 18 U.S.C. § 3582(c)(2) says, such a resentencing can happen

in the case of a defendant who has been sentenced to a term of imprisonment based on a sentencing range that has subsequently been lowered by the Sentencing Commission pursuant to 28 U.S.C. 994(o), upon motion of the defendant or the Director of the Bureau of Prisons, or on its own motion, the court may reduce the term of imprisonment, after considering the factors set forth in section 3553(a) to the extent that they are applicable, if such a reduction is consistent with applicable policy statements issued by the Sentencing Commission.

Though this only happens if the person was originally sentenced based on the sentencing guidelines.

So, for Mr. Smith, the question is whether he was sentenced based on the sentencing range under his C plea.

C pleas And Sentencing Ranges

The Supreme Court very recently held that a C plea does not prevent someone from getting the benefit of a retroactive change in the guidelines under 18 U.S.C. § 3582(c)(2) if the person's sentence was based on the guidelines in Freeman v. United States. So Mr. Smith is eligible for a new sentence if his C plea was based on the guidelines.

There is, though, the problem of his lawyer's statement to the Probation Officer, which expressly said that the sentence was not based on the guidelines, but, rather, on "the interests of justice."

As this case shows, in federal criminal practice, sometimes it's better not to talk about the interests of justice.

The Parol Evidence Rule

Happily, the Sixth Circuit held that when determining whether a C plea is based on the sentencing guidelines, you don't look at parol evidence.

Most criminal defense lawyers choose their practice area so they don't have to think about the parol evidence rule. They'd rather think about parole evidence (get it?).

The Parol Evidence Rule is the rule that when interpreting a contract, like a plea agreement, you don't look at evidence outside of what's in the document.

So, here, the court of appeals looked only at the plea agreement itself, and not at the defense lawyer's statement, and determined that Mr. Smith's plea was based on the sentencing guidelines.

As a result, the Sixth Circuit sent Mr. Smith's case back for resentencing under section 3582.

* This discretion is sometimes overly celebrated among those charged with a crime. Just because a judge can give probation for, say, health care fraud with more than $100 million in losses doesn't mean that the judge will. It's a bit like how I could sell you my car for $100. Sure, I've got the legal ability to do it, but I'm not going to.

** For those not in the know, before sentencing in every federal criminal case, a presentence report is written by a United States Probation Officer. The report contains a calculation of the now advisory sentencing guidelines, as well as a social history of the person being sentenced. And, yes, this is not what you normally think of Probation Officers doing.

September 27, 2011

New York Times Uncovers A Trial Penalty In Federal Cases. Also, the Sun Rises.

Yesterday, the New York Times reported that there is a trial penalty in criminal cases - that is, people accused of a crime spend more time in prison if they go to trial and lose than if they plead guilty.

The Times also reported that federal prosecutors have a lot of power.

September 23, 2011

Mortgage Fraud Is Not Money Laundering, Or, Why Not To Buy A House With A Drug Dealer

It's money laundering week here at the Federal Criminal Appeals Blog. Yesterday, I wrote about Walter Blair, the lawyer who was convicted for performing extra-legal services.

Today, the Third Circuit issued a happier decision (though not for the government) in United States v. Richardson.

The Dream of Home Ownership

Asya Richardson was the fiancé of Alton Coles, a known drug dealer in Philadelphia. Mr. Coles was also something of a renaissance man, promoting a series of nightclub events and running a record label, Take Down Records. The nightclub generated revenue and broke even. Take Down Records was not financially successful.

Ms. Richardson and Mr. Coles wanted to realize the American dream of home ownership. This presented a problem. Ms. Richardson only made $22,800 a year as a customer service representative at Bank of America. Mr. Coles asserted that he made $100,000 a year as the CEO of Take Down Records. Unfortunately, Mr. Coles, like many entrepreneurs, had bad credit.

The solution? Mortgage fraud. The couple decided to put the house in Ms. Richardson's name, and they said in their paperwork that she made more than $110,000 per year.

This allowed the couple to purchase the house together, but place it in Ms. Richardson's name.

Closing Costs

They still needed money for the down payment though. Here's how the court of appeals describes how they funded part of the money they brought to settlement.

The day of settlement was marked by a flurry of banking activity. At 12:08 p.m., a $9,800 cash deposit was made into Coles' and Richardson's joint checking account at PNC Bank. This deposit took place at a PNC branch located in Philadelphia. At 1:12 p.m., Coles made a $9,140 cash deposit into Take Down Records' business account. The funds were later transferred to Coles' personal checking account and used towards the down payment. Half an hour later, at the same bank branch, Coles deposited $9,200 in cash directly into his personal checking account. At 3:33 p.m., Richardson made a $9,200 cash deposit into the couple's joint checking account. This deposit was made at a PNC branch located in Stratford, New Jersey, which was near the location of the settlement. Finally, at 4:00 p.m., Coles made a $6,160 cash deposit into a Wachovia checking account belonging to his son. This deposit, too, occurred at a branch located in Stratford.

The settlement went smoothly and the couple became happy homeowners.

Trouble Brews


shortly after the couple had moved into the new home, a federal grand jury returned an indictment charging Coles with a single count of possession of a firearm by a convicted felon. Three superseding indictments followed charging Coles and others with various drug trafficking and firearms crimes. On March 22, 2006, a fourth superseding indictment was filed charging Coles and Richardson with money laundering, 18 U.S.C. § 1956(a)(1)(B)(i), conspiracy to commit money laundering, 18 U.S.C. § 1956(h), and wire fraud, 18 U.S.C. § 1343.

The couple went to trial, along with others. Mr. Coles was convicted of the drug distribution charges, as well as the money laundering. Ms. Richardson was convicted of money laundering. Both were acquitted of wire fraud.

Ms. Richardson was sentenced to twenty-four months in prison.

The Appeal

On appeal, Ms. Richardson argued that there was not enough evidence to support her conviction for money laundering.

As the Third Circuit explained, to find someone guilty of money laundering, the government has to prove:

  1. an actual or attempted financial transaction;

  2. involving the proceeds of a specified unlawful activity;

  3. knowledge that the transaction involves the proceeds of some unlawful activity; and

  4. knowledge that the transaction was designed in whole or in part to conceal the nature, location, source, ownership, or control of the proceeds of a specified unlawful activity.(internal textual modifications omitted)

Ms. Richardson argued that there was not enough evidence that she knew that the transaction was being used to launder drug money to convict.*

The government countered that the intricate set of deposits on the day of settlement strongly indicated that something was afoot. All the deposits were under $10,000, giving a strong argument that they were made to defeat the reporting requirement that is triggered by a $10,000 deposit.

This, by the way, is itself a crime, prohibited by 31 U.S.C. § 5324, and known as smurfing.**

However, as the court noted, there was precious little showing that Ms. Richardson herself was aware of the pattern of deposits.

The government argued that not having Mr. Coles name on the loan was suspicious. And, the government pointed out, that Ms. Coles lied about her income to get the loan - surely that's suspicious.

In a passage sure to warm the hearts of mortgage brokers everywhere, the court noted,

These circumstances show that Richardson lied about her income and had the property titled in her name, not to hide Coles' involvement (which by then was perfectly obvious), but to get around Coles' bad credit and purchase the house as planned. No jury could have reasonably reached a different conclusion.

(internal citation omitted)

This wasn't money laundering - it was mortgage fraud. With a little more than a year left on her sentence, Ms. Coles conviction was vacated.


* She also argued, based on United States v. Santos, that the money laundering statute only applies to profits from drug dealing, not gross receipts, and that the money here involved gross receipts. The court of appeals rejected that argument.

** And, yes, that's my second Smurf reference in a money laundering post this week. Here's an odd article on how "smurf" is used that doesn't include this NSFW varation.

September 22, 2011

Money Laundering, Obstruction of Justice, And A Full-Service Lawyer

Walter Blair was a full-service lawyer. He received a phone call from a woman who wanted to hire a criminal defense lawyer. The woman's name was Ms. Nicely. Ms. Nicely had a relatively intricate problem.

The Safe Full of Money

As it happened, she was in possession of a safe that contained a substantial amount of money that belonged to Mr. Rankine. Mr. Rankine was a drug-dealer. The money was drug money. Mr. Rankine's girlfriend had been found murdered, and Mr. Rankine was missing.

Ms. Nicely had been receiving threats about the money in the safe and became frightened. Through a referral from a co-worker, Mr. Henry, she contacted Mr. Blair.

They met. Mr. Blair told her to open the safe "by any means necessary" and bring the money to him. She did.



Mr. Blair and Mr. Henry counted the money - there was approximately $170,000. Mr. Blair made up a cover story about a joint investment headed by Mr. Rankine's girlfriend. Since she was no longer living, she couldn't repudiate the story.

Mr. Blair then had his law partner create a corporation to take the money so that Ms. Nicely and Mr. Henry could invest in real estate. This was in 2003 when investing in real estate seemed less like investing in Smurf collectibles.

Mr. Blair also told Mr. Henry and Ms. Nicely that they would need to set aside money to cover the legal fees for two of Mr. Rankine's colleagues who had been arrested and were charged in the U.S. District Court in Richmond Virginia.

The Federal Case In Virginia

Mr. Blair reached out to two Virginia lawyers to represent Mr. Rankine's colleagues. Mr. Blair also retained himself to represent the men. Eventually, he filed a pro hac vice motion in the federal case in Virginia.

(A pro hac vice motion is a motion that lets an attorney practice law in a court that she is not otherwise admitted to practice in for one time only, provided certain conditions are met).

As a part of the pro hac vice motion, Mr. Blair told the court that he had never been disciplined by any bar association. As it happened, that was not entirely accurate - Mr. Blair had previously had his law license suspended in West Virginia for witness tampering.

Things Break Bad

Mr. Blair gave Ms. Nicely a set of things to memorize about how all of these transactions were supposed to have gone down. Sadly, when interviewed by the FBI, Ms. Nicely was not 100% in line with Mr. Blair's instructions. Oh what a tangled web we weave.

Mr. Blair was indicted for money laundering, in violation of 18 U.S.C. § 1956 and § 1957 for his handling of the funds brought into his office. He was charged with obstruction of justice for his false statement in his pro hac vice motion under 18 U.S.C. § 1503. He was also charged with failing to file a tax return.

On appeal, he had two main challenges. The Fourth Circuit gave Mr. Blair a split decision in United States v. Blair.

The Money Laundering Safe Harbor Issue

First, the money laundering statute has a safe harbor provision for criminal defense attorneys who are receiving money from someone to mount a defense. Mr. Blair contended that this safe harbor provision sheltered him from one of the money laundering charges against him.

There's been a lot of attention to this issue lately, particularly since the Eleventh Circuit rejected a government money laundering prosecution in United States v. Velez. The basic rule of the safe harbor provision is that if a person has money that was derived from illegal conduct, and uses that money to pay for a defense attorney, that transfer cannot be the basis of a money laundering conviction. Section 1957(f)(1) recognizes that the Sixth Amendment protection of the right to counsel is more important than criminalizing this behavior.

Here, though, the Fourth Circuit rejected the safe harbor provision's application to Mr. Blair. As Judge Wilkinson said,

Blair used someone else's criminally derived proceeds to bankroll counsel for others.

This, the majority found, exceeds the scope of the safe harbor provision. Though Judge Traxler wrote a forceful dissent arguing that the safe harbor provision should apply.

Obstruction of Justice Challenge

Mr. Blair fared much better on his challenge to the obstruction of justice conviction. The government argued that lying on a pro hac vice motion is obstruction of justice. To do that, the prosecutors had to successfully "establish a nexus between the false statement and the obstruction of the administration of justice." That is, the government had to show that Mr. Blair's false statement "had a natural and probable effect of impeding justice."

The Fourth Circuit found no evidence that Mr. Blair lying about his West Virginia disciplinary troubles caused any problems, or was likely to cause any problems, with anything. Mr. Blair's representation was already a massive conflict of interest - his lie was just icing.

The court of appeals concluded that the government's allegations rested on "mere speculation."

The appellate court, then, vacated Mr. Blair's conviction for obstruction of justice, and remanded for resentencing without that count of conviction.

September 22, 2011

My Guest Post on the ACS Blog on the War on Drugs

Over at the American Constitution Society's blog, I have a guest post on how President Obama has handled the war on drugs.

By way of a teaser, Reason Magazine has an article called "Bummer" which is very critical of President Obama. The post is my take on how Obama has fared - I think he's not a full-on bummer, but he's also not the President I thought he'd be when he was running.


September 21, 2011

Important White-Collar Crime Decision By the Federal District Court in D.C.

Judge Huvelle on the U.S. District Court for the District of Columbia issued an opinion in United States v. Ring that is tremendously important for white-collar practitioners specifically, or people who are interested in sentencing in federal criminal cases more generally. It dodges, in a very nice way, the question of how much of a penalty the government can try to assess on a person accused of a federal crime who decides to go to trial.

The Washington Post has a story, as does Sentencing Law & Policy.

Mr. Ring was accused of being involved in Jack Abramoff’s illegal deeds. Unlike everyone else in the case – indeed, unlike most white-collar defendants – Mr. Ring went to trial. He was convicted.

The government asked the court to impose massively higher sentencing guidelines adjustments than it requested for others who had entered a guilty plea and cooperated with the government. As Judge Huvelle noted,

 As Ring points out, the government now advocates for a Guidelines methodology that it has never asked for before (and that the Court has not previously employed) with respect to calculating the sentences of his co-conspirators.

The increased guidelines were significant.* Mr. Ring argued that they were the result of the government wanting to punish him for making them go to trial.
Defendant’s position is that the government is retaliating against him for exercising his Sixth Amendment right to trial. It is easy to see why such an inference might be justified, since the government’s new methodology for calculating defendant’s offense level (prior to adjustments for role in the offense and obstruction of justice) would result in a Guidelines sentence of between 121 and 151 months—nearly nine years longer than it would otherwise have been. . . . Indeed, the government’s position is that Ring’s total offense level (37) should be the highest of all participants in the conspiracy, despite the fact that Abramoff (whose offense level was 34, not including acceptance of responsibility) and Scanlon (whose offense level was 27, not including acceptance of responsibility) were clearly more culpable.

Mr. Ring asked the court to apply the guidelines that were used for the others in the case, instead of using the higher guidelines the government asked for.

Judge Huvelle was sympathetic,

The notion that an ostensibly objective system of sentencing guidelines can produce such wildly varying results for essentially the same offense conduct is deeply troubling, and indeed, as Ring argues, if the Guidelines are “subject to manipulation” in this fashion, it would mock the very consistency the Guidelines were meant to impose on such elementary concepts as “offense level.”

Judge Huvelle did not find that the government was imposing a trial penalty, though. Instead, she adopted the guidelines applicable to the others through a straightforward guidelines analysis, ultimately concluding that Mr. Ring’s guidelines were in line with the others in the case.

* For the folks who are into the details of the guidelines issues, to summarize so you can see if you want to read the opinion, the main issues are: (1) the application of a bribery cross-reference under § 2C1.7 that would apply the bribery sentencing guidelines under § 2C1.1 instead of the § 2C1.7 Honest Services Fraud guidelines; (2) the “more than one bribe” enhancement under § 2C1.1; (3) loss calculation under § 2C1.1(b)(2); (4) a manager enhancement under § 3B1.1; (5) an obstruction of justice enhancement under §3C1.1; and (6) whether Ring can get acceptance under § 3E1.1 even though he went to trial.

All issues were resolved under the 2003 version of the guidelines, for ex post facto reasons. (and, though I normally like to link to the guidelines sections themselves, I didn't here, because they are only available in pdf).

September 20, 2011

The "Snowstorm" That Wasn't There, or, Why DNA Doesn't Get Collected From Every Misdemeanant On Probation

Mark Twain may have said that the coldest winter he ever spent was a summer in California. Or maybe not. Regardless, the quote suggests itself as the inspiration behind the United States Attorney's Office for the Northern District of California's charging decision in United States v. Baker.

Robert Baker was a passenger in car in a high-speed chase in Northern California. The chase was "speedy" in two senses - in addition to driving fast, there was methamphetamine in the car.

The chase ended badly for the chasee - the police caught up to the car and charged Mr. Baker with conspiracy to possess with intent to distribute methamphetamine.

In the car, the police found only 10 grams of meth. The government charged Mr. Baker, though, with much more, based on the testimony of two police officers who said that Mr. Baker was throwing bags of white powder at their car, which would explode on the windshield and create a "snowstorm" effect for a few seconds.

The government asserted that the white powder was meth, and that the "snowstorm" was caused by a much larger quantity of meth, more than 50 grams, and that Mr. Baker should be punished for having that larger amount of the drug.

Mr. Baker called another officer in his defense, who said he was a part of the chase and saw no "snowstorm." He also produced radio runs from the police that were free of any winter weather reports.

The jury went with Mr. Baker, acquitting him of the felony conspiracy charge and, instead, convicting him of a misdemeanor based on the drugs in the car.

At his sentencing for the misdemeanor, he was placed on probation for three years.

The sentencing judge, as a condition of probation, ordered that Mr. Baker be required to provide DNA to the Attorney General.

Mr. Baker appealed this condition of probation, and asked the Ninth Circuit Court of Appeals to order the destruction of all the DNA he had provided.

A sentencing court can only order that DNA be collected if it has the authority from Congress to enter such an order. The statute is 42 U.S.C. § 14135a.

As it happens, the statute provides no ability for a district court to order DNA collected from someone who is on probation, and, therefore not in custody, and who was only convicted of a misdemeanor.

So, if Mr. Baker had been convicted of a felony, the government could take his DNA for the national DNA database. If he was in jail, even for a little bit, the government could take his DNA for the national DNA database. But with a misdemeanor conviction and probation, Mr. Baker's DNA gets to stay with him.*

The Ninth Circuit reversed, remanded, and ordered all the DNA already collected destroyed.

* Did you know DNA evidence can be faked? Check out this article in the New York Times.

September 19, 2011

Judge Posner on Narcotics Wholesalers and Drug Quantity

I'm a big fan of Judge Richard Posner. As I've mentioned here before, Judge Posner is very bright - and has almost single-handedly revolutionized the role that economics plays in thinking about the law.

I was, therefore, happy to see that Judge Posner authored an opinion for the Seventh Circuit dealing with the relationship between heroin wholesalers and heroin retainers in United States v. Alvarado-Tizoc.

Alvarado-Tizoc dealt with two men who sold wholesale quantities of heroin and fentanyl. As Judge Posner explains,

Fentanyl is a very potent synthetic narcotic, used lawfully as a painkiller and unlawfully as a substitute for heroin. Because of its potency it must be greatly diluted before being consumed; otherwise it will kill. Deaths from overdoses of fentanyl by heroin addicts soared in 2006. Addicts' demand for fentanyl apparently had been augmented by a shortage of high- quality heroin, but it has fallen since 2006, probably because the deaths caused by overdosing on fentanyl induced more intensive efforts by law enforcers to disrupt the supply of the drug.

(Internal citations omitted. In this passage from the opinion, there were so many internal citations it almost drove me to Bryan Garner's position that citations should be in footnotes)

As wholesalers, the men who were sentenced in this case sold the drug to retailers, knowing that it would be diluted - this caused an odd sentencing result. As the court of appeals explained,
The defendants were wholesalers of heroin and fentanyl for illicit use. Their customers, the retail dealers, diluted the fentanyl (which already had been diluted to some extent) that they bought from the defendants in order to make it safer to consume. The dilution produced mixtures that contained less than 1 percent fentanyl, and the retailers sold these mixtures (doses) to their customers. The quantity (as measured by weight) of the greatly diluted fentanyl sold by the retailers was 11 to 16 times the quantity of fentanyl that the defendants had sold them. For sentencing purposes the weight of an illegal drug includes the weight of a mixture containing a controlled substance. U.S.S.G. § 2D1.1(c) n. A and Application Note 1; United States v. Sowemimo, 335 F.3d 567, 574 (7th Cir. 2003); cf. 21 U.S.C. § 841(b). Hence for sentencing purposes the retailers were selling much more fentanyl than their suppliers, who are the defendants in this case.

The sentencing court found that the men who were appealing were in league with the retailers. Because they were necessarily relying on the retailers to sell the fentanyl, the district court reasoned, they were all jointly liable for the retailers quantity of drug distribution. They were all, in the language of the guidelines, engaged in a jointly undertaken criminal activity - akin to being coconspirators, even though that wasn't the charge against them.

Judge Posner thought this would be an odd kind of conspiracy, noting that,

the fact that the buyers diluted the fentanyl they received (and that this was foreseeable to the defendants) no more proved a conspiracy than the fact that a seller of chocolate syrup to a soda fountain knows that the syrup will be mixed with milk or soda to make chocolate milk shakes or chocolate sodas rather than being sold in its original, undiluted form makes the seller a conspirator in the retail sale of adulterated chocolate drinks.

Because a buyer and seller are not, necessarily, in a conspiracy under Seventh Circuit law, the court of appeals rejected the argument that the wholesalers in this case were conspirators with the retailers.

Because there was no jointly undertaken criminal activity, the men who were appealing their case were sentenced using the wrong guidelines range - it should have been calculated using only their drug quantities instead of those of the retailers. Their sentences were reversed and sent back to the district court.

There are two things about this that are striking to me.

First, it is crazy to use the weight of a mixture or substance containing a drug for sentencing purposes, instead of using the amount of the drug itself. Judge Posner, and, apparently, the Seventh Circuit, agrees:

Emphasis on the weight of a defendant's drugs (in this case the weight of the dilute drugs sold by customers of defendants), whether or not they are diluted, has the perverse effect of giving drug dealers an incentive to possess and sell drugs of high purity or potency and makes the length of sentences depend perversely on the weight of the inactive ingredients in the drugs.

Second, this case hangs on Judge Posner's willingness to find that wholesalers and retailers are not engaged in a joint activity. The only way he gets there is by looking at an analogy to the business world, where thinking of a run of the mill soda distributor being in cahoots with a manager of a gas station that has a soda fountain would be unthinkable.

But, if a judge without that economics background looked at this case, the result could have been much different. Many people, and many judges, think of drug dealers as an undifferentiated mass of lawless people. If you don't see differences between different kinds of roles in the web of drug distribution, you can see how it would be easier to lump drug wholesalers and drug retailers into the same kind of conspiracy, without really thinking about their unique roles.

Perhaps this is a perverse argument for much more prosecution of commercial crimes.

September 16, 2011

The Federal Government Asks The Ninth Circuit To Hear The Obama Threats Case En Banc

Earlier, during the summer, I blogged about a Ninth Circuit opinion that vacated a conviction for making racially-motivated threats against President Obama.

As I noted at the end of that post, I am really looking forward to seeing how this gets resolved en banc.

And, apparently, I am now closer to getting to see that. The government has filed a petition for the Ninth Circuit to rehear the case. Politico's Josh Gerstein has detailed coverage and a link to the government's filing.

September 16, 2011

The Ninth Circuit Rejects A Car Search In Mr. Rodger's Neighborhood

In many ways, riding in a car is so much worse for you than, say, walking or riding a bike. When I drive, I know I'm not exercising; I can almost feel my muscles convert to fat. Driving burns gasoline, which is bad for the environment. Cars clog roads.

Other than the massive convenience and the ability to privately listen to bad radio, cars don't have much to recommend them.

Cars are even worse when you realize that driving a car also diminishes your Fourth Amendment rights. If the police have probable cause to think you have some contraband, they normally need a warrant to go in your house. Not so for your car. Because cars can move, the courts don't require a warrant to search a vehicle - mere probable cause is enough.

If you're arrested on the street, the police can search, "incident to arrest," anything you could reasonably be thought to reach while you're being subdued and arrested. If you're arrested in a car, the police can search, incident to your arrest, anything inside the car.

Perhaps this is one reason so few drug dealers on The Wire drive minivans. Or perhaps the lack of minivans on The Wire has more to do with this video.

In any event, given the law on the Fourth Amendment and vehicle searches, United States v. Rodgers, from the Ninth Circuit, is a breath of fresh air.

Mr. Rodgers was pulled over at 3:30 in the morning on the mean streets of Lakewood, Washington. His registration information showed that his car was one color - his car was, in fact, another. He was in a neighborhood known for crime, specifically juvenile prostitution.

The police officer who pulled him over approached the car. He recognized Mr. Rodgers as someone he'd pulled over before. Many times.

The officer also saw a girl who he estimated was about fifteen years old. He asked Mr. Rodgers why he was driving the girl at 3:30 in the morning. Mr. Rodgers said that he was taking her to an apartment building as a favor.

The officer suspected that Mr. Rodger's transportation involved a different kind of favor. He asked the girl for identification. She didn't have any. He asked her name, she gave him one.

The officer ran the name and found that there was an arrest warrant out for the girl. He pulled Mr. Rodgers and the girl out of the car, separately, for questioning. He asked the girl again for identification. She had no purse, and no identification in her pockets.

The officer then decided to search the car, near where the girl was sitting, for her identification.

He searched her seat and the center console. He found crystal meth.

He arrested Mr. Rodgers, then searched the entire car. He found a handgun and other drugs. Mr. Rodgers was charged in federal court with federal gun and drug charges.

He challenged the search of his car, but the district court denied his motion.

He was convicted at a bench trial, and determined to be an armed career criminal under 18 U.S.C. § 924(e)(1).

The Ninth Circuit reversed, finding that the search violated Mr. Rodger's rights.

The court of appeals rejected the government's position that the officer could search Mr. Rodger's car for the girl's identification, saying,

[The officer] did not identify any particular facts or observations that led him to believe [the girl] had identification and that it was inside Rodgers' car. Nor can we find any such facts in the record. There is, for example, no indication that [the officer] saw [the girl] trying to hide anything in the car, that [she] was eyeing anything inside the car, that [she] made any furtive movements, or that any papers or objects appearing to be identification were in plain view. Indeed, the only relevant fact [the officer] offered--that he never saw a purse or bag that might have contained [the girl's] identification--cuts against a finding of probable cause to search the car.

Because there was no probable cause, or other lawful reason, to search the car for the girl's identification, the evidence found had to be suppressed. Everything found after that was fruit of the same illegal search.