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.

January 13, 2013

The First Circuit On Police Providing Information To Drug Dealers - You're Only In A Federal Drug Conspiracy If You Know It's A Federal Drug Conspiracy

It seems that Rolando Ramos was a marijuana dealer. I say that because the police had him on a wire doing drug deals, found marijuana in his house when the executed a search warrant, and because he pled guilty to being involved in a conspiracy to distribute marijuana.

Mr. Ramos worked at a auto repair shop - which he dealt marijuana out of. One guy who worked at the repair shop had a brother in law who was a cop. The cop's name is Carlos Burgos.

Mr. Burgos was convicted of being a part of Mr. Ramos's drug distribution conspiracy. But the First Circuit, in United States v. Burgos, overturned that conviction because there wasn't enough evidence.

1066058_patrol_hat_too.jpgFamily Ties

Mr. Burgos worked as a uniformed officer in Worchester, Massachusetts. His beat included a high-crime area known as "Main South." In Main South was a car repair shop - G & V General Auto Repair. Mr. Burgos's brother-in-law worked at G & V.

Mr. Burgos's brother in law gave him discounts on car repairs. Mr. Burgos took advantage of those discounts.

Also working at G & V was Mr. Ramos. Mr. Ramos wasn't really a mechanic, he was more of a gopher - running money to the bank and picking up parts.

Also, Mr. Ramos was dealing drugs. Though more on that later.

As time went on, Mr. Burgos got to be friendly with many of the other mechanics at G & V. Eventually, his brother in law moved on to greener pastures, though the mechanics at G & V kept giving Mr. Burgos discounts.

Savvy shopper that he is, Mr. Burgos kept using G & V for his automotive needs.

Mr. Ramos And Mr. Burgos

Mr. Ramos never talked to Mr. Burgos about his drug dealing. When he pled guilty, he flipped, and testified at Mr. Burgos's trial. Mr. Ramos described Mr. Burgos as being a personal friend. The First Circuit seemed skeptical.

Ramos met some members of Mr. Burgos's family, but never went into his house; the only time that Ramos went to Mr. Burgos's house was to tow a car. Mr. Burgos never went to Ramos's house. On one occasion, Ramos helped Mr. Burgos's sister and her infant son by towing her car and repairing a flat tire, which he did without charging her.

Though the court of appeals also noted that Mr. Ramos did sell Mr. Burgos some automotive equipment and, at one point, a used laptop for slightly less than market price. And they exchanged a phone call on Christmas Day once.

But one would hope that each man had closer friends.

Mr. Ramos Needs Information

Eventually, Mr. Ramos became convinced that the police were watching him at the store. This was because police were watching him at the store.

Mr. Ramos asked Mr. Burgos for information about whether he was under surveillance. Mr. Burgos found out that the Vice Squad was, indeed, watching the auto shop.

In the worst evidence for Mr. Burgos, they spoke on a recorded call and Mr. Burgos told Mr. Ramos that he should "take it easy for now" because the police were on to something at the auto shop.

Mr. Burgos Goes To Trial

Mr. Burgos was indicted for being a part of Mr. Ramos's drug conspiracy.

The government looked at this evidence and tried to convince a jury that Mr. Burgos was a dirty cop helping a drug dealer. In fact, they did convince a jury that Mr. Burgos was dirty cop helping a drug conspiracy. The government did not, however, convince the First Circuit.

The First Circuit Addresses Whether This Cop Has This Specific Dirt

The First Circuit first laid out the standard for whether a sufficiency of the evidence challenge would succeed:

Mr. Burgos was convicted of conspiracy to distribute and to possess with intent to distribute marijuana. To affirm his conviction, we must determine whether a reasonable jury could conclude that the Government proved beyond a reasonable doubt each element of the crime: (1) "a conspiracy existed," (2) Mr. Burgos "had knowledge of the conspiracy" and (3) Mr. Burgos "knowingly and voluntarily participated in the conspiracy."

The First Circuit rejected the government's argument that it made a sufficient showing on the second requirement - that Mr. Burgos knew of the conspiracy.

The government argued that Mr. Burgos knew that there was a drug conspiracy, because he likely knew that the vice squad was investigating. The First Circuit stopped the government short on this claim:

a reasonable jury could conclude, beyond a reasonable doubt, that Mr. Burgos knew that Main South was an area of high crime, and specifically high drug crime, that the Vice Squad investigated crimes involving drugs, prostitution and gaming, and that the Vice Squad was surveilling G & V. From this, a jury certainly could infer that Mr. Burgos was aware that the Vice Squad was investigating G & V for possible criminal activity that fell within its purview--drug crimes, prostitution or gaming. None of the evidence, however, establishes, beyond a reasonable doubt, that the Vice Squad was investigating a drug crime, as opposed to prostitution or gaming.

Since there wasn't any reason to think - based just on the fact that the vice squad was looking into the shop - that Mr. Burgos knew this was for drugs, he couldn't have been convicted for being a part of a drug conspiracy.

The government argued, then, that Mr. Burgos should have known that something was afoot - he was a trained police officer after all. The First Circuit thought Mr. Burgos probably should have known something was up, but not what it was:

The combination of both the Gang Unit and the Vice Squad surveilling G & V, Ramos's ability to secure items at well-below retail cost for resale to Mr. Burgos, and Ramos's inquiries, on two occasions, concerning surveillance, were warning signs that something illegal was afoot at G & V. There simply is no evidence, however, that Mr. Burgos knew, or was aware of a high probability, that the illegal actions involved drugs.

The case was vacated and remanded. Mr. Burgos goes home (I'm betting he won't be going back to his old job though).

January 5, 2013

Short Wins - Restrictions on Prison Communications, Career Offender Remands, Competency Hearings, and Mail Fraud

Happy New Year!

In our first "Short Wins" of the new year, the Eighth Circuit reverses a district court's order restricting a person in BOP custody from communicating with folks on the outside, the Ninth Circuit reverses on a career offender determination, and the Sixth Circuit reversed when a district court didn't give a person counsel in a competency hearing.

My personal favorite, though, is the Ninth Circuit's remand in a mail fraud case that, the court of appeals determined did not involve the mails.

Sometimes it's the little things.

To the victories!

1155650_berlin_siegessule.jpg1. United States v. Allmon, Eighth Circuit: After appellant was convicted of offenses arising out of his involvement in a drug trafficking operation and a conspiracy to kill a witness, the district court granted the government's motion to restrict appellant from communicating with 29 people. Years later, the court on its own motion ordered more stringent restrictions on appellant's communications after it learned that appellant circumvented the initial restrictions. Because the Director of the Bureau of Prisons did not make a motion to further restrict appellant's communications, this was error. As a result, the order requiring more stringent restrictions was vacated.

2. United States v. Lee, Ninth Circuit: Appellant was convicted of distributing crack cocaine and was sentenced as a career offender under Sentencing Guideline section 4B1.1 based on two prior convictions that the district court identified as controlled substance offenses. Because the government failed to meet its burden of showing that one of the two convictions qualifies as a predicate offense, the case was remanded for the district court to consider appellant's career offender status.

3. United States v. Phillips, Ninth Circuit: Appellant was convicted of mail fraud, among other offenses, arising out of his scheme to defraud his company. Because appellant's fraudulent scheme did not depend in any way on the use of the mails, his conviction for mail fraud was reversed.

4. United States v. Pileggi, Fourth Circuit: Appellant was convicted of various offenses as a result of his involvement in a fraudulent sweepstakes scheme. He was sentenced to 50 years in prison and ordered to pay more than $ 4 million in restitution. Appellant appealed his sentence, but not the restitution amount. On remand for resentencing, the court increased the restitution amount to more than $ 20 million. Because the appellate court's mandate did not give the district court the authority to change the restitution amount, the second restitution order was vacated and the case remanded for the district court to reinstate the first order.

5. United States v. Ross, Sixth Circuit: Appellants Bryan Ross and Robert Burston were convicted of offenses arising out of their involvement in a counterfeit check scheme. With respect to Mr. Ross, the district court erred when, upon granting a competency hearing, it failed to reappoint full-time counsel to represent Mr. Ross until the issue of competency was resolved. Mr. Ross' case was remanded for an evidentiary hearing to determine whether he was unconstitutionally deprived of counsel at the competency hearing. If the district court determines that Mr. Ross was deprived of counsel, his conviction and sentence will be vacated.

6. United States v. Watson, Fourth Circuit: Appellant was convicted of being a felon in possession of a firearm and ammunition. The district court denied appellant's motion to suppress a statement he made after being detained by police for three hours without probable cause. This was error because (1) appellant's three-hour detention was an unlawful custodial arrest in violation of his Fourth Amendment rights, (2) the taint of this unlawful arrest was not purged by the two Miranda warnings provided during his detention or by any intervening circumstance, and (3) the erroneous admission of appellant's statement was not harmless. As a result, appellant's convictions were vacated and the case remanded to the district court.

7. United States v. Xu, Ninth Circuit: Four Chinese nationals appealed their convictions arising out of their scheme to steal funds from the Bank of China and retain the proceeds by illegal transfers of funds and by immigration fraud. Because the district court erred in applying Sentencing Guideline section 2S1.1(a)(1) instead of section 2S1.1(a)(2), which resulted in a higher base offense level, the case was remanded for resentencing.

January 2, 2013

Telling People They Can Use A Drug In A Way Different Than How The FDA Says They Can Use A Drug Is Not A Crime, Says the Second Circuit

Alfred Caronia was a sales rep for a pharmaceutical company. And, despite what you might think by reading some of the literature, being a pharmaceutical sales rep is not a crime. It's even more emphatically not a crime after the Second Circuit's opinion in United States v. Caronia.

1213599_pills.jpgPart of Mr. Caronia's job was to encourage folks to buy Xyrem.

According to the Second Circuit,

Xyrem's active ingredient is gamma-hydroxybutryate ("GHB"). GHB has been federally classified as the "date rape drug" for its use in the commission of sexual assaults.

Despite Xyrem's dark side, it was approved by the FDA for two uses for folks with narcolepsy.

Mr. Caronia's company thought that perhaps doctors should be prescribing it for an even greater assortment of problems.

Mr. Caronia's job, in part, was to find doctors who would talk to other doctors about the benefits of Xyrem's FDA-approved uses. The doctors did not provide this service for free.

One of the doctors who worked with Mr. Caronia was Dr. Peter Gleason.

And, by way of background - it's ok for a doctor to prescribe a drug for a use that isn't on the label. The FDA doesn't want to get between a doctor's relationship with her patient, even on off-label uses of prescription drugs.

At the same time, it's a crime to "misbrand" a regulated drug. A drug is misbranded if:

its label is false or misleading; the label fails to display required information prominently; its container is misleading; or it is dangerous to health when used in the dosage, manner, frequency, or duration prescribed, recommended, or suggested on the label.

The Wire

The federal government started investigating Dr. Gleason for promoting an off-label use of Xyrem.

The feds wired up a cooperator. The cooperator was another doctor, who called Mr. Caronia and asked about an off-label use of Xyrem.

Mr. Caronia, as only a man paid on commission can, talked up the benefits of the drug for many kinds of maladies - insomnia, Fibromyalgia, restless leg, Parkinsons, chronic fatigue, chronic pain, and MS.

He also said it will make you lose weight without dieting or exercise. [that was a joke]

These statements - and other related ones - got Mr. Caronia indicted for conspiracy to commit misbranding.

Indicted For Aggressive Sales

Mr. Caronia said that he was being indicted for commercial speech. There's a line of cases from the Supreme Court that say that even commercial speech is protected by the First Amendment.

The district court agreed. As the Second Circuit said,

The court observed that "the criminal information . . . allege[d] Caronia's promotion of off-label uses of an FDA-approved drug," and concluded that Caronia stood charged with a crime the actus reus of which was First Amendment speech.

But, the district court concluded that the prohibition on commercial speech is reasonably tailored to the objectives of the Food Drug and Cosmetic Act. So it's ok to charge people criminally for this First Amendment activity.

Mr. Caronia went to trial and was convicted.

The Second Circuit

One big question running through the appeal is whether Mr. Caronia was charged with a crime based on his speech - as the district court determined - or whether he was charged with misbranding and his speech was used as evidence of his other acts that were criminal.

The Second Circuit went through the trial testimony and found that the government's theory here was that Mr. Caronia violated the law by his speech.

So, the government is prosecuting Mr. Caronia's speech. Is that ok?

That's really two questions - first, is Mr. Caronia's conduct covered by the statute and, second, if his conduct is covered by the statute, does it violate the First Amendment.

The Second Circuit let that second question answer the first:

under the principle of constitutional avoidance, . . . we construe the FDCA as not criminalizing the simple promotion of a drug's off-label use because such a construction would raise First Amendment concerns. Because we conclude from the record in this case that the government prosecuted Caronia for mere off-label promotion and the district court instructed the jury that it could convict on that theory, we vacate the judgment of conviction.

So, according to the Second Circuit, promoting the off-label use of a drug is not a crime under the statute. If it were, the courts would have to think about whether such a statute is constitutional.

December 26, 2012

The Second Circuit Reverses A Conviction For Tax Evasion Based On Insufficient Evidence

Five partners at Ernst & Young - Robert Coplan, Martin Nissenbaum, Richard Shapiro, and Brian Vaughn, and Charles Bolton - were charged with a number of tax crimes in federal court in New York, specifically tax evasion, conspiracy to defraud the United States, and lying to the IRS. The Second Circuit said that the government didn't prove that two of the men were guilty and send the case back.

Ernst & Young had developed a number of tax shelters. Tax shelters - to be clear - are not themselves necessarily legal or illegal. As the jury was instructed, "it depends on the facts."

1102930_piggy_bank_1.jpgThere were five tax shelters at issue. The Second Circuit, in United States v. Coplan, described the tax shelter that was the basis of the tax evasion count this way:

The Add-On shelter was a tax strategy marketed as a means to defer indefinitely income tax liability on capital gains, including the capital gains generated in the second year of [another tax shelter involved in the case, which converted ordinary income to capital gains, which are generally taxed at a lower rate for folks who are using tax shelters .] Add-On involved the purchase of offsetting digital option pairs, followed by a series of transactions designed to generate a tax loss. The offsetting options were structured so that there was a "one-pip" gap between their strike prices, so that, in a theoretical "home run" scenario, a taxpayer could make a multimillion dollar profit. [H]owever, there was no reasonable possibility of earning a profit from Add-On apart from the "home run" scenario, since the Add-On fee structure required payments to [Ernst & Young] and the entity acting as general partner that exceeded the potential payoff.

Four of the men - Mr. Coplan, Mr. Nissenbaum, Mr. Shapiro, and Mr. Vaughn - were charged with, and went to trial on, three charges - conspiracy to defraud the United States, tax evasion, and obstructing the IRS. Mr. Vaughn and Mr. Coplan were also charged with making false statements to the IRS. Mr. Bolton pled guilty.

The government's theory, basically, was this:

At trial, the Government sought to demonstrate that the defendants conspired to conceal the true nature of the five tax shelters by creating a variety of "cover stories" regarding the purported business purpose of the shelters, when in fact the shelters were motivated solely by a desire to avoid taxes. In essence, the Government sought to demonstrate that the defendants hid the truth from the IRS by withholding information and making affirmative misstatements.

After the trial, the jury returned a guilty verdict on all counts.

Bolton, who had entered a plea, was sentenced to 15 months in prison. The folks who went to trial were sentenced to between 20 months to three years.

The Second Circuit reversed the conspiracy charges against Shapiro and Nissenbaum because there was insufficient evidence to support them.

That's a tough standard, to win a sufficiency challenge you've got to show that at least one juror could have reasonably found the person charged guilty. Worse, in a conspiracy case with multiple objects of the conspiracy - as in this case - to win you've got to show that the person wasn't engaged in any object of the conspiracy. Yet that's what the Second Circuit found happened.

The opinion is 95 pages and summarizes a decent bit of the evidence from a multi-week trial. In essence, there wasn't enough evidence that Mr. Shapiro was familiar enough with the details of the tax shelter that the government alleged caused tax evasion.

Here's the important bit from the opinion that will matter to folks not involved in this case (though, by all means, if you have a tax evasion case involving what happened at a company, read the entire opinion). Basically, the government's case was too thin as to Shapiro (internal citations omitted):

Having reviewed the record and the arguments of counsel, we conclude that the evidence against Shapiro is insufficient to support his conviction on Count One. In reaching this conclusion, we are mindful that the absence of direct evidence is not dispositive, since "the government is entitled to prove its case solely through circumstantial evidence." Nevertheless, "[i]f the evidence viewed in the light most favorable to the prosecution gives equal or nearly equal circumstantial support to a theory of guilt and a theory of innocence, then a reasonable jury must necessarily entertain a reasonable doubt." In this case, an essential element of the conspiracy charged in Count One required proof beyond a reasonable doubt that Shapiro joined the alleged conspiracy with the "specific intent" to violate the law. The evidence with respect to Shapiro's intent, viewed in the light most favorable to the Government, remains, at best, in equipoise. Because "[i]t would not satisfy the [Constitution] to have a jury determine that the defendant is probably guilty," we conclude that Shapiro's conviction on Count One must be reversed.

It's nice to see a rejection of the idea that someone is "probably" guilty in a Second Circuit opinion.

The court of appeals reached a similar conclusion for Mr. Nissenbaum.

Because the conspiracy conviction fell, the Second Circuit held that the substantive charges of tax evasion also had to be vacated for Mr. Shapiro and Mr. Nissenbaum. Mr. Nissenbaum's conviction for making a false statement to the IRS was also vacated for insufficient evidence.

The district court also imposed a fine on Mr. Bolton in excess of the statutory maximum. That was reversed so it could be reduced to the statutory maximum.

December 24, 2012

Short Wins - Mayan Apocalypse Edition; The World Didn't End, But There Are New Cases On Restitution, Health Care Fraud, Federal Stalking, and Sequestration of Witnesses

One would have thought that, with the end of the world predicted for Friday of last week, our nation's appellate courts would have spent their last week on Earth with family or friends, rather than cranking out wins for folks charged with federal crimes.

Perhaps circuit court judges have access to better science than those who thought that the movie 2012 was a documentary set in the future. Our federal courts of appeal cranked out a whopping 6 victories for people accused of crimes in federal court last week. Perhaps they were simply trying to clear their docket up for more relaxed figgy pudding on Tuesday.

There are some good cases here involving a wide range of federal criminal topics - restitution, gun sentencing, trial sequestration, stalking using a telecommunications device, and civil rights violations. It's a nice stocking stuffer of law for this slow week.

To the victories!

1155650_berlin_siegessule.jpg1. United States v. McRae et al, Fifth Circuit: Former police officers David Warren, Gregory McRae, and Travis McCabe were convicted in the same trial of offenses arising out of the death of Henry Glover, a private citizen, in the aftermath of Hurricane Katrina. Because Mr. Warren demonstrated that he suffered specific and compelling prejudice based on the district court's refusal to sever his trial from his co-defendants, the court abused its discretion in denying Mr. Warren's motions to sever. Consequently, Mr. Warren's convictions and sentences were vacated and the case remanded for a new trial. As to Mr. McRae, the evidence was insufficient to support his conviction for denying Mr. Glover's descendants and survivors the right of access to the courts. As a result, that conviction was vacated and the case remanded for resentencing. As to Mr. McCabe, the district court did not abuse its discretion in granting him a new trial because of newly discovered evidence.

2. United States v. Cochrane, Sixth Circuit: Appellant was convicted of being a felon in possession of a firearm. He was sentenced to 41 months in prison for the firearms conviction and to a consecutive one-year term for violating the conditions of his supervised release. The district court's failure to explain why it imposed consecutive sentences was an abuse of discretion. As a result, appellant's supervised release violation sentence was vacated and the case remanded for resentencing.

3. United States v. Engelmann, Eighth Circuit: Appellant was convicted of several bank and wire fraud offenses. He filed a motion for a new trial and evidentiary hearing based on, among other things, an alleged conversation between two government witnesses during the trial that apparently violated the sequestration order. The district court abused its discretion in denying appellant's request for an evidentiary hearing. Without the hearing, the court lacked a principled way to determine whether the alleged conversation violated the sequestration order or whether any violation prejudiced appellant. Consequently, remand was required to further develop those issues.

4. United States v. Sharma, Fifth Circuit: Two doctors pled guilty to defrauding health care insurers. As part of their sentences, the district court ordered them to pay over $43 million in restitution to 32 victims and 30 private insurers. Because the amount awarded exceeded the insurers' actual losses by millions of dollars, the district court abused its discretion in adopting the unsupported loss figures. The restitution order was vacated and the case remanded for recalculation of the award.

5. United States v. Tucker, Third Circuit: Appellant pled guilty to possession of a firearm by a convicted felon. At sentencing, the government argued that appellant should be subject to a 15-year mandatory minimum sentence based on three prior convictions for "serious drug offenses." Because one of the prior convictions did not qualify as a serious drug offense, appellant's sentence was vacated and the case remanded for resentencing.

6. United States v. Grimes, Eighth Circuit: Appellant was convicted of 19 counts based on stalking and using the mail and telephone to make threatening and harassing communications. Counts 12-17 were multiplicitous because they arose out of a single course of conduct. Counts 13-17, as well as the special assessments applicable to these counts, were vacated.

December 19, 2012

The Eleventh Circuit Discusses When The Government Can Take Your Wife's Stuff To Make Resitution For A Crime You Committed

When a person is convicted of a federal crime, especially in a fraud case, but in lots of other kinds of federal criminal cases too, the district court sometimes also orders that the person pay restitution.

The point of restitution is that the person has to pay back any money that they took - they have to make any victims of the crime whole again.

To satisfy a restitution judgment, the federal government can go try to get that money from assets that a person has - they can go after bank accounts and retirement accounts and houses.

A frequent question many folks have is whether they can also go after property that a person jointly owns with his or her spouse.

The Eleventh Circuit recently opined on how this works in United States v. Duran.

Duran Duran

Lawrence Duran and Carmen Duran were married.

Then Lawrence Duran was convicted of participating in a conspiracy to defraud Medicare. As a part of his sentence, he was ordered to pay restitution of more than $85 million. He was also sentenced to 50 years in prison.

1389190_new_york.jpgBefore Mr. Duran's legal troubles, he owned an apartment with Mrs. Duran in New York City.

The Durans divorced before Mr. Duran was sentenced. In the divorce, it appears that Mrs. Duran was given sole title to the New York apartment.

Hungry Like The Wolf

After Mr. Duran was sentenced, the government wanted its $85 million. It applied for a writ to execute the restitution judgment. In the application for the writ, the government said that the apartment was a substantial asset that it should be able to collect.

When the prosecutors applied for the writ of execution, they told the court that they were serving it by using the district court's electronic case filing system. By filing it, in other words, it would be sent electronically to any attorney who had filed a notice of appearance in the case.

Because Carmen Duran wasn't a lawyer involved in the case - and didn't have a lawyer in the case - she didn't get a copy of the motion asking for a writ.

The Reflex

Getting an application from the government, though, caused the Court to approve the application for a writ. The writ ordered the Marshals Service to satisfy the judgment against Lawrence Duran by "levying on and selling" the apartment.

Carmen Duran filed a motion to dissolve the writ and not have her apartment sold. She said she was an innocent owner of the apartment who deserved an evidentiary hearing. Mrs. Duran said that she got half the apartment in the divorce anyway.

The government opposed Mrs. Carmen's motion, saying that she could get half of whatever they collected when the Marshals sold it. They said that their judgment lien had priority over Mrs. Duran's unrecorded claim.

When you look at the property records of New York, apparently, the apartment is listed as jointly owned by both Durans.

It seems that Mrs. Duran's divorce lawyer failed to record the new deed that showed she owned the apartment alone.

So Misled

The district court said it didn't have jurisdiction to hear the claim. If Mrs. Duran wants to challenge this, the district court's view was that the right place for a property dispute in New York was a state court in New York.

Mrs. Duran appealed.

The Eleventh Circuit started by looking at the Fair Debt Collections Act - the statute that the government has to use to collect a restitution judgment.

As the Eleventh Circuit explained,

The Act limits the authority of the United States to levy against jointly-owned property. The United States may levy "property which is co-owned by a debtor and any other person only to the extent allowed by the law of the State where the property is located." Id. § 3010(a). With regard to levying against property under a writ of execution, "[c]o-owned property [is] subject to execution [only] to the extent such property is subject to execution under the law of the State in which it is located." Id. § 3203(a).

The Act also says the government has to give notice to any co-owner or any other person with an interest in the property before they can take it. And the government has an affirmative burden to look for people who might have an interest.

Most importantly, the Eleventh Circuit said,

The Act obliges a district court to adjudicate any contested ownership interests in property subject to a writ of execution. The Act provides that the United States may levy only property in which a judgment debtor has a "substantial nonexempt interest." Id. § 3203(a). To that end, the district court must determine whether the debtor has any ownership interests in the property, and the district court must determine the ownership interests of any person who moves to dissolve or modify any writ.

So, all ended well for Mrs. Duran - except as to her ex-husband's fifty year prison sentence.

The Eleventh Circuit directed that

On remand, the district court must determine the respective ownership interests, if any, of Carmen and Lawrence in the apartment when the United States obtained the writ of execution and whether Lawrence had a "substantial nonexempt interest" in the apartment that the United States could levy.
December 18, 2012

The Eighth Circuit On How To Get Your Stuff Back After The Government Takes It Using A Search Warrant

There's little judicial attention paid to folks who have their stuff taken by the police executing a search warrant - and who want it back later.

Thankfully, just in time for Christmas, the Eighth Circuit breaks out with United States v. Bailey.

1382778_old_brick_cell_phone.jpgNot George Bailey And Perhaps Not A Wonderful Life

In 2003 Mr. Bailey was arrested in Minneapolis on prostitution-related charges. Some of his personal items - a wallet, a cell phone, and $2,000 in cash - were taken pursuant to a search warrant.

He was prosecuted - and convicted - in federal court in Minnesota of transporting someone across state lines for the purpose of engaging in prostitution.

He filed an appeal and lost.

It's hard out there for a pimp.

He still wanted his stuff back.

Mr. Bailey Goes (back) To Court

He filed a motion under Rule 41. As the Eighth Circuit explains,

Rule 41 provides that a person "aggrieved by an unlawful search and seizure" or "deprivation of property" may seek the return of the property by filing a motion in the district where the property was seized. Fed. R. Crim. P. 41(g). The court must receive evidence on "any factual issue necessary to decide the motion," and if it grants the motion it must order the government to return the property.

The government told the judge that Mr. Bailey's stuff was returned to the Minneapolis police department - the federal government didn't have Mr. Bailey's things any more.

Mr. Bailey appealed, saying that he had a right to a hearing.

The Eighth Circuit agreed and sent the case back. If a man has a right to a hearing, said the Eighth Circuit, then the man ought to get a hearing.

That was not this case.

Mr. Bailey Gets A Hearing

On remand, Mr. Bailey got his hearing - he didn't get one witness, the AUSA who presided over the trial is now a state judge in Minnesota. Mr. Bailey wanted to subpoena her but the district court refused. She sent a letter saying she didn't know anything about where Mr. Bailey's wallet, cash, and cell phone went.

But a number of other folks did testify. They said that Mr. Bailey's things went back to the Minneapolis police department.

The supervisor of the Minneapolis police department said that they searched the Minneapolis police property room and didn't find Mr. Bailey's things.

Mr. Bailey Wants To Be Made Whole

After the testimony ended, the government asked the court to dismiss the proceeding. There was no evidence the government had anything that they could return, so the government argued the motion had to be dismissed.

Mr. Bailey asked that the district court convert his case to a claim for damages. The government lost his stuff, and he wanted to be paid for it.

The district court said no, saying that it had "completed its assigned responsibility by the remand."

One has the sense that the district court was not enthusiastic about this case.

Every Time A Defendant Wins An Appeal An Angel Gets Its Wings

Mr. Bailey appealed.

The Eighth Circuit held that

We have previously considered whether compensatory damages are available under Rule 41 when the government has lost or destroyed a defendant's property. See United States v. Hall, 269 F.3d 940 (8th Cir. 2001). In Hall, the federal government had improperly disposed of a pickup truck and a waterbed which had been seized from the defendant. Id. at 941. Since the property could no longer be returned, the district court granted damages equal to the fair market value of the items. Id. Although such an award was not authorized under Rule 41 itself, "the court should grant the movant . . . an opportunity to assert an alternative claim" under a statute which authorizes money damages against the government. Id. at 943.

So the law in the Eighth Circuit is clear - if the government loses your stuff you get to ask for the fair market value of it.

The district court was, apparently, not familiar with Hall.

The case was remanded to figure out what Mr. Bailey's damages would be.

I assume the next appeal in this case will be over the value of a cell phone purchased in 2003. Stay tuned!

December 17, 2012

Short Wins - Stealing the Identity of a Corporation, Conspiracies to Distribute Marijuana, and Jury Instructions for Sexual Assault

This week's wins cover three circuits and four diverse areas of law.

Particularly interesting (to me) are the Fourth Circuit's opinion holding that it may not be a crime to steal the identity of a corporation. It feels like corporate personhood and its limits are popping up in all sorts of ways these days.

The Eighth Circuit has an interesting jury instruction issue in a sexual assault case, and, remarkably, the First Circuit has a remand based on the sufficiency of the evidence in a marijuana conspiracy case. A good set of wins all around.

And good work Fourth Circuit for having two entries on the list!

To the victories!

1155650_berlin_siegessule.jpg1. United States v. Hilton, Fourth Circuit: Appellants Jacqueline, Tamatha, and Jimmy Hilton were convicted of offenses arising out of their scheme to defraud a furniture manufacturer. Jacqueline and Jimmy were convicted of, among other crimes, identity theft and aggravated identity theft. Because the statutes governing these crimes are ambiguous as to whether they include the theft of a corporation's identity, Jacqueline's and Jimmy's convictions on these counts were vacated. As to the remaining counts, the court vacated Jacqueline's and Jimmy's sentences and remanded for resentencing.

2. United States v. Rouillard, Eighth Circuit: At appellant's trial for rape, he requested that the jury be instructed that the knowledge element of rape required the jury to find not only that (1) he engaged in a sexual act with a woman when she was incapable of consenting, but also that (2) he knew of the woman's incapacity or inability to consent. The district court declined to provide instruction (2). This was error, as (2) is an element of the offense and deprived appellant of his defense. Consequently, appellant's conviction was reversed and the case remanded for a new trial.

3. United States v. Torres-Miguel, Fourth Circuit: Appellant was convicted of illegal reentry by an aggravated felon. At sentencing, the district court imposed a 16-level enhancement based on its finding that appellant's state conviction for a criminal threat constituted a prior "crime of violence" under Sentencing Guideline § 2L1.2(b)(1)(A)(ii). Because the state conviction did not qualify as a crime of violence, the enhancement was improper. Appellant's sentence was vacated and the case remanded for resentencing.

4. United States v. Burgos, First Circuit: In drug conspiracy case, a rational jury could not have concluded beyond a reasonable doubt that appellant had knowledge of or was willfully blind to a marijuana distribution operation. Because the government did not meet its burden of proving that appellant knowingly and voluntarily participated in the conspiracy, appellant's conviction was vacated with instructions for the district court to enter a judgment of acquittal.

December 13, 2012

A Federal Judge Can't Reopen A Sentencing Hearing, Even When There's $17 million In Restitution At Stake

It's hard, when things go wrong, not to seek a mulligan. And we all get off on the wrong foot sometimes.

When a case is in front of a federal judge for sentencing, though, a mulligan is only very rarely available.

The Fifth Circuit case of United States v. Murray shows why.

498474_eraser.jpgThree Men and a Ponzi (scheme)

Ted Murray, David Lapin, and Jeffrey Wigginton were charged with mail fraud, conspiracy to commit mail fraud, securities fraud, and money laundering. The charges arose out of a Ponzi scheme.

Mr. Murray took his case to trial and was convicted of everything but the money laundering.

Mr. Wigginton entered a plea to conspiracy to commit mail and securities fraud. In the plea,

He agreed to pay "full restitution to the victim(s) regardless of the counts of conviction"; admitted" that any fine or restitution imposed by the Court will be due and payable immediately upon sentencing"; and pledged that he would "not attempt to avoid or delay punishment." Wigginton also agreed to "waive the right to appeal the sentence imposed or the manner in which it was determined," unless the sentence exceeded the statutory maximum.

Mr. Lapin pled guilty to misprison of a felony. I'm thinking he either had great facts or a good lawyer.

Each man was sentenced, at the latest, on March 1, 2010.

At the sentencing hearings, the district court determined that none of the men owed restitution.

A Federal Prosecutor Later Discovered a $ 17,564,534.21 Mistake

The government, a few months after the sentencing hearings, realized that it meant to seek restitution. In the amount of $17,564,534.21.

It filed a motion to have the district court order restitution. The men - who were trying to move on after the sentencing hearing - objected.

The district court held a number of hearings. Finally, it ordered that the men pay the restitution.

They appealed.

A District Court Can't Reopen A Sentencing Willy-Nilly

The Fifth Circuit set the table of issues this way,

A trial judge lacks authority to correct a sentencing error unless Congress has provided otherwise. Outside of such a provision of authority, errors at sentencing may be corrected only on appeal. The court below amended defendants' sentences, requiring defendants to make restitution to their victims. We are pointed to no potential source of authority for this change of sentence except the Mandatory Victims Restitution Act of 1996 (MVRA).

The MVRA, though, doesn't let a district court go back to reopen a sentencing hearing when the district court has already made a finding, under the MVRA, that restitution wasn't appropriate because, in the language of the statute

(A) the number of identifiable victims is so large as to make restitution impracticable; or (B) determining complex issues of fact related to the cause or amount of the victim's losses would complicate or prolong the sentencing process to a degree that the need to provide restitution to any victim is outweighed by the burden on the sentencing process

What's great about this is that in two of the men's cases, the district court didn't make this finding explicitly. Rather, by adopting the PSRs as factual findings - which contained language that the number of victims was not determinable - and the Fifth Circuit held that this counted as the required finding under the statute.

So, the MVRA doesn't let the district court reopen the case.

Then the general rule that a federal sentencing can't be reopened applies, and the district court's imposition of $17 million and change in restitution was vacated.

When Is An Appeal Waiver Not An Appeal Waiver

Mr. Wigginton gave up his right to appeal his sentence, however. The government argued that this meant he also gave up his right to appeal the new restitution order.

The Fifth Circuit disagreed.

Because an appeal waiver has to be unambiguous, if it could be interpreted two ways, it won't be enforceable.

Here, the court of appeals found that the appeal waiver could be read to apply to "any sentence imposed at the end of any sentencing process regardless of how extended and illegal" or it could mean "an appeal of a sentence imposed as long as it's done during the authorized sentencing process."

Personally, I find that second reading a little strained, but I'm glad it worked out for Mr. Wigginton.

Because the appeal waiver can be read two ways, it didn't bar his appeal.

And the men avoided a massive restitution judgment.