February 25, 2013

Short Wins - Three Odd Cases

Three odd cases were decided last week in the federal circuits.

First, the Eleventh Circuit vacated a set of convictions because the indictment didn't successfully allege that the folks who were convicted had committed a crime.

The Sixth Circuit had a two-fer this week; one case involved sentencing irregularities and the other involved irregularities of a more troubling and frequent kind - cops lying.

To the victories!

1155650_berlin_siegessule.jpg1. United States v. Izurieta, Eleventh Circuit: Appellants were convicted of one count of conspiring to unlawfully import goods and six counts of smuggling goods into the United States. Because the indictment did not adequately set forth a violation of criminal law on any of the counts, all of appellants' convictions were vacated. The smuggling counts were based on a regulation, the violation of which resulted in paying a fine, not criminal punishment. The conspiracy count did not adequately put appellants on notice as to what criminal statute they were alleged to have violated, especially given that the vast majority of the indictment focused on acts that were not criminal.

2. United States v. Kurlemann, Sixth Circuit: Eric Duke and Bernard Kurlemann were involved in a scheme to sell homes to straw men who couldn't afford them. Kurlemann was convicted of making false statements to a lending institution, among other offenses. Because the jury instructions for the false statements count included an erroneous legal theory, Kurlemann's conviction was reversed and the case remanded for retrial on this count. At Duke's sentencing for loan fraud and making false statements, the court granted his motion for a downward departure under Guideline § 5K1.1 for substantially assisting in Kurlemann's prosecution, but didn't identify Duke's post-departure Guidelines range. As a result, it was unclear whether or by how much the court varied from that range in imposing sentence. For these reasons, the case was remanded for resentencing.

3. United States v. Shaw, Sixth Circuit: Appellant pled guilty to distributing cocaine after officers discovered large amounts of it in his home during a protective sweep. Police unlawfully entered and remained in the home under false pretenses. First, they lied about having a search warrant - it was actually for a neighbor's home - and second, once inside, they lied again about the address on the warrant. Because the officers had no right to enter the house based on a lie and no right to stay there based on a lie, the interaction violated the Fourth Amendment. As a result, the district court's denial of appellant's motion to suppress the cocaine was reversed, and the case remanded for further proceedings.

February 22, 2013

The Supreme Court Says A Seizure Isn't Incident To A Search That Happened A Mile Away

Someone told the police that Chunon Bailey sold drugs. Worse, he sold drugs and had a gun at his house at 103 Lake Drive in Wyandanch, New York.

That someone was a confidential informant.

The police took that tip and got a search warrant for 103 Lake Drive.

The police were getting ready to go into his house - they had set up outside and were watching it.

They saw Mr. Bailey leave the basement apartment at 103 Lake Drive and get in a car. Two officers followed the car as it drove away. The rest of the search team started searching the house.

A mile away, the cops pulled Mr. Bailey over. They ordered him out of the car and patted him down. They found a ring of keys in his pocket.

They then put him in handcuffs and told him that he was being detained incident to a search warrant at 103 Lake Drive - a mile away.

Inside the house they found a number of things that were unlawful to possess. He was charged in the Eastern District of New York with possessing those things.

Detention Incident to a Search Warrant

1038828_u_s__supreme_court_2.jpgNormally, when the police execute a search warrant, they can hold people who are inside the house that's being searched. Even though holding someone is a "seizure" that generally not only allowed under the Fourth Amendment, there's an exception when the person was held while the police execute a search warrant.

Mr. Bailey's case is a little off that mark though.

Sure, if the cops bust in to your house, it makes sense that they'd want to make sure you don't come after them with a gun or take a magnet to all of your hard drives. And the best way to do that is make sure you're not near a gun or a magnet - which will require a little bit of detention.

So courts are sensitive to that and allow the police to detain someone - even though any detention is a "seizure" within the scope of the Fourth Amendment as a part of executing a search warrant. The Supreme Court said that's ok in Michigan v. Summers.

Though, Mr. Bailey's case, the limits of a detention incident to the execution of a warrant grew way beyond what the rule had allowed in the past - following a guy away from his house, stopping him a mile away, and bringing him back just so he could be "incident" to his place being searched.

Nonetheless,

The Court of Appeals for the Second Circuit ruled that Bailey's detention was proper and affirmed denial of the suppression motion. It interpreted this Court's decision in Summers to "authoriz[e] law enforcement to detain the occupant of premises subject to a valid search warrant when that person is seen leaving those premises and the detention is effected as soon as reasonably practicable." 652 F. 3d 197, 208 (2011).

Happily for Mr. Bailey, we have a Supreme Court.

The Court, in United States v. Bailey, held that Mr. Bailey was not detained as a part of a search that was happening a mile away from a place he was trying to leave.

One opinion, written by Justice Kennedy, said this was because the Fourth Amendment balancing of harms that's necessary to figure out if a seizure is "reasonable" cuts against this kind of search. Another opinion, written by Justice Scalia, said this was because Summers announced a bright line rule that just doesn't apply to this case.

But, in the end, Mr. Bailey's detention was not lawful.

February 19, 2013

Short Wins - President's Day Edition

It's a scattershot collection of sentencing remands in this week's short wins.

Also, Happy Belated President's Day everyone, or, as OPM says, happy Washington's Birthday:

This holiday is designated as "Washington's Birthday" in section 6103(a) of title 5 of the United States Code, which is the law that specifies holidays for Federal employees. Though other institutions such as state and local governments and private businesses may use other names, it is our policy to always refer to holidays by the names designated in the law.

Used car dealers with their "President's Day Sales" may differ though.

To the victories!

1155650_berlin_siegessule.jpg1. United States v. Battle, Tenth Circuit: Appellant was convicted of conspiracy to possess with an intent to distribute 50 grams or more of crack. He was sentenced to 360 months in prison, and was later resentenced to 324 months after he filed a motion to reduce his sentence based on the retroactive amendment of the crack cocaine guidelines. The 324-month sentence was based in part on the court's finding that appellant was responsible for more than 3.4 kilograms of crack. Because the record did not support attributing this amount to appellant, the court reversed and remanded for resentencing.

2. United States v. Epps, D.C. Circuit: Appellant was convicted of various drug offenses under a Rule 11(c)(1)(C) plea agreement. He was sentenced to 188 months in prison followed by five years of supervised release. The court had jurisdiction to hear the appeal notwithstanding appellant's release from prison and the start of his supervised release. The appeal was not moot because appellant's term of supervised release may be impacted by the outcome of the appeal. Finally, appellant was entitled to a reduction of his sentence under the revised guidelines. For these reasons, the case was reversed and remanded.

3. United States v. May, Ninth Circuit: Appellants pled guilty to receipt of stolen mail and mail theft. The court's loss calculation included expenses the U.S. Postal Service ("USPS") incurred to avert future thefts. The court improperly ordered restitution for USPS' expenses because the mail theft of which the defendants were convicted occurred after, and could not have caused, USPS' delivery procedure change. As a result, the portion of the restitution order awarding restitution for USPS' expenses was vacated.

4. United States v. Patrick, Seventh Circuit: Appellant pled guilty to sex trafficking and was sentenced to 360 months in prison, to be served consecutive to a 20-year state court sentence appellant was serving. Because the court failed to discuss appellant's cooperation with authorities, appellant's sentence was vacated and the case remanded for further proceedings.

5. United States v. Capers, et al., Eleventh Circuit: Bishop Capers, Leon Frederick, and Larry Little were convicted of conspiracy to possess with intent to distribute cocaine and crack cocaine. The court ruled that the Fair Sentencing Act, which reduced the guidelines ranges for the offenses at issue, did not apply to Mr. Capers and Mr. Little's sentencing guidelines calculations because their offenses were committed before the Act was passed. This was error. Consequently, Mr. Capers and Mr. Little's sentences were vacated and the case remanded for resentencing.

February 12, 2013

You Can't Suppress The Body, But You Can Suppress The Fake ID Used To Find The Body

The Supreme Court has said that you can never suppress the body of a person accused of a crime - the person's identity is not able to be kept out of evidence, even if that identity is the result of an unlawful arrest or search.

This is a huge issue in illegal reentry cases. If a person is deported then returns to this crime, that's illegal reentry. If the person is deported after having been convicted of certain kinds of felonies - whoa buddy, that's illegal reentry after having been convicted of an aggravated felony.

In light of the Supreme Court's rule about how you can't suppress the body of the person accused, many people who handle illegal reentry cases find them massively depressing. If you can't suppress the person's identity, even if the knowledge comes from an unlawful search, then you've gutted the Fourth Amendment for people accused of illegal reentry.

Yet, in United States v. De La Cruz, the Tenth Circuit said that a motion to suppress should have been granted when the subject of the motion to suppress was whether a man's identification was taken against his Fourth Amendment rights.

1337574_clean_my_car_3.jpgMr. De La Cruz Was in the Wrong Place

Three ICE agents were staking out Gill's Truck Wash in Tulsa, Oklahoma. They were looking for a man who they thought was in the country illegally. The truck wash wasn't open yet.

A car pulled up with tinted windows. A passenger got out. The agents got a one or two second glimpse of the person driving the car.

They decided that the person driving the car may be the guy they're looking for.

They pulled the car over.

The car was not driven by the man they were looking for - instead, it was driven by Enrique De La Cruz.

Mr. De La Cruz was dropping off his brother Armando. In the backseat of the car sat Mr. De La Cruz's wife and his mother in law. They were joined by Armando's wife.

The agents asked Mr. De La Cruz if he was the man they were looking for. They compared the way he looked to the picture they had of the other man. Mr. De La Cruz was not the other man.

The agent, figuring that he had already pulled the guy over, asked Mr. De La Cruz for his identification. Mr. De La Cruz gave them a fake id. They used the fake id to figure out who he is. Turns out he was in the country illegally - after having been previously deported.

The Tenth Circuit

The Tenth Circuit found that this stop and search violated Mr. De La Cruz's rights under the Fourth Amendment.

The interesting part, though, is what they held about whether he's allowed to complain about the stop.

As the Tenth Circuit set it up

In Lopez-Mendoza, a case addressing civil deportation hearings, the Supreme Court noted that "[t]he 'body' or identity of a defendant or respondent in a criminal or civil proceeding is never itself suppressible as a fruit of an unlawful arrest, even if it is conceded that an unlawful arrest, search, or interrogation occurred." Id. at 1039. Lopez-Mendoza, however, does not "exempt[] from the 'fruits' doctrine all evidence that tends to show a defendant's identity." Rather, Lopez-Mendoza's "statement that the 'body' or identity of a defendant are 'never suppressible' applies only to cases in which the defendant challenges the jurisdiction of the court over him or her based upon the unconstitutional arrest, not to cases in which the defendant only challenges the admissibility of the identity-related evidence."

So, Mr. De La Cruz can challenge the admissibility of the fake id at his trial. That fake license was taken in violation of his Fourth Amendment rights, so it won't come in at trial.

February 11, 2013

Short Wins - Resentencings Abound

It's been a big week for resentencings - especially in the Sixth and Seventh Circuits.

The DC Circuit came in with an important decision on the BOP's Inmate Financial Responsibility Program. The Ninth Circuit weighed in on supervised release conditions in a sex case.

Though, really, six opinions from our federal circuits last week and all of them involve a resentencing. It's a sad kind of winning.

To the victories?

1155650_berlin_siegessule.jpg1. United States v. Godoy, D.C. Circuit: Appellant pled guilty to mail fraud, was sentenced to 60 months in prison, and ordered to enroll in the Inmate Financial Responsibility Program. Because he could not be ordered to enroll in the program, his sentence was modified to reflect that enrollment was voluntary.

2. United States v. Preston, Ninth Circuit: Appellant was convicted of abusive sexual contact and sentenced to 50 months in prison and lifetime supervised release, subject to several conditions: (1) participating in plethysmograph testing; (2) prohibiting the possession/viewing of "any other material" of a sexual nature; and (3) prohibiting contact with or being "in the company of" children under 18. The court did not make specific factual findings before ordering the testing in condition (1). On remand, if the court again orders testing, factual findings must be made. Because condition (2)'s reference to "any other material" was too broad, remand for clarification on this point was warranted. Finally, remand on condition (3) was appropriate to add a mens rea requirement and for the court to explain its reasons for imposing the condition, given that it implicates significant liberty interests, or, if it cannot, to narrow the condition appropriately.

3. United States v. Deen, Sixth Circuit: Appellant was convicted of distributing crack and sentenced to 66 months in prison and four years of supervised release. After violating supervised release, he was sentenced to two years in prison to "give the Bureau of Prisons another chance to do some in-depth rehabilitation." Because the Sentencing Reform Act prohibits a court from imposing a sentence to enable a person to complete a treatment program or otherwise promote rehabilitation, the court erred in imposing a sentence based on appellant's rehabilitative needs. His sentence was vacated and the case remanded for resentencing.

4. United States v. Love, Seventh Circuit: Appellant was convicted of distributing and conspiring to distribute crack. Because he committed these offenses before the effective date of the Fair Sentencing Act, but was sentenced after, he was entitled to resentencing under the Act's less stringent crack provisions. Resentencing was also proper because the court incorrectly calculated the guidelines sentence. For these reasons, his sentence was vacated and the case remanded for resentencing.

5. United States v. Wren, Seventh Circuit: Appellants were convicted of crack offenses. They both had original Guideline ranges above the statutory floor and received sentences below that floor because of the substantial assistance they provided to the prosecutor. After they were sentenced, the Sentencing Commission made changes to the Guideline ranges for crack that would have permitted a reduction in their sentences. Because the court erred in ruling that appellants were prevented from receiving lower sentences under Guideline § 5G1.1, the case was remanded.

6. United States v. Macias-Farias, Sixth Circuit: Appellant was convicted of drug trafficking and sentenced to 320 months in prison. Because the court failed to make the findings necessary to enhance appellant's sentence for obstruction of justice under Guideline § 3C1.1, remand for resentencing was required.

February 7, 2013

It's Hard To Lie (Though Not For The Reason You Think); or You Haven't Made A False Statement If The Statement You Made Isn't False

Daniel Castro was a high-ranking person in the Philadelphia Police Department. And the Third Circuit's opinion in his case - United States v. Castro - may just be the most awesome published opinion I've seen in months.

Mr. Castro was charged with three separate extortion conspiracies and also with making a false statement to federal agents - a violation of 18 U.S.C. § 1001.

The jury hung on the extortion charges. They convicted on the false statement charge.

He pled to one extortion conspiracy to avoid retrial and the plea agreement had an appeal waiver.

Yet, despite that, the Third Circuit reversed his false statement conviction because the government hadn't proven it. The Third Circuit held that he was so clearly not guilty of making a false statement that it would be a manifest injustice to not reverse on those grounds - so the appeal waiver didn't bar their consideration of the issue.

1095398_right_or_wrong.jpgThe (Not) False Statement

Mr. Castro had a friend, Rony Moshe. Mr. Castro lost some money in a bad investment. He thought of his losses as a debt owed to him by the person he invested with - a man named Encarnacion. Mr. Moshe proposed that he could refer some tough debt collectors to help Mr. Castro collect this "debt" from Mr. Encarnacion. Mr. Moshe really went out of his way to try to work with Mr. Castro.

As you may have already suspected, Mr. Moshe was also an FBI informant.

After a lot of back and forth and a lot of regrettable statements on wires, Mr. Moshe gave Mr. Castro some money that he told Mr. Castro came from Encarnacion. In fact, it came from the FBI.

The FBI interviewed Mr. Castro. The asked him if he ever got money from Mr. Encarnacion.

Mr. Castro said that he did not. Though of course he thought that he did. Though he didn't - the money came from the FBI.

His statement that he didn't get any money from Encarnacion was the basis of his false statement conviction.

Failing to Fib

On appeal, Mr. Castro argued that this wasn't a false statement. In fact, it was a true statement - he did not, in fact, get any money from Encarnacion.

Mr. Castro didn't know that the statement was true - he intended to lie. But, despite his best efforts, he failed to fib.

The Third Circuit set out the standard for a false statement prosecution:

To establish a violation of §1001, the government [is] required to prove each of the following five elements: (1) that [the accused] made a statement or representation; (2) that the statement or representation was false; (3) that the false statement was made knowingly and willfully; (4) that the statement or representation was material; and (5) that the statement or representation was made in a matter within the jurisdiction of the federal government.

The second element is plain as day. And Mr. Castro's statement wasn't false. So, the Third Circuit reversed his conviction for making a false statement.

The Government's (Rejected) Arguments

The government was unhappy with this result - Mr. Castro thought he was committing a crime, even if he actually wasn't. The Third Circuit empathized, but disagreed:

In the broadest sense, it is surely so that Castro was morally wrong even if not legally guilty, but our legal system does not convict people of being bad. If they are to be convicted, it is for specific crimes, and the government here undertook the burden of proving that Castro had committed each element of the specific crime set forth in § 1001. It failed to do that.

The government was really unhappy with this result. They argued that there's a "sting operation exception" to the requirement that a person make a false statement for there to be a successful false statement prosecution. Undercover operations do odd things to the truth. Many is the time I've sat with someone after they've been arrested in a sting and the predominant emotion is betrayal. Folks just can't get over being lied to by someone who turned out to be a federal agent.

The Third Circuit didn't much care for the "sting operation exception"

The ready and dispositive response to that argument is that, even if a "sting exception" to the strictures of § 1001 is a good idea, it is simply not in the statute. Congress knows how to pass laws that penalize statements made to law enforcement officers by a defendant who incorrectly believes the statements to be false. Compare 18 U.S.C. § 1956(a)(1) ("knowing" laundering of funds "which in fact involves the proceeds" of a crime), with id. §1956(a)(3) (intentional laundering of funds "represented to be" proceeds of a crime). But it did not do so when it enacted § 1001, and we are not free to amend the law.

In a desperate move, the government then argued that the money really came "from" Encarnacion, even though they came from the FBI.

The Third Circuit's response - "It is not clear how the quotation marks around the word "from" in that sentence help the argument."

Ouch.

As a result, Mr. Castro's false statement conviction was reversed.

So many ways to be wrong, but morally and in terms of what happened. Yet they add up to make something so right.

February 6, 2013

If A Person Ought To Have A Franks Hearing, Then They Ought To Have A Franks Hearing; Pre Franks Is Not Franks Enough

In a criminal case, most lawyers need to figure out what motions to file. A big part of this is to sit down with the government's evidence and try to figure out what parts of the government's case came from something that violated the constitution.

It's frustrating when some part of the evidence came from a search warrant - challenges to search warrants are tricky, because a judge already signed off on the warrant. It's not to say it can't be done, it's just different than challenging, say, if the FBI ran into a client's office and took a bunch of stuff without a warrant.

Sometimes you can challenge a warrant if the affidavit in support of the warrant clearly didn't establish probable cause to think there was going to be evidence where the cops searched.

The trouble with that is that normally the district court judge won't let you examine any witnesses to rule on the issue - if part of the point of filing pretrial motions is to learn more about the government's case and learn more about what their witnesses are going to be like, then this kind of a challenge to a warrant doesn't get you what you want.

file000265247244.jpgAnother thing you can do, though, is challenge the warrant because the cops lied or left something out of the application for the warrant that was really important. This is called a Franks challenge.

As the Seventh Circuit explained in United States v. McMurtrey,

In Franks v. Delaware, 438 U.S. 154 (1978), the Supreme Court held that when a defendant makes a substantial preliminary showing that the police procured a warrant to search his property with deliberate or reckless misrepresentations in the warrant affidavit, and where such statements were necessary to the finding of probable cause, the Fourth Amendment entitles the defendant to an evidentiary hearing to show the warrant was invalid.

So, when is it that a person bringing a Franks challenge has made that preliminary showing? That's the subject of United States v. McMurtrey.

But first, the Seventh Circuit explains what the district court's options are when a Franks challenge to a warrant has been made:

A district court that is in doubt about whether to hold a Franks hearing has discretion to hold a so-called "pre-Franks" hearing to give the defendant an opportunity to supplement or elaborate on the original motion. Though permissible, this procedural improvisation is not without risk, as the sparse case law indicates. In such a pre-Franks hearing, the natural temptation for the court will be to invite and consider a response from the government. However, the court should not give the government an opportunity to present its evidence on the validity of the warrant without converting the hearing into a full evidentiary Franks hearing, including full cross-examination of government witnesses. We emphasize that the option to hold such a limited pre- Franks hearing belongs to the district court, not the defendant. If the defendant's initial Franks motion does not make the required "substantial preliminary showing," the court need not hold a pre-Franks hearing to provide the defendant a further opportunity to do so.

I've never seen a district court order a pre-Franks hearing. Now I kind of want to see one - it looks cool. The government doesn't get to talk, but the defense lawyer does. Awesome. It's like the inverse of a grand jury proceeding.

In Mr. McMurtrey's case, there were two affidavits in support of the warrant. They contradicted each other. So one had to be wrong.

At least one.

So, Mr. McMurtrey made a sufficient showing to get a Franks hearing.

That's not quite what the district court wanted to do though.

As the Seventh Circuit explained it

Rather than hold a full Franks hearing, however, the district court held a truncated pre-Franks hearing. The district court permitted the government to offer additional evidence to explain the discrepancies in the affidavits. That evidence should have required a full Franks hearing, yet the defendant was not permitted full cross-examination on the government's new evidence. The court then relied on the untested government evidence to find that the defendant had failed to make a showing sufficient to obtain a full Franks hearing.

Indeed, the defense lawyer started to cross the cop on his affidavit but was shut down on the grounds that the district court wasn't having a Franks hearing.

Because the court didn't give Mr. McMurtrey his full hearing, the case was remanded and his conviction was vacated.

February 4, 2013

Short Wins - The Seventh Circuit Goes Strong, But the Ninth Circuit Goes Interesting; Resentencing, Discovery Violations, And Money Laundering

It's a good week in the circuits for folks accused of federal crimes.

The Seventh Circuit has been active (though sadly without Judge Posner). United States v. Diaz-Rios looks interesting - it's a remand for resentencing in a mitigation role case. Personally, I think the mitigating role reduction is too rarely applied (though I would say that). I'm always happy to see pro-defendant law made on that guideline.

Perhaps most interesting, though, is United States v. Doe - a Ninth Circuit discovery violation case. Looks like all of DOJ's Brady training may not have eliminated the whole problem. Shocking.

Speaking of things that are only shocking ironically, the New York Times had a nice piece on police lying. Though, realistically, if our country is going to put more people in prison than Stalin had in his gulags, a little bit of government lying is going to be hard to avoid.

Also well worth a look is United States v. Demmitt - a reversal for money laundering where the government failed to show that the folks accused of the crime intended to conceal where the money came from.

To the Victories:

1155650_berlin_siegessule.jpg1. United States v. Diaz-Rios, Seventh Circuit: Appellant pled guilty to trafficking a large amount of cocaine. At sentencing, both appellant and the government agreed that a two-level mitigating-role reduction under Sentencing Guideline § 3B1.2 was warranted. Because the reasons the district court gave for refusing this reduction did not show that the court evaluated all of the relevant factors under this Guideline, remand was required for the district court to explain its basis for rejecting the reduction.

2. United States v. Vidal, Seventh Circuit: Appellant pled guilty to offenses arising out of his participation in a scheme to rob a stash house. At sentencing, he argued that he should be sentenced to the mandatory minimum because of his psychological problems. Because the district court's reasons for rejecting appellant's argument that his psychiatric issues warranted a below-guidelines sentence were not clear from the record, his sentence was vacated and the case remanded for resentencing.

3. United States v. Doe, Ninth Circuit: Appellant was convicted of various drug felonies. Because the district court erred in denying two of appellant's discovery requests as overbroad, his conviction was vacated and the case remanded for a hearing to determine (1) whether the requested documents contain or would have led to information that may have altered the verdict and (2) whether the government discharged its obligation to provide the defense with material exculpatory evidence. The court also made several procedural errors at sentencing: (1) failing to accurately state the Guidelines range; (2) failing to give the parties a chance to recommend a sentence; and (3) failing to address all but one of appellant's objections to the Presentence Report and his arguments for further Guideline reductions. For these reasons, if appellant's conviction is reinstated, resentencing is required.

4. United States v. Cervantes, et al., Fifth Circuit: Appellants Mark Milan, Cristobal Cervantes, and Luis Alvarez were convicted of offenses arising out of their scheme to conduct an armed home invasion to steal a large quantity of drugs. In sentencing Mr. Cervantes and Mr. Alvarez, the district court applied a two-level enhancement under Guideline § 2D1.1(b)(1) because the drug conspiracy involved firearms. This was error because Mr. Cervantes and Mr. Alvarez were also separately sentenced for possession of a firearm in furtherance of a drug trafficking crime. Consequently, the case was remanded for resentencing.

5. United States v. Block, et al., et al., Seventh Circuit: Eight appellants pled guilty to offenses arising out of their involvement in a large heroin distribution conspiracy. One of the appellants, Samuel Peeples, received a two-level enhancement under Guideline § 2D1.1(b)(1) for possession of firearms by his co-conspirators. Because this enhancement was not supported by the record, Mr. Peeples' sentence was vacated and the case remanded for resentencing.

6. United States v. Demmitt, Fifth Circuit: Appellant was convicted of money laundering and other offenses. The government failed to present evidence that that the wire transfer at issue was designed to conceal or disguise the nature, location, source, ownership, or control of the fraudulently obtained money. Because no rational trier of fact could have found that the evidence established all of the elements of money laundering beyond a reasonable doubt, appellant's conviction was vacated.

January 31, 2013

To Prove Mail Fraud, The Government Has To Show You Used The Mail

Our brave new world of internet technology is encouraging innovation of all kinds. Innovation of new ways to interact with each other, new ways to learn, new ways to work, new ways to embezzle and create records of one's embezzlement, and new ways for the government to try to prosecute.

In United States v. Phillips, the Ninth Circuit - in an opinion written by S.D.N.Y. SuperJudge Rakoff sitting by designation - brushed back a prosecution for embezzlement from a tech company.

1369865_mailbox.jpgThe government, you see, prosecuted a former CEO of a tech company for mail fraud.

No one uses the mail any more.

False Invoices and Bad Emails

Mark Phillips was the co-founder and CEO of MOD Systems Inc. MOD was a high-tech start-up that was trying to develop and monetize a platform to sell and distribute content to consumers.

Mr. Phillips had a girlfriend - Jan Wallace. Like many men with a girlfriend, he liked to email her. She liked to email him back. It was good.

Unfortunately, Mr. Phillips was also involving her in a scheme to get money out of his company and onto his wrist.

Feel Good Watches

Ms. Wallace introduced Mr. Phillips to Feel Good Watches. Mr. Phillips decided to buy two watches from Feel Good. I'd like to think it was one for him and one for her; it's the romantic in me.

The watches cost $30,000 each - they were Breguet watches. At that price, one can imagine that they would make you feel very good indeed.

Feel Good mailed the first watch to Mr. Phillips. Mr. Phillips then emailed Ms. Wallace and said,

I received the watch, it's beautiful . . . If possible could I pay you for this so I can pay out of a company for consulting work.

Mr. Phillips then created a number of fake invoices for a company called Wallace Black LLC. He had MOD pay Wallace Black LLC through his attorney. The money that went to Wallace Black LLC was deposited into an account controlled by Ms. Wallace.

All of these communications and transfers - it appears - went through email or wires.

Ms. Wallace did not provide accounting services to MOD. It isn't clear whether she provided them to Feel Good Watches.

The fake invoices created a complicated paper trail. Following it was made easier for the government by Mr. Phillips emails with Ms. Wallace.

There was also a regrettable transfer of funds from the company to make a down payment on a mortgage for Mr. Phillip's condo.

The Charges and Trial

Mr. Phillips was charged with wire fraud, mail fraud, and money laundering. He was convicted at trial and sentenced to 48 months in prison.

Where's the Mail?

On appeal, Mr. Phillips argued that he hadn't committed mail fraud, since he hadn't used the mail.

The government's position was that Mr. Phillips used the mails when one of the watches - the first one - was mailed to him.

Mr. Phillips, on the other hand, countered that the watch wasn't a part of the conspiracy, rather, it was simply something that was just that he used the money he received from MOD to buy a watch.

The question is whether the mails were used in furtherance of the scheme to defraud. So, was the watch sent to further the scheme?

The Ninth Circuit said no.

The Supreme Court has previously ruled, in United States v. Maze, that where a man used a stolen bank card to pay for motels, and the motels mailed invoices for the stuff he charged, the mailing of the invoices wasn't enough to make things into mail fraud.

Because the bank card scheme's success didn't depend on the mailings, the Court said there was no mail fraud there.

Here, for Mr. Phillips, because the watch being mailed wasn't necessary to the scheme to defraud Mr. Phillips' company, he wasn't guilty of mail fraud.

As the Ninth Circuit put it,

Here, as in Maze, the success of Phillips's fraudulent scheme did not depend in any way on the use of the mails. The fact that Phillips purchased a watch with $30,000 of fraudulently obtained MOD funds, instead of using the funds for his personal benefit in some other fashion, did not in any way affect the scheme "to defraud MOD and to obtain money from MOD," as charged in Count 5. The fact that payment eventually was made to a watch dealer and that watch dealer mailed a watch in return was not a part of the scheme to defraud MOD and to obtain money from MOD - it was simply the byproduct of that scheme. Put another way, as a result of Phillips's successful execution of his scheme to defraud, he had sufficient funds to pay for the watch.

The mail fraud conviction was, therefore, reversed.

January 29, 2013

When FBI Agents (Allegedly) Talk In The Hallway; or Why Even A Lawyer Should Not Talk To the FBI If There's A Real Estate Fraud Investigation Afoot

Marc Engelmann was accused of conspiracy to commit bank and wire fraud, as well as bank and wire fraud. He was convicted at trial after some very shady stuff might have happened between two FBI agents. The Eighth Circuit (yes, the Eighth Circuit!) remanded in United States v. Engelmann.

Dual Price Real Estate Deals

Mr. Engelmann was a real estate attorney. He represented a seller in nine different deals that the government thought broke the law.

In each deal, the buyers and the sellers entered into "dual price" purchasing agreements. Basically, that means they agreed that they would tell the lenders that they were buying the property at a higher price than the actually were, so that the lender would lend more money.

No one would be surprised to learn that the mortgages ultimately went into default and the properties were sold at foreclosure.

645099_the_secret.jpgMr. Engelmann's Trial

At trial for his role in defrauding these lenders, Mr. Engelmann's defense was that he thought the lenders knew about the dual price agreements. If the lenders knew, then there's no harm to them. (though it's not totally clear what the point of a dual price agreement would be, but ok)

At trial, the district court entered a sequestration order - anyone who would be a witness had to leave the courtroom so that the witnesses couldn't tailor their testimony to what they'd already heard.

Two FBI Agents testified at trial. They both said that Mr. Engelmann told them that he knew that the lenders were unaware of the dual pricing agreements. Mr. Engelmann testified that he told the agents, instead, that if the lenders didn't know of the agreements, then it would be fraud.

The prosecutor argued in closing that the Agent's testimony about what Mr. Engelmann told them was

"the most important evidence that has been presented" and "the most powerful evidence about the defendant's guilt in this case." The prosecutor argued Agent [One]'s testimony regarding the statement was especially credible since Agent [One] was not in the courtroom while Agent [Two] testified and thus "didn't have the benefit of hearing Special Agent [Two]'s testimony" before giving his own.

The jury convicted Mr. Engelmann.

A Phone Call To Chambers

After the jury verdict, a man called the district court judge's chambers. The man's name was McNamara. Here's how the district court summarized the call:

[McNamara] informed the Court that he had attended the Engelmann trial and wanted to advise the Court of what he perceived as an "injustice" that had occurred during trial. Mr. McNamara reported that, during a court recess after [Agent 2] had testified, Mr. McNamara observed [Agent 2] talking to [Agent 1], who had not been in the courtroom during [Agent 2's] testimony. According to Mr. McNamara, the two agents were discussing [Agent 1's] testimony regarding the procedure and techniques the agents had used during the case investigation. Mr. McNamara also reported that he saw [Agent 2] look at the notes he had referred to during his testimony. Mr. McNamara said he felt this observation was significant because [Agent 1] later gave testimony consistent with [Agent 1's] testimony regarding the agents' procedure and techniques in their investigation and as to what [Engelmann] had told them during the interview. Mr. McNamara further expressed that it was his recollection that the Government argued in closing that [Agent 2] and [Agent 1] had testified independently and that they had never spoken to one another about their testimonies.

So, basically, McNamara alleged that the two agents colluded on what they'd say in the middle of trial. And the prosecutor hit that colluded testimony hard in closing argument.

And, because any trial lawyer will wonder about this - The first agent to testify was the case agent (who is allowed to sit in during the trial) the second agent to testify was not the case agent.

The District Court Springs Into Inaction

The district court wrote to both of the parties and told them about this.

Mr. Engelmann moved for a new trial and asked for an evidentiary hearing.

The district court said no. No hearing, no new trial. The district court said there wasn't much reason to believe McNamara and also that the agents colluding on their testimony in the hallway didn't violate the sequestration order.

And, the district court added, if it did violate the sequestration order, well, it didn't really matter, because McNamara only said they talked about their "procedure and techniques" in the investigation.

The Eighth Circuit Disagreed

The Eighth Circuit remanded and directed that the district court hold a hearing to develop the testimony about what happened. There are two conclusions that are interesting.

First, the court of appeals held that

Since sequestration orders are meant "to prevent witnesses from tailoring their testimony to that of prior witnesses," it would be illogical to hold that [one] Agent, excluded from the courtroom pursuant to a sequestration order, could wait outside the courtroom doors and then discuss with [the other] Agent the testimony which [the other] Agent had just given.

Second, and sort of deliciously for those defense-minded folk among us, the Eighth Circuit addressed whether the error was harmless.

The court of appeals said that because the prosecutor said this was "the most powerful evidence of the defendant's guilt in the case," this was a serious enough issue that a hearing on the sequestration violation was warranted.

January 28, 2013

Short Wins - If The Circuits Are Only Going To Give One Victory To A Defendant In A Week, This Is A Pretty Good One

Perhaps our nation's circuit court judges took it easy last week because of the inauguration, or Martin Luther King Jr. Day, but there's only one case where a defendant won in a published opinion in a federal appellate court.

That said, it's a great win -- sufficiency of the evidence reversal from the Eleventh Circuit.

In other news, vaguely related to this blog, I was quoted in the Baltimore Sun, talking about the prospects for Supreme Court review of a Fourth Circuit case involving a federal habeas challenge to a state conviction.

Here's my quote:

Speaking of the possibility of an appeal by Merzbacher, Matthew G. Kaiser, an appeals specialist in Washington, D.C., said the Supreme Court has shown some interest in cases like Merzbacher's, in which attorneys have been accused of failing to discuss plea negotiations with their clients.

Still, Kaiser said, Merzbacher should not hold out too much hope because the court only takes a fraction of the cases it is asked to review. "It's perhaps moved from really massively unlikely to nearly massively unlikely," he said.

The article is available at this link.

To the victory!

1155650_berlin_siegessule.jpg1. United States v. Jimenez, Eleventh Circuit: Appellant was convicted of intentionally misapplying $5,000 or more from an organization receiving more than $10,000 in federal funds in one year. Because there was insufficient evidence to support a finding that appellant intentionally misapplied funds, his conviction was reversed and the case remanded with instructions for the district court to enter a judgment of acquittal.

January 25, 2013

Health Care Fraud Restitution Amounts Can't Be Set On Just An Insurance Company Saying It Would Like A Lot Of Money

Two doctors, married to each other, were accused of health care fraud. They pled guilty and fought at sentencing about the amount of the restitution that they would have to pay back to the insurance companies for what they did. And, in United States v. Sharma, the Fifth Circuit held that a district court can't just make up a restitution number.

Dr. Arun Sharma and Dr. Kiran Sharma ran two pain management clinics in Texas.

1028452_syringes_and_vial.jpgAt these clinics, the Doctors Sharma would give pain injections to patients. The health care fraud involved "paravertebral facet-point injections."

I have no idea what those are, but they sound really unpleasant. Happily for the Sharma's patients, many of the injections which were billed never happened. Though, that the injections never happened was not so happy for the insurers or, ultimately, the Sharmas.

Instead, two things would happen. First, sometimes a cheaper faster (and, I imagine, easier for the patient) "tigger point injection" would be given. The doctor would then "upcode" the injection as a paravertebral facet-point injection, since that injection pays more.

If you've ever done a health care fraud case, you know that upcoding is a huge deal.

Then, second, sometimes the doctors would simply create phantom bills for injections that never happened.

The Sharmas were indicted for 64 counts of conspiracy, health care fraud, mail fraud, money laundering, and unlawful distribution of controlled substances. They ultimately pled guilty to one count of conspiracy and one count of health-care fraud.

The big issue at sentencing was restitution. In their plea agreements, the Sharmas agreed that the district court would determine the restitution amount and that they would do what they can to pay it.

Though, in an atypically compassionate move, the government agreed to place $1,500,000 of the money that the Sharmas had received in an educational trust for their son.

Before sentencing, a probation officer prepared a Presentence Report. The PSR determined that the loss amount was $43,318,170.93 and that the Sharmas should pay restitution in that amount. It was not a coincidence that the $43 million amount was submitted by the insurance companies.

The Sharmas hired a forensic accountant and submitted an alternative restitution figure. The accountant backed out losses that the insurance company said were the result of procedures other than injections - like the allergy treatments that Kiran Sharma provided which were undisputedly legitimate.

The accountant also said that the losses on the upcoded procedures was done incorrectly - the loss should be the difference between the procedure that was done and the procedure that was billed for. It should not be just the cost of the procedure that was billed for.

The account calculated the loss at $21,028,963.61. Which is still not chump change, but it's a lot lower than the $43 million.

The district court rejected the accountants work, accepted the insurance companies' number, and ordered restitution of $43 million.

The Fifth Circuit reversed. Noting that "excessive restitution awards cannot be excused by harmless error; every dollar must be supported by record evidence," the court of appeals said that "[b]y . . . directly incorporating the amounts from the victim impact statements into the PSRs as actual losses, the Probation Office went astray."

The Fifth Circuit picked out three examples of victim impact statements that were pretty egregious:

One insurer, Tricare, claimed as loss all of its payments to the Sharmas dating back to 1997. Inasmuch as the charged conspiracy did not begin until 1998, however, the 1997 payments plainly do not constitute actual losses under the MVRA.18 A second insurer, Texas Amerigroup, reported that it paid the Sharmas $650,775.01 for injections, out of a total of $929,884.55 paid to them for all treatments. Yet the Probation Office listed the larger figure, the one for total payments, as actual loss instead of listing only the lesser amount that the insurer paid for injections. This too overstates the insurer's loss by including payments not caused by the specific convictions.19 A third insurer, Principal Life Insurance, attached a spreadsheet of all of its payments to the Sharmas, but expressly stated that it was "not sure which claims relate to the guilty plea." The Probation Office nevertheless reported all of those payments as actual loss.

The case was sent back for the district court to recalculate the amount of restitution that the Sharmas owe.

January 17, 2013

The Fourth Circuit Holds That Corporations Aren't People For The Purposes Of The Identity Theft Statute, Or Take That Citizens United

Tamatha Hilton was the bookkeeper for a company called Woodsmith's. Woodsmith's made furniture. Ms. Hilton made bad decisions.

Specifically, for a few years, she took checks written by Woodsmith's customers and gave them to her husband, Jimmy Hilton. Mr. Hilton did not work at Woodsmith's.

Mr. Hilton gave the checks to his ex-wife, Jacqueline Hilton. Ms. Hilton opened a bank account at Suntrust in her name, saying that she was the owner of a company called Woodsmiths Furniture Company.

She was not.

She was, however, the owner of a pre-printed stamp from an office supply store that said checks made out to Woodsmiths should be deposited into her Suntrust Account.

You can probably guess how that was used.

1390098_garden_chairs_2.jpgOver two years Woodsmiths lost around $650,000 to Ms. Hilton's Suntrust Account.

The three were charged with identity theft, mail fraud, mail theft, money laundering, conspiracy, passing forged securities, and making a false statement to a financial institution.

At trial, Ms. Hilton was acquitted of making a false statement to a financial institution. Everyone else was convicted of everything else.

In their appeal to the Fourth Circuit, resolved in United States v. Hilton, Mr. and Ms. Hilton challenged their convictions for identity theft, on very clever grounds:

Jimmy and Jacqueline appeal their convictions for identity theft and aggravated identity theft, in violation of 18 U.S.C. §§ 1028(a)(7) and 1028A (the identity theft statutes). They argue that the conduct charged, namely, the use of the stamp bearing Woodsmiths' name in endorsing the stolen checks, did not constitute a violation of the identity theft statutes, because the language of those statutes does not encompass the act of stealing the identity of a corporation.

Ultimately, the Fourth Circuit agreed.

Noting that,

In light of the serious consequences flowing from a criminal conviction, the rule of strict construction rests on the principle that "no [person] shall be held criminally responsible for conduct which he could not reasonably understand to be pro- scribed." Accordingly, although "[t]he simple existence of some statutory ambiguity is not sufficient" to trigger automatic resolution of the ambiguity in favor of a defendant, "we will construe [a] criminal statute strictly and avoid interpretations not clearly warranted by the text." (internal citations omitted)

The statute, 18 U.S.C. § 1028(a)(7) makes it illegal to transfer, possess, or use "a means of identification of another person with the intent to commit, or to aid or abet, or in connection with, any unlawful activity that constitutes a violation of [f]ederal law, or that constitutes a felony under any applicable [s]tate or local law." The vicious § 1028A - which imposes a two-year consecutive mandatory minimum if someone commits and identity theft crime in connection with another felony - uses the same language.

In the definition section for both statute defines "means of identification" as "any name or number that may be used, alone or in conjunction with any other information, to identify a specific individual."

Under the Dictionary Act - the Act that defines terms used in federal statutes if there isn't another definition that's more closely tailored - "person" includes corporations. "Individual" though, might not.

Because that's an ambiguous question, the Fourth Circuit held that the identity theft statute does not apply to corporations.

we are left with a "grievous ambiguity or uncertainty in the statute[s]," and we decline to speculate regarding Congress' intent. Instead, faced with the choice of two plausibly valid interpretations, "we yield to the rule of lenity." (internal citations omitted)

Though the convictions for mail fraud, mail theft, money laundering, conspiracy, and passing forged securities still stood. The folks who were convicted were remanded for resentencing.

January 15, 2013

Short Wins - Day After The Inauguration Edition

It's hard not to want to celebrate the orderly processes of government on the day after a Presidential Inauguration.

Though, for those of us who represent people accused of crimes, the "orderly processes of government" may feel a bit different. It's good that we don't have lynch mobs or posses with pitchforks chasing people who we think have violated the norms of our society.

But, as our President reminded us yesterday, our journey is not complete. Of course, most folks agree with the President that our journey is not complete until women earn equal pay, same sex couples can marry, voting rights are meaningful, and immigrants are welcomed.

It would also be nice to think that our journey's completion requires maybe not putting more people in prison than any other country in the world.

I suppose that doesn't make for as fun a speech though.

You come here not for complaints about state power, but to be reminded of the virtues of laws, courts, and processes, even for those who are on the outs with our United States government. Regardless of the flaws with our current system, we still have better appellate processes than a group of vigilantes.

It's a good week in the federal circuits for wins in fraud cases. If you only read this week's "Short Wins" you might think that the sentencing guideline for fraud - 2B1.1 - is complicated or difficult to apply. Indeed, the bulk of this week's cases are victories in sentencing appeals.

To the victories!

1155650_berlin_siegessule.jpg1. United States v. Catchings, Sixth Circuit: Appellant pled guilty to identity theft. When the district court calculated the amount of loss under Sentencing Guideline § 2B1.1(b)(1), it erroneously included losses stemming from credit cards that were not obtained or used in violation of criminal law. Consequently, the court incorrectly calculated appellant's guidelines range. Remand for resentencing was required.

2. United States v. Grant, Eighth Circuit: Appellant was convicted of conspiracy to distribute at least 30 but less than 50 grams of crack cocaine and sentenced to 170 months in prison. His sentence was reduced to 130 months as a result of the 2008 amendments to the crack cocaine sentencing guidelines. Appellant sought another reduction under the Fair Sentencing Act, and his sentence was reduced to 123 months. Because the district court abused its discretion when it failed to articulate its rationale for sentencing appellant at the middle of the guidelines range, remand for resentencing was required.

3. United States v. Diallo, Third Circuit: Appellant pled guilty to possession of 15 or more counterfeit credit cards with intent to defraud. At sentencing, though the actual loss was $160,000, the district court assessed a 16-level enhancement under Guideline § 2B1.1 because he could have charged $1.6 million on the credit cards at issue. Because the district court did not properly analyze whether appellant intended to cause the full potential loss, and because this error was not harmless, remand for resentencing was appropriate.

4. United States v. Hall, Eleventh Circuit: At appellant's sentencing for a variety of fraud crimes, she was assessed a four-level enhancement under Guideline § 2B1.1(b)(2)(B) because the district court incorrectly found that the offenses involved more than 50 but less than 250 victims. Because it was unclear from the record whether the court would have imposed the same sentence absent any error, the sentence was vacated and the case remanded for resentencing.

5. United States v. Resendiz-Moreno, Fifth Circuit: After appellant plead guilty to illegal reentry, the district court calculated his offense level, applying a 16-level enhancement under Guideline § 2L1.2(b)(1)(A)(ii) based on the court's determination that appellant's prior conviction for first-degree cruelty to children constituted a crime of violence. Because the statute under which appellant was convicted did not require a showing of physical force, the offense did not constitute a crime of violence. Therefore, appellant's sentence was vacated and the case remanded for resentencing.

6. United States v. Roussel, Fifth Circuit: Appellant was convicted of wire fraud and conspiracy involving a scheme to defraud a utilities provider. At sentencing, the court erred in applying a two-level enhancement under Guideline § 2C1.1(b)(1) because it incorrectly found that more than one bribe occurred. The court also erred in calculating the fraudulent contract's expected benefit to appellant, as it's calculation was purely speculative. As a result, the court started at an incorrect guidelines range. Because it is unclear whether the court would have imposed the same sentence had it started with the correct range, the errors were not harmless, and remand for resentencing was required.

7. United States v. Zepeda, Ninth Circuit: Appellant was convicted of nine offenses arising out of his role in injuring people inside a home located on the Ak-Chin Reservation of Arizona. In counts 2 through 9, appellant was convicted under The Major Crimes Act, which governs certain crimes committed by Indians in Indian country. Because the government failed to prove beyond a reasonable doubt that appellant was an Indian under the Major Crimes Act, his convictions on these counts were vacated.

January 13, 2013

Short Wins - A Franks Hearing in the Seventh Circuit!

Who doesn't love a good Franks hearing? Apparently the district court judge in the Seventh Circuit case of United States v. McMurtrey.

It's a relatively quiet week in the federal circuit's for defense victories. A Fourth Amendment win in the Tenth Circuit, a few sentencing remands, and, most exciting (for me) a Franks hearing remand in the Seventh.

To the victories!

1155650_berlin_siegessule.jpg1. United States v. Castro, Third Circuit: Appellant was convicted of offenses arising out of three separate schemes to extort money through violence. Because the record did not contain evidence that he knowingly made a false statement to the FBI, his conviction of this offense was reversed. Given the reversal of his conviction on this count, remand was required for resentencing on appellant's conviction for conspiracy to commit extortion to calculate the correct guidelines range.

2. United States v. De La Cruz, Tenth Circuit: The district court erred in denying appellant's motion to suppress his ID card, which was obtained during an investigative seizure, because (1) the agents did not have reasonable suspicion to continue to detain appellant to obtain his identification and (2) the court erroneously concluded that appellant's identification was not suppressible, even if there was an unlawful seizure. For these reasons, the district court's decision was reversed and the case remanded.

3. United States v. Fraga, Fifth Circuit: Appellant was sentenced to 27 months in prison and a lifetime of supervised release after pleading guilty to failing to register as a sex offender. Because the district court did not give reasons for its imposition of a lifetime term of supervised release, this portion of the sentence was vacated and the case remanded.

4. United States v. McIntosh, Eleventh Circuit: Appellant was sentenced to 120 months in prison after pleading guilty to possession of five grams of crack with intent to distribute and carrying a firearm during a drug trafficking offense. After appellant committed these offenses, but before he was sentenced, the Fair Sentencing Act was enacted. The Act, among other things, raised the threshold possession amount that triggered the mandatory minimum sentence - 120 months - applied in appellant's case. Because appellant was sentenced after the Act's effective date, he was entitled to have the benefit of the Act's higher threshold for the mandatory minimum sentence. Consequently, his sentence was vacated and the case remanded for resentencing.

5. United States v. McMurtrey, Seventh Circuit: Because appellant demonstrated that the affidavits on which the search warrant for appellant's home was based were contradictory, remand was required for a full hearing pursuant to Franks v. Delaware.