Week 1-Perjury, False Stmts, and Obstruction of Justice

Tuesday, August 23, 2011 9:47 PM

Rd. pgs. 321-346

A. Perjury United States v. Bronston FACTS: P owns Bronston Productions, Inc. that btwn 1958 and 1964 produced movies in several European locations. Several bank accounts were opened in foreign countries and the P supervised the transactions in the foreign bank accounts P attempted a bankruptcy claim and arrangement with creditors in 1962 and hearing was held in 1966 Hearing held to determine assets of the P for the benefit of the creditors P lied about having Swiss bank accounts b/c he actually had a personal account in Geneva btwn 1959 and 1964 However, P was asked if he had at the time of questioning, a Swiss account and he said now-this was literally truthful because at the time he did not and also when asked if ever, it was the company that had the account and not Bronston personally Claim of perjury premised on fact that P answered the 2nd question with literal truthfulness but unresponsively addressed his answer to the co's assets and not his own in an effort to mislead the bank court PROCEDURE: At Bronston's perjury trial, Dist Ct. told jury basic issue was whether P spoke his true belief and that Perjury necessarily involves the state of mind of the accused and essentially consists of "1) wilfully testifying to the truth of a fact which the questioning party does not believe to be true", 2) Testimony could not be found wifully false unless at the time it was given the person fully understood the questions put to him but chose to give false answers knowing the same to be false, and P could not be convicted for not understanding the questions asked and then giving a nonresponsive answer BUT could be if he gave an answer not literally false but when considered in the context it was given, nevertheless constituted a false stmt. Ct of Appeals--P contended as in Dist Ct that key question asked was imprecise and suggestive of various interpretations Argued he could not be convicted of perjury on basis of testimony that was concededly truthful, however unresponsive Ct of Appeals held: that the question was readily susceptible of a responsive reply and that it properly tested Bronston's belief in the truthfulness of his answer AND In relation to 18 USC 1621, an answer containing half of the truth which also constitutes a lie by negative implication when the answer is intentionally given in place of a responsive answer called for by a proper question is perjury (def) Bronston appeals again to challenge the specificity of the question and the legal sufficiency of his answer to support the perjury conviction ISSUE: Has the federal perjury statute been correctly interpreted by the Dist Ct and Ct of Appeals so as to support conviction based on the answer given by the P? HOLDING: No, reversed. RULE: If a witness speaks and answers with literal truth, they should not automatically be charged with perjury-the burden is on the examiner to pin the witness down to the specific object of inquiry REASONING: Ct does not reach issues of the suitability of the question asked (though it would probably have left it as sufficient) but instead takes up issue with the interpretation of the perjury statute Literal problem with the application of 1621 to the P's answer because the statute confines itself to the witness who "willfully states any material matter which he does not believe to be true" The statute says nothing about implication--though the P's answer to the question was nonresponsive if we assume the question was directed at personal bank accounts as well as co bank accounts, his answer only implied a material matter that he does not be lieve to be true Statute does not criminalize that kind of answer--different than stmts that are criminally fraudulent or extortionist in nature There is no evidence to broaden the statute nothing to suggest that Congress intended for broader meaning --a clarification question asked by the otherside would have easily cleared the matter up or clearly shown perjury Witnesses unintentionally give nonresponsive answers out of nerves or whatever else all the time Further, when presented with issue about whether or not the answerer intended to mislead the examiner, it should not be left to a jury to decide whether the unresponsive answer true and complete on face was intended to mislead or divert examiner State of mind of the witness is relevant only to the extent that it bears on whether he does not believe his answer to be tru e-the answer in this case true We dont want to scare witnesses into not testifying for fear of perjury if they make a mistake or misunderstand a question and give an answer that a jury decides was given with intent to mislead even if it is technically true Perjury must not be jumped to right away as the primary or even secondary safeguard against errant testimony Elements of Perjury under 1621 It is a crime for someone to Have taken an oath before a court, officer or person and Willfully and contrary to such oath State or subscribe any material matter Materiality Test: whether the false testimony was capable of influencing the court on the issue or whether the false testimony would have the natural tendency or effect to influence, impede, or dissuade the Grand Jury from pursing its investigation That he does not believe to be true Evasive vs. Affirmatively Misleading Testimony Some argue statute should be construed narrowly to protect an individual's right to privacy but to what extent should the right to privacy limit truthtelling obligations to society Two Witness Rule In assessing the sufficiency of the evidence--to assure that a perjury conviction is not premised upon one person's oath against another "the testimony of two witnesses or the testimony of one witness, plus corroborating evidence"--See U.S. v. Diggs, pg. 326 The corroborative evidence is not required to be sufficient to the point of allowing conviction, but conviction is not permitted where the corroboration consists of merely peripheral testimony not tending to show the falsity of the accused's stmts while under oath Rule satisfied when there is direct testimony from one witness and additional independent evidence so corroborative of the direct testimony
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 Rule satisfied when there is direct testimony from one witness and additional independent evidence so corroborative of the direct testimony that the two when considered together are sufficient to establish the falsity of the accused's stmts under oath beyond a rsble doubt Literal Truth is not always a savior Key element-may lead to overturning a perjury conviction if the answer given was literally true--perjury must be premised on the utterance of a false stmt and cannot be based on a particular interpretation the examiner places upon the answer--- but does context of the question matter? Some courts say the context matters where the context should make it obvious what the examiner is actually asking and thus the literal truthfulness of the answer does not matter--thus a willful deceptive answer given which in the context was clearly given with intent to deceive may be the premise for perjury and context can matter Some courts say that where it can be shown from the context of the question and the state of the testifier's knowledge at the time that the testifier clearly knew what the question meant, the gov't must be permitted to present and the fact -finder to consider those contextual facts Literal Truth Defense-applies in cases where perjury Defendant responds to a question with an unresponsive answer--which is unable to be tested in the context of the question unless there is speculation as to what the unresponsive answer implies False Declaration Statute-18 USC 1623 It is a crime for someone to Under oath, in any proceeding before or after to any court or grand jury to Knowingly make Any false Material declaration Applies only in judicial or grand jury proceedings, unlike perjury which applies in all sorts of situations including simple depositions Additionally, this section allows or a "retraction" defense which requires testifier to admit that the previous stmt was false, the admission of falsity must be made in the same ct or grand jury proceeding, and false declaration must not already have substantially affected the proceeding and must not have become manifest that such falsity has been or will be exposed. B. False Statements United States v. Hixon FACTS: Hixon was involved in a work accident and requested continuing disability benefits (strained right knee that resulted in several surgeries) Had to quit job because it required him to walk on rough terrain Hixon filled out two forms with the DOL and on one answered N/A in regards to question about Commission and Self-Employment--the other form was with the OWCP and also asked about Self-Employment and Hixon responded "No" twice on this form, even though it explained what self-employed entailed. Employer received 3 phone calls in the fraud department regarding Hixon An investigation revealed that Hixon, with several associates were working a booth and the Dixie Deer Classic which was an outdoor show where booking or travel agents display their merchandise or offers in an effort to sell to customers Saw Hixon carrying and setting up portable booth and carrying his work table, supplies, brochures, and paraphernalia to promo te the business Investigation showed that Hixon had worked other shows and took several business and hunting trips for Woods and Water Outdoo r Consultants while on disability Hixon was paid income and or commissions When questioned, Hixon explained that he started the business 6 years ago, but initially said that the co. was his wife's business, that she handled all of the shows and his personal involvement was nothing more than staying home and answering phones and taking one business related trip in per year Once presented with the evidence against him, Hixon changed his story and said he had been employed since the start of the disability PROCEDURE: D charged w/4 counts of violating 1001 for "falsely indicating that he was not self-employed and concealing his self-employment and ownership of the Woods and Water Outdoor Consultants on the 4 forms he filled out Challenged the Dist Ct in denying motion for acquittal because he is not guilty as a matter of law because he claims that the only work he did was for his company and that under state law, as a corporate officer he was an employee of the corp and as such c ould not as a matter of law be self-employed and thus he did not make a false material stmt or representation Dist Ct held whether the D was self-employed was a question of fact for the jury to decide based on statute-knowingly or wilfully making false material stmts or concealing material facts He was indicted not for his answer but for concealing the material fact The Dist Ct told the jury to determine as a fact whether the D willfully concealed his self-employment or falsely state he was not selfemployed and told them to disregard the existence of the corporation in the determination ISSUE: Was sufficient evidence present for jury to convict Hixon for falsely stating he was not self-employed HOLDING: No--Hixon's representation that he was not self-employed was not on its face a false representation--no evidence that he obtained money personally and not the corporation--not self-employed because he worked for the corporation and was thus an employee. RULE: False Stmt of Fact requires: Making of a stmt That is false With knowledge of its falsity That is relevant to the functioning of a federal department or agency (ct, etc) and That the false stmt was material REASONING: The statute reads that an "employee" includes an officer, but not a director, but--a director may accept duties that however that also make him an employee Hixon was in fact an officer and thus an employee, but the gov't has not presented evidence that Hixon personally kept any commissions for trips sold (rather than turning it over to the corporation) No evidence to conclude that the D was self-employed simply because he owned all the stock in the company and was the president. Payments by the corporation would require withholding and w-2s Hixon was no indicted for his answers to the questions about whether he was employed in any manner, but rather only about being selfemployed thus it did not get at the questions that he actually answered falsely Def. of self-employed is a person that works for one's self and not for others. Which is not the case-Hixon worked for a corporation which is still working for another (the corporate entity) Prosecution for a false stmt under sec. 1001 cannot be based on an ambiguous question either where the response may be literally and factually correct. And indictment premised on a stmt which on its face is not false cannot survive
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correct. And indictment premised on a stmt which on its face is not false cannot survive Concurrence: Disagrees with the majority analysis, but agrees with the outcome Undisputed that Hixon was an officer of the corporation and thus an employee and he was not as a matter of law, self-employed Thus, stmt that he was not self-employed was not false as a matter of law and was entitled to judgment of acquittal unless the evidence permitted a finding that the corporate veil could be pierced No evidence presented that Hixon had done any of the things w/regard to the corporation which would permit such a finding Thus, should be no instruction to the jury about piercing the corporate veil even if the instruction which the dist ct gave the jury had been adequate to explain what the jury must consider in determining whether to disregard the existence of the corp. and thus dist ct erred in sending this matter to the jury The defendant did make false stmts and clearly intended to do so but was not indicted for those Legislative History of 1001 One of broadest criminal statutes in fed crim code First enacted in 1863, "An Act to Prevent and Punish Frauds Upon the Gov't of the United States"--prohibited filing of false fictitious or fraudulent claims against US Passed in response to procurement frauds being committed on the US Gov't during Civil War Statute broadened at end of 1st WW to cover false stmts made for purpose of and with intent of cheating and swindling or defrauding the gov't of the US Changed again up until 1996 and in that version prohibited false stmt to a dept. and agencies of the federal gov't Post 1996-ammended to apply any false stmt made within the jurisdiction of the executive, legislature, or judicial branch--largely overruled decision in Hubbard v. US which interpreted the statute to exclude stmts made to federal courts because it would chill advocacy on behalf of clients In regards only to legislative branch, false submission made for administrative purposes or in connection with an investigation are excluded and the prohibition does not apply to a party to a judicial proceeding or that party's counsel for stmts, representations, writings or documents submitted by such party or counsel to a judge or magistrate in that proceeding Exculpatory No Doctrine Previously a defense to a 1001 charge, created by lower courts--a false response to a question that was limited to a denial of involvement in a criminal activity was viewed as not constituting a false stmt, rational being in part on the 5th amendment privilege against self-incrimination, that a should not be compelled to respond to an agent's question, so limited denial of involvement in criminal conduct did not otherwise mess up a gov't function Concealment 1001 also makes it a crime to conceal info-to be guilty of concealment, Person must have a legal obligation to disclose the information to the gov't--does not include full disclosure when seeking advice from gov't ethics committees before making a decision about an action C. Obstruction of Justice Arthur Andersen LLP v. United States FACTS: P was the auditor in charge of evaluating Enron's finances in 2001 and instructed its employees to destroy documents pursuant to its document retention policy Enron was a natural gas co that in the 1990s switched to energy conglomerate with aggressive accounting practices and rapid growth that followed P audited Enron and gave offered it consulting services 2000, Enron started losing money-Duncan was the engagement team head for Enron Turned out that the P was also in trouble of its own at that time as it had been involved in a settlement with the SEC relate d to auditing work it did for Waste Mgmt, Inc. and paid a massive fine and was censured and enjoined from committing further viola tions of securities law Enron's CEO resigned and a senior accountant at Enron warned the new CEO that it could implode in a wave of accounting scandals-also informed Duncan and Odom, one of the P's partners who had supervisory responsibility over Duncan (who worked for the P) Issues with Enron and accounting problems became public in 2001 and SEC opened an informal investigation P formed crisis team to deal with it and included Temple, an in-house counsel and outside counsel to represent it in any litigation Temple discussed Enron w/other in-house counsel Odom held meeting with 89 employees and told them to comply with the firm's document retention policy, meaning a single central engagement file which would contain only info that is relevant to support the company's work and in cases of threat of lit, no related info will be destroyed He explained that if destroyed in the normal course of the policy and litigation is filed the next day, that is great and whatever was of interest would then be gone Temple entered the matter into her computer as Type of Potential Claim and emailed Odom, suggesting he remind the engagement team of our documentation and retention policy SEC released letter, notifying investigation and requested certain info and documents and Enron forwarded to the P a copy of the letter Time and time again, employees were reminded to follow the document destruction and retention policy, but these meetings were followed by substantial destruction of paper and electronic documents Documents were requested and document destruction continued throughout this time An email circulated from Duncan's secretary that said "Per Dave, No More Shredding- we have been officially served for our documents Enron filed for bankruptcy shortly after, Duncan was fired and then plead guilty to witness tampering PROCEDURE: P indicted for violation of 1512 alleging that it knowingly and intentionally and corruptly persuaded others to withhold documents and alter them for use in official proceedings, including regulatory and criminal proceedings and investigations Jury concluded that the action of destroying these documents made the P guilty of violating 18 USC 1512(b)(2)(A) and (B) Crime to knowingly use intimidation or physical force, threaten, or corruptly persuade another person with intent to cause that person to withhold documents from or alter documents for use in an official proceeding Ct of Appeals for 5th Cir. affirmed ISSUE: Did the jury instructions adequately define the requisite consciousness of wrongdoing needed in order to be liable for knowingly corruptly persuading? HOLDING: Jury instructions failed to convey properly the element of a "corrupt persuasion conviction under 1512(b) and thus reverses Dist and Appeals Ct. RULE: Whoever knowingly uses intimidation or physical force, threatens, or corruptly persuades another or attempts to do so or engages in misleading conduct toward another person with intent to cause or induce any person to withhold testimony or withhold a record, document or other object from an official proceeding or alter, destroy mutilate or conceal an object with intent to impair the object's

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document or other object from an official proceeding or alter, destroy mutilate or conceal an object with intent to impair the object's integrity or availability for use in an official proceeding shall be fined or imprisoned not more than 10 years or both REASONING: In assessing the reach of federal statutes, restraint in their application should be exercised the question is what does it mean to knowingly corruptly persuade another with intent to cause that person to withhold docs or alter docs for use in an official proceeding This act is not itself malign--it is ok in some circumstances, i.e. atty client privilege and an atty persuading a client to withhold stuff from gov't for purposes of representation Documentation retention policies are common practices used often to keep certain information from getting into the hands of t he gov't and it is ok in normal circumstances The language of the statute provided shows in clear plain meaning that there must be the requisite mens rea...as it says "knowingly corruptly persuades", and not knowingly persuades or corruptly persuades without knowing or intent, evidenced by the acts that would cause such persuasion such as using intimidation--you must be conscious of the wrongdoing in order for it to be done knowingly--thus limiting liability for criminal acts to conduct that is culpable Chapter 4: Principles of Statutory Interpretation 89-144 A. Mens Rea Element Ratzlaf v. United States FACTS: Fed law requires banks and other financial institutions to file reports w/Sec. of Treasury when involved in a cash transaction that exceeds $10K Illegal to break up transactions to avoid filing reports (structuring transactions illegal) Structuring the transactions willfully is a violation of law and such person is subject to criminal penalties Ratzlaf owed a casino debt and came to pay it ($100K) and the official for the casino told him that transactions over 10K had to be reported and that they could accept a cashiers check without triggering the reporting requirement He went to a bank and purchased cashier's checks for each less than being $10K and he knew that they had to obey the reporting requirement too PROCEDURE: D charged with structuring transactions to evade the banks' obligation to report cash transactions and trial judge told jury that that the gov't had to prove the D's knowledge of the banks' reporting obligation and his attempt to evade it but not that the D knew that structuring was unlawful D was convicted, fined and sent to prison D appealed, claiming that he could not be convicted because willfully per the statute required him to know that the conduct was unlawful 9th cir. Confirmed the trial court and the Sup Ct granted certiorari ISSUE: does a person's purpose to circumvent a bank's reporting obligations suffice to sustain conviction for "willfully violating" the antistructuring provision? HOLDING: to give effect to the statutory willfulness specification, the gov't has to prove Ratzlaf knew the structuring he undertook was unlawful. Reversed. RULE: Establishing "willfulness" requires something more willful violation requires gov't to prove that the defendant acted with knowledge that his conduct was unlawful. When you have conduct that is not implicating a public welfare issue, the court is going to carefully inspect that mens rea element requirement and generally hold the gov't to prove intent. In particular with tax offenses, all require conduct that is willful such that if someone can demonstrate to the jury that he really thought that he was committing no crime, it is a perfect defense. REASONING: Though the D admitted that he structured the cash transactions and that he did so with knowledge of and a purpose to avoid the banks' duty to report currency transactions, which is forbid by the statute, the statute also requires that the actor do so willfully, which the court interprets to mean that the actor does these acts with knowledge that it is illegal and thus he willfully violates the statute. Ct reaches this conclusion based on how the word is used throughout the remainder of the subchapter of the statute in question, explaining that the context influences the meaning of a word in a statute and the act is not itself evil or nefarious Though ignorance of the law is generally not a defense to a criminal charge, but in some contexts, Congress may decree otherwise, which it has done in this case in the statute Willfully is a word with many meanings and as with many words in statutes, the meaning is dependent on the context The legislature said "willful", not "knowing" conduct Note 1 Legislative Response to Ratzlaf Shortly after Sup Ct's ruling, Congress modified the statute and provides now that "whoever violates this section shall be fined in accordance with title 18 USC, imprisoned not more than 5 years or both it was the intent of Congress to overrule the Ratzlaf decision by this amendment because it restores the clear congressional intent that a D need only have the intent to evade the reporting requirement as the sufficient mens rea for the offense Note 2 Willfulness in Tax Statutes Looking at 26 USCA 60501-requires trades or businesses receiving more than $10K in cash to report the transaction to the Treasury on a particular form. What is the mens rea requirement in light of Ratzlaf? Cases interpreting the issue have ruled that "willfulness" mean no more than the D charged with the duty knows what he is doing Note 3 Ignorance of the Law Lambert v. California: majority reaffirmed the rule that ignorance of the law will not be an excuse of crime, without an extraneous reason for dismissing the charge or vacating the conviction- This case, the court excused the conduct of the D finding a violation of due process when a felony registration ordinance was applied to an individual who had no knowledge of a duty to register Note 4 Good Faith Reliance on Counsel The Ratzlaf decision suggests that specific intent to commit the crime might be negated by good faith reliance on the advice of counsel.in United States v. Eisenstein, and v. Cheek, the Sup Ct initially overruled a conviction for tax evasion on the belief that the jury instruction improperly limited the D's claim that he truly believed that the tax code did not treat wages as income Court said that tax laws has long been read to require a specific intent to violate the law and a good faith belief that one is not violating the law negates willfulness an thus it was an error for the trial court to insist that it was only so if the good faith belief was objectively reasonable On retrial, D argued good faith belief was established b/c of his reliance on the advice of counsel but the 7th Cir. Again convicted stating that the defense of advice of counsel requires 1)before taking action 2)person in good faith sought the advice of an atty whom he cons idered competent 3) for the purpose of advice on the lawfulness of his possible future conduct 4)and made a full and accurate report this
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competent 3) for the purpose of advice on the lawfulness of his possible future conduct 4)and made a full and accurate report this atty of all material facts 5)and acted strictly in accordance with the advice of his atty who had been given a full report In order to rely on this defense from an atty or other professional, the person must demonstrate that he made a full and comp lete disclosure to the facts b/c we want people to be able to give great, full, and honest advice which requires knowing all mater ial facts Court stated that the deal breaker here was 3rd element--because the D obtained advice from 3 attys but only on the status of the tax laws but not about the lawfulness of any future act he was considering advice not sought til after he failed to file properly the for the first time
Note 5 Reading in a Mens Rea Element When is it appropriate for the Court to read a mens rea requirement into the statute? The Court has stated that the existence of a mens rea is the rule or, rather than the exception to, principles of criminal law in America and in common law tradition it has always been that where there is ambiguity concerning a criminal statute, it should be resolved in the favor of lenity and thus, a state of mind component should be read into an offense even when the statutory de finition did not in terms so provide Not too common for there to be a strict liability statute in the criminal law code Public Welfare Offense-require a lesser showing of intent.. Knowing conduct is enough--represents the kind of conduct that the public is not able to protect itself against But in the machine gun case for instance, the court ruled that possession of such and knowing that you possess it is not enough to be convicted of possessing a machine gun thus you have to know that the fact that you possess a machine gun as it is defined with in the statute Note 7 Level of Mens Rea in Other Criminal Statutes When it come to drugs and selling items used with drugs, the court has concluded that the level of mens rea need not be so much that the seller intends the item to be used with drugs mens rea is established when the D is aware that customers in general are likely to use the drug paraphernalia with drugs and thus the gov't need only establish that the D knew that the items at issue are likely to be used with illegal drugs which isnt hard to prove and not specifically that the seller knew that the items were drug paraphernalia as defined in the statute Opinion in Bryan v. US suggests that the Court is more likely to provide a carve out exception to the general rule that ignorance of the law is no excuse in cases where the statute involved is highly technical, as was the case with Ratzlaf and the tax evasion case with conduct that was apparently innocent Different than the statute for Firearms Owners which only requires knowledge that the conduct is unlawful and not knowledge of the actual federal licensing requirement for dealing in firearms B. Ambiguity in Other Elements Dowling v. US Alleged violation of the Nat'l Stolen Property Act-illegal to move goods which you know are stolen--issue was whether bootlegged records are stolen goods in the sense that they were created unlawfully as a copy against the copyright owner Ct concludes that the broad consequences of the copyright law itself shows that Congress did not intend this statute with much harsher punishments to include moving bootlegged records in commerce . Copyright infringement is the violation and not the Stolen Property Act--Sup. Pg. 77 sec. 2314 There was a whole other statute already dealing with this crime-the Copyright Act under 17 USC 106 When there is ambiguity in a statute, there is a rule that applies: the rule of Lenity--if there is an ambiguity in the application of a criminal statute.. You should rule for the defendant (see above note) Then you resort to legislative history to see what Congress intended Note 1 Ambiguity To what extent does the Court employ the methodology used in Ratzlaf to interpret this statute? Ambiguity in statutes can in part be attributed to the legislators having to write laws in the substantive areas that are constantly developing Note 2 Trade Secrets EEA enacted to deal with theft of trade secrets--18 USC 1831 and 1832 1831 Economic Espionage--punishment for those who knowingly misappropriate or attempt to or conspire to misappropriate, trade secrets with the intent or knowledge that their offense will benefit a foreign instrumentality or foreign agent Designed to apply only when there is evidence of foreign sponsored or coordinated intelligence activity 1832 Theft of Trade Secrets--applies to anyone who knowingly engages in the theft of trade secrets or an attempt or conspiracy to do so with the intent to convert a trade secret, related to or included in a product produced for or placed in commerce, to the economic benefit of anyone other than the owner, and intending or knowing that the offense will injure any owner of that trade secret Attempt and conspiracy are distinct offenses and lists them separated from those acts that constitute completed crimes under the statute Defines trade secret as intangible information in all forms and types that is financial, business, scientific, technical, eco nomic or engineering info, etc IF the owner has taken rsble measures to keep such info secret AND the info derives independent economi c value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, t he public McCormick v. US Hobbs Act Violation/Extortion (pg. 47 of supplement) sec. 1951--Interference with Commerce by Threats or Violence-US had to prove that D induced a cash pymt and that he did so knowingly and willfully by extortion--conduct that is inclusive of conduct taken toward committing a crime.. Its essentially a statute punishing the completion and the attempt and failure--you need a specific intent to violate a law in order to be charged with attempting or conspiracy to do so. Jury wanted more specific instructions on what def of extortion was--extortion under color of official right means the obtaining of money by a public official obtained unlawfully b/c it was not due to him or his office different than receiving a legitimate gift or voluntary political contribution (given freely without expectation of benefit in return) Judge also stated however that it would not be illegal in and of itself for the D to have solicited or accepted political contributions from people who would benefit from doing so. Problem was that the court of appeals erred--matters of intent are for the jury to consider--there need to be evidence of a quid pro quo transaction in order to commit a violation of Hobbs act--it is unrealistic to think that Congress meant that it was a crime to obtain property from another, with his consent, under color of official right because election campaigns have long been financed by private contributions The money that goes over to McCormick was campaign money Evans v. US Sup Ct granted cert to resolve conflict among circuits over Q whether an affirmative act of inducement by a public official, such as a demand, is an element of the offense of extortion "under color of official right" prohibited by the Hobbs Act Ct agrees that an affirmative act by the public official is NOT required and thus affirms the court below The trial court concluded that the act of accepting the cash knowing that it was intended to ensure that he would vote a certain way and that he would try to persuade others to do the same constituted an implicit promise to use his official position to serve the interests of the money giver and thus though he didnt initiate the transaction, he is still violating the Hobbs Act

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giver and thus though he didnt initiate the transaction, he is still violating the Hobbs Act Court of Appeals affirmed (Sup Ct too)--the jury instruction did not require the jury to find that the D had demanded or requested the money or conditioned the performance of any act upon receiving such money Affirmative acts of inducement by a public official is not required to support to a conviction of extortion under color of official right--you need not prove inducement because it doesnt apply to extortion under "colour of official right" portion of the statute Statutory terms generally are presumed to mean their common law meaning, and at common law, extortion was an offense committed by a public official who took by colour of his office money that was not due to him for the performance of his official duties demand or request by the official is not an element of the offense- But Congress has expanded this definition to include acts by private individuals pursuant to which property is obtained by means of force, fear, or threats as well (doesnt apply here) Based on the congressional history the intent does not seem to be to require the affirmative act on the part of the official in order to find that person had induced another Wrongful acceptance of a bribe establishes all of the inducement that the statute requires for extortion Dissent argues that extortion at common law was only effected by a person who wrongfully accepted or took money under a false pretense of official right in other words, extortion accomplished by fraud Majority says no, there were plenty of other common law extortion types Does the majority's stmt "we hold that the gov't need only show that a public official has obtained a pymt to which he was not entitled, knowing that the payment was made in return for official acts" really exclude a quid pro quo transaction? Or does this stmt actually require a tit for tat deal? Note 1 Interpreting Statutes How has the Court in McCormick and Evans dealt with the ambiguity in the statute? Define what the terms meant in common law and how they have been used in other statutes found in the same chapter and how the Sup Ct or Cir. Cts have interpreted those similar statutes with the same terms and use that as a launch pad. Though sometime it seems like these are all just ways of making educated guesses as to what the intent of Congress was Congress should probably just write better statutes. Note 2 Bribery/Extortion Can all acts of simple bribery by a public official be presented as extortion? Has the court blurred the distinction btwn the two? Yes, I think so. Note 3 Quid Pro Quo Evans seems to make the presence of quid pro quo rather obvious before the Sup Ct will acknowledge its existence, which is crazy. Short of the official making an affirmative act by asking for something in return, it seems that the court will not find a quid pro quo relationship Note 4 Campaign Contributions Should McCormick and Evans be limited to cases involving campaign contributions? I don't think so because politicians can be bribed or extort money for a number of other reasons after election such as money for favors, etc. And the harm does not really seem to be in campaign contributions because that is essentially the reason that people donate private funds to campaigns. With the hope that the recipient if elected will further their interests Giles case the Sup Ct stated that they believed that Evans requires a quid pro quo action in all extortion cases and not just in campaign cases Note 5 Beyond Campaign Contributions Should things like travel money, food, gifts, or other items of value count in extortion charges? Some courts have grappled with this and have interpreted McCormick and Evans to mean that Evans stood for a more relaxed quid pro quo stnd to be applied in non-campaign contribution cases and in McCormick, the stnd is more strict but that was a campaign case and also Some thing that Evans stood for an answer to the question about the requirement of quid pro quo in contexts outside of campai gn contributions and others have read Evans differently Evans merely clarifies that 1) no affirmative step towards the performance of the public official's promise need be taken (i.e. fulfillment of the quid in the quid pro quo) and 2) that the quid pro quo of McCormick is satisfied by something short of a formalized and thoroughly articulated contractual arrangement (i.e. merely through knowing the payment was made in return for official acts is enough) Evans is thus limited to campaign contributions and extortion arising in that context Thus, it is suggested that the same quid pro quo requirement should exist for extortion cases arising outside of the campaign contribution context Note 6 Gifts Under the Gratuities Statute-sec. 201-Bribery of Public Officials and Witnesses (pg. 14 Sup)--to induce such public or person selected to be public official to do or omit to do any act in violation of the lawful duty of such official or person How does the receipt of gifts by public officials differ in the context of the gratuities statute? In order to establish a violation of the statute, the gov't must prove a link btwn a thing of value conferred upon a public official and a specific official act US v. Sun-Diamond Growers of Cali 18 USC 201(c)-the illegal gratuity statute- Prohibits giving anything of value to a present, past, or future public official Case at hand considers whether conviction under the statute requires a showing beyond the fact that a gratuity was given beca use of the recipient official's position Respondent is a trade association that engaged in marketing and lobbying activities on behalf of members which were owned by growers and they are charged with making illegal gifts to the former Secretary of Agriculture ($5,900 in illegal gratuities including tickets to a sporting event, luggage, means and framed print and a crystal bowl) Indictment alluded to 2 favorable treatments from the Secretary at the time 1) R's members participated in the MPP, which was a grant program to promote the sale of US farm commodities in foreign countries the funds would have been used to defray the foreign marketing expenses of the members 2) R had an interest in the gov't's regulation of a low-cost pesticide used by many member growers and the EPA was trying to put the kibosh on the use of it and members though they could get the Secretary to convince the EPA otherwise The indictment did not actually allege those two matters or any other specific connection btwn either of them or btwn any oth er action of the Secretary and the gratuities conferred But not necessary to allege a direct nexus btwn the value conferred and the official act performed Trial court instructed jury it was not necessary that the gov't prove that the alleged gratuity was linked to a specific or identifiable official act or any act at all Told that sufficient if the R provided the Secretary with unauthorized compensation simply because he held public office

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 Told that sufficient if the R provided the Secretary with unauthorized compensation simply because he held public office Ct of appeals reversed, stating that the "for or because of any official act" language means what it says and the jury instru ctions invited the jury to convict on materially less evidence than the statute requires evidence of gifts driven simply by Secreta ry's official position The Sup Ct places the statute in the context of the statutory scheme to decipher what is required The statute has two distinct criminal acts, the one at issue being more in depth-requiring that there be intent--bribery requires intent to influence an official act, while illegal gratuity requires only that the gratuity be given or accepted for or because of an official's acts Bribery requires a quid pro quo intent Illegal Gratuity--may constitute merely a reward for some future act that the public official will take and may already have decided to take or for a past act that he has already taken- But there must still be a connection btwn the intent of the giver (R) and a specific official act--which can be shown by the fact that the R gave Secretary a gratuity because of his official position, for various reasons but this will not always be sufficient to show Cant just be because of any act in general Note 1 Aftermath d

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Lecture Week 1 & 2

Thursday, August 25, 2011 6:29 PM

Final based on hypos discussed in the classroom--you can miss class, just request for a recording, but you should be here!--Professor Larsen will send email about pages in the reading to pay close attn to! 612-371-3278--Donna Dawn--legal admin assistant of Professor Larsen--Professor Larsen writes letters of recommendation as well so keep that in mind!!! Talk about hypo next week from tonight---thus, review and think about the hypo before next Thursday's class Problem 1 is a handout--issue spotting--think about for next class--this is important because he may ask about a particular set of facts in a hypo for the exam and you will be better prepared for the exam Answer the questions for your own benefit at the end of the hypothetical 1) Can Mike be charged with perjury under 1621 or/and false stmts under 1001? Mike can be charged with making false stmts under 1001 for the statement he made in the letter that he sent to OIG, drafted by his attorney, wherein he stated that "NDP hereby submits all documents called for by the OIG subpoena and no records have been withheld." additionally, for that statement he could be charged with making a false stmt through simply concealing the totality of the records (maybe does he have a legal duty to make a full disclosure in this context--it appears that it does because it was a civil subpoena.) He can also be charged with making false statements during the testimony to the Grand Jury when he was asked directly whether or not NDP ever inflated the cost of its inventory and he affirmatively answered "No, not that I'm aware of" because he was in fact aware of such price inflation because it was done by him and thus, this was a direct lie. This statement can also be charged as perjury under 1621 (though 1623 is possible too) because he is under oath in court at this point and he made a statement that he did not believe was true that was directly related and material to the case at hand --b/c the question was clear--did you ever not are you right now. Mike was acting on behalf of the corporation (sole shareholder) and he was an agent--includes employees, chair, etc. Because at the time the question was asked, it was no harm because the policy was changed and thus no economic harm, and thus there is an issue if the statement he made was actually material.you can argue this statement is not material at the time it was made, though it was not known at the time, it would be known if he was charged with this crime Can Mike be charged with obstruction of justice and if yes, what statute/s appear to have been violated? He could be charged with violation of 1516-Obstruction of a Federal Audit assuming that he receives more than 100,000 per year in money from CMS because OIG is a gov't agency that was tasked with auditing him and Mike prevented them from successfully doing that by d estroying and keeping from them certain documents and he did so with intent of defrauding the United States gov't When the first entries were reversed though, there was no investigation open on him at the time, but when he deleted the file , he had already testified at the Grand Jury and was under investigation and the matter is officially underway because there still ha s to be the indictment issued for that proceeding to end but then a new one starts 1519: enacted to rid of this issue crime to destroy or later docs in contemplation of an investigation (doesnt matter by wh om) pg 43 of supplement 2) Can the gov't charge NDP? Yes for everything that Mike has done Why would the gov't want to charge the company and why wouldnt it? It would want to charge the company because it wants to deter the company in the future and others like it from engaging in the fraudulent conduct and obtain recovery, basically to send a mes sage but it would not want to in this case simply because if it bankrupts the company or causes it to dissolve and being that it i s the only company that provides certain prosthetics, it would be doing a disservice to those persons depending on those medical devices . 3) Would I charge Mike? Why or why not? I would charge Mike because I would not him to continue behavior of this kind in other places and as the sole shareholder, he is essentially the pockets of the company, yet I wouldnt want to because of what it would do the company--he had the intent and the fact that it became a nonissue based on the gov'ts clarification and thus he should be charged 4) Would I charge NDP? Why or why not? I would not charge NDP because the only bad actor in this case was Mike and he cant be dealt with privately and there is no sense in hurting the company. Lesson 1: Counsel your client properly when dealing with issues of concealment and lying and withholding information False Stmts What is the difference btwn False Stmts and Perjury? False Stms are a 1001 offense There is no oath involved to be convicted of a False Stmt--that is the difference to be convicted of perjury you had to have committed the act under oath Also different in that False Stmts can be committed by concealment meaning having not said anything or not provided the answer in full or failing to provide a material fact when asked about it--this cannot happen in perjury US v. Hixon While filling out his disability forms, he answered "no" to self-employment status, but it was found out later that he was the president and chief officer of a hunting and outdoor travel company It was a corporation and the issue was whether he was an employee of the corporation or was he self-employed He is indicted for answering no to self-employment, which under GA law turned out to be the literal truth because as an officer of the corporation, which is an entity, he was actually an employee of it and thus not self-employed. Conviction for false stmts is overturned Should have charged the guy with stealing federal money-defrauding the US Gov't Pg. 337 Note 3-Concealment leading to conviction of False Stmts under 1001--there will be a question about this on the exam !!!!!!!! Only arises as a offense if there is an obligation by law to disclose the information and the information material Different than the tort of fraud where there must be actually damages in criminal law, the fraud offense can be committed simply for the fraud to be relevant to a material matter, regardless of whether or not it actually influenced of affected the issue at hand--no loss required Obstruction of Justice Arthur Andersen LLP v. US-Enron Case Charged as an obstruction of justice for destroying documents, reversed by the Sup Ct Email went out reminding employees about the document destruction policy of the accounting firm which was really code for "destroy old stuff immediately" The jury instructions were a mess--structural errors-3 types--leads to vacating the conviction Judge is biased Incompetent representation Improper jury instructions Other reason in obstruction, there has to be a connection btwn the actions taken and a proceeding that was obstructed and th ere was no proceeding in this case that was actually obstructed by the destruction of these documents--no evidence that there was a proceeding that required the documents which were destroyed
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 that was actually obstructed by the destruction of these documents--no evidence that there was a proceeding that required the documents which were destroyed Perjury--look at pg. 44 of the Supplement Hard to charge and hard to prove 2 different Perjury Offenses and the Differences----there will be a question about the difference btwn these statutes on the final why is there a difference and what is it- 1621 2 Witness Rule: In assessing the sufficiency of the evidence--to assure that a perjury conviction is not premised upon one person's oath against another- Rule satisfied when there is direct testimony from one witness and additional independent evidence so corroborative of the di rect testimony that the two when considered together are sufficient to establish the falsity of the accused's stmts under oath beyond a rsbl e doubt--we dont want to convict based upon the word of one witness under this statute 1623 1623 permits only the circumstance in criminal code anywhere where the offense can be completed and be completely undone at the same time by the party Retraction Defense in regards to the false declaration offense--not present in 1621 Within the same judicial proceeding, the testifying witness changes mind and spills the truth, the offense of false declarations made previously is removed Additionally, the 2 statutes apply to different proceedings 1623 applies only in the context of a Grand Jury proceeding compared to 1621 which can be charged and committed in all sorts of proceedings and circumstances (see reading notes) US v. Bronston Bronston is convicted of perjury and he appealed and argued in Ct of Appeals that the question was ambiguous and believe he was answering the question as asked.. He answered it with literal truth Issue of assets was a material matter in the bankruptcy proceeding--for perjury, the lie or concealment must go to a matter that is material--the nature of the stmt must be material (capable of influence does not have to actually or have influence, but is capable of doing so within the context of the case) Conviction ends up reverse why and how? The examiner obtained a nonresponsive answer to his question and should have followed up with it and clarified to get the correct and fully truthful answer, but he did not Bronston was indicted for lying about an answer to a question which he did actually truthfully answer on its face, even thoug h he did intend to mislead Pg. 322-applicable mens rea-"willful conduct"--not knowing or accidental or incidental--willfully usually connotes a heightened requirement of malicious intent--something more than just committing the act and knowing you did it-for perjury, false stmt, money laundering context, knowing is not enough--must be more egregious in nature Note 7-pg. 328-US v. DeZarn compared to the Bronston case Context can come into play, even if the answer is literally on its face true--the answer was not really unresponsive because based on the context, the witness understood the question and directly answered the question it was not an issue of the question being ambigous--but if you have to speculate as to whether or not the witness understood the question being asked, then you cannot rely on context and the literal truth defense remains

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Week 3-Ch. 5 Mail & Wire Fraud

Thursday, September 01, 2011 4:33 PM

Pg. 170 case--Do not read this case in the text book because it has been rendered null as of June 2010--professor took majority and copied only that portion along with 1st paragraph of Scalia's concurrent opinion Read this opinion carefully---Honest Services Mail Fraud--will be on the exam pay attn.--Skilling case

A. Intro Mail Fraud: requires gov't to prove 1) scheme devised or intending to defraud or for obtaining money or property by fraudulent means a nd 2) use of causing the use of the mails or private courier in furtherance of the fraudulent scheme AND materiality is essential to proving mail fraud. Originally focused on the misuse of postal system by way of a counterfeit scheme Now, focus on to the scheme of defraud element of the statute Mail and Wire fraud are often used by prosecutors to criminalize fraudulent conduct that may not be covered in other legislat ion B. Scheme to Defraud US v. Maze--Sup Ct rejected use of the Mail Fraud statute where the mailing in furtherance of the scheme to defraud was premised on an al leged use of stolen credit card and the subsequent mailing to collect on the bills Rejected argument that these collection mailings were necessary to the scheme's success Dissent argued that this statute has been traditionally used against fraudulent activity as a 1st line of defense and thus wh en a new form of "fraud" pops up, the mail fraud statute becomes a stopgap device to deal on a temp basis with the new phenomenon until legislation that is particulariz ed is enacted Note 1--Schemes to Defraud--Courts have found the "scheme to defraud" element of this statute encompasses an endless array of frauds including franchise fraud, securities fraud, and insurance fraud. Note 2 --Limitations--any limits as to what can be considered fraudulent conduct under the Mail Fraud Statute? Sup Ct has found that a "use of the mails for the purpose of obtaining money by means of threats of murder or bodily harm" was not a scheme to defraud for the purpose of mail fraud McNally v. United States FACTS: Former public official of the state of KY and McNally, for alleged violation of the federal mail fraud statute under 18 USC 1341 Ps and a 3rd party were politically active in the Dem party during the 1970s and ever Dem gov was elected, the 3rd party was made chairman of the state's Dem Dem party and given de facto control over selecting the insurance agencies that the state would purchase its policies from The work comp carrier for the state agreed at the request of 3rd party to share in all commissions received over $50k to other agencies at the specification of the Chairman $851k in commission was funneled to 21 agencies picked by the Chairman, one of which was a company controlled by the Chairman himself, nominally owned and operated by the P, McNally The co. was created solely for the purpose of allowing the Chairman to obtain commissions from the workers' comp carrier Theory of the case of the Prosecutor was that the participation of the P in a self-dealing patronage scheme defrauded citizens and gov't of the state of certain intangible rights, such as the right to have the state's affairs conducted honestly PROCEDURE: Chairman pled guilty to mail and tax fraud and sentenced to 3 years imprisonment and Ps charged with conspiracy and 7 counts of mail fraud, of which only 1 was not dismissed before trial The remaining mail fraud count based on the mailing of commission checks to the workers' comp carrier by the insurance compan y from which it had secured coverage for the State Alleging the Ps devised a scheme 1)to defraud citizens and gov't of the state of their right to have the state's affairs conducted honestly and 2) to obtain directly and indirectly money and other things of value by means of false pretenses and the concealment of material facts Dist Ct then told jury that conviction for said crime could happen on one of 2 sets of findings That the Chairman had de facto control over award of workers' comp insurance contract to the carrier, that he directed pymts from this contract to his own co and without disclosing that interest to persons in the gov't whos actions could have been affected by the disclosure and tha t Ps or either of them aided and abetted him in that scheme or That the Sec. of Public Protection and Regulation had supervisory authority regarding the state's workers' comp insurance at the time when the co received commissions, that he had an ownership interest in that co and did not disclose that interest to persons in state gov't whos e actions or deliberations could have been affected by such and that McNally aided and abetted him (going only to McNally's guilt) Jury convicted on both mail fraud and conspiracy Ct of Appeals affirmed the both, relying on previous decisions that held that the mail fraud statute proscribes schemes to de fraud citizens of their intangible rights to honest and impartial gov't ISSUE: did the jury permit a conviction for conduct not within the scope of the mail fraud statute? HOLDING: Reversed-Yes. RULE: Proper interpretation of the Mail Fraud statute requires this Court to set its boundaries by limiting in scope to the protection of property rights and if Congress desires to go further, it must speak more clearly than it has. REASONING: Mail fraud clearly protects property rights, but does not refer to intangible rights of citizens to a good gov't and the scar ce history of statute shows at most that the original impetus behind the mail fraud statute was to protect people from schemes to deprive them of their money or property Case law interpreting the "any scheme or artifice to defraud" held that the phrase should be interpreted broadly insofar as property rights are concerned but said nothing about broadening the statute's reach But did include everything that affected property that was designed to defraud by representations as to the past or present or suggestions and promises as to the future This case was actually codified and added the language "or for obtaining money or property by means of false or fraudulent pr etenses, representations or promises as to the future the court did not say "everything designed to defraud", but rather "any scheme or artifice Additionally, when there are two rational readings of a criminal statute, the Court has often stated that the harsher should only be chosen when Congress has spoken in clear and definite language The conduct that was in question was the state officer allegedly violating the statue if he chooses an insurance agent to pro vide insurance for the state but specified that the agent must share its commissions with other named agencies, in one of which the officer has an ownership interest an d hence profits when his agency receives part of the commissions The appeal did not ask the court to find that the jury was not required to find that the state itself was defrauded of any mo ney or property and it was not charged that the absence of the alleged scheme the state would have paid a lower premium or secured better insurance Most importantly, the commissions received were not the property of the state gov't or that the state was deprived the contro l over how its money was spent as this was not charged, it doesnt matter The jury convicted on conduct that was not within the reach of the mail fraud statute Note 1--McNally's Reach: would the outcome have been different if the gov't had alleged a deprivation of money or property in the indictment and if jury had been instructed on necessity of the gov't proving a loss of money or property? I dont think so--what money was lost by the gov't or what property the only real argument which was alluded to by the parties was the loss of the right to control how the gov't's money was spent, which is a right that is inherent in property the ability to control its distribution or use
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the gov't's money was spent, which is a right that is inherent in property the ability to control its distribution or use Note 3--Kickback Schemes/Faithful Services--following McNally, but relying on the dissent, the gov't argued that kickback schemes deprive the employer of the salary and benefits paid to the employee in reliance on his faithful services free from conflict of interest in US v. Johns Some courts bought this and others have rejected it Note 4--Kickback Schemes/Right to Information--another similar argument was that the employer suffered loss because had it known of the supplier's willingness to pay kickbacks, it might have used this info to drive a harder bargain An ancillary property right of controlling expenditures is a right to know any material information that might affect its con trol of expenditures Mixed response from lower courts, some seeing the critical distinction being whether the employee had capacity to influence o nly the selection of the supplier (as in McNally) or also the amount paid to the supplier Note 7--Wording of the Indictment--this can matter be specific in alleging what property rights are being defrauded or taken Note 8--Conspiracy to Defraud--Stevens (dissenting in McNally) argued that "defraud" as used in 1341 should be interpreted in same way that the term has been interpreted in 371 (Conspiracy to Defraud the US--2 or more who conspire to commit any offense against US or defraud the US or agency thereof in any manner for any purpose andthere is an act committed to effect such defrauding shall be guilty BUT if offense, the commission of which is the object of the conspiracy is a misdemeanor only, punishment shall not exceed the max provided for in such misdemeanor) 371 includes conspiracies to commit any offense against the US as well as conspiracies to defraud the US or its agencies The purpose of the statute as stated in the Dept of Justice Manual is to protect the gov't functions from frustration and dis tortion through deceptive practices Such conduct must touch the gov't in 1 of 3 ways according to the court Cheat the gov't out of money or property Interfere or obstruct legit gov't activity Make wrongful use of the gov'tal instrumentality C. What Constitutes Property? a. Intangible Property Carpenter v. US FACTS: Winans, P, was reporter for Wall Street Journal and became one of 2 writers of a daily column, "Heard on the Street", which discussed selected stocks or groups of stocks, giving positive and negative information about them and taking a point of view w/respect to investment in the stocks that it reviews P regularly interviewed corp execs to put together interesting perspectives on the highlighted stocks (none here in this dispute contained corporate inside information) Column was well received and had the potential to affect the price of the stocks it discussed Thus, info before publication had to be kept confidential (company policy) P ignored and entered into a scheme with Brant and the other P, both working with a brokerage firm to give them advance info as to timing and contents of the column They involved a client of Brant to buy or sell based on the probable impact of the column and profits were to be shared and a ll thought such scheme would not affect the journalistic integrity of the column Importantly, no articles were found to have been altered so as to provide further profit potential to the stock -trading scheme 4 months, Ps made net profits of $690,000.00 Brokerage firm became suspicious and launched an investigation and all parties denied knowing anyone at the Journal, but the conspirators fought and then Winans, the writer, and Carpenter went to the SEC and revealed the entire scheme PROCEDURE: Brant plead guilty and was a witness for the gov't Dist Ct concluded the column has an impact on the market, though it cannot be quantified easily in any given case Ps convicted for violation of Securities Exchange Act (sec. 10(b)) which provides it is unlawful for any person, directly or indirectly by the use of any means or instrumentality of interstate commerce or of the mails or of any facility of any national securities exchange to. ISSUE: Did the convicted persons engage in activities that were a scheme to defraud the Journal within the meaning of the mail and wire fraud statute and if yes, did they obtain any money or property from the Journal? HOLDING:--affirmed--yes RULE: Confidential business information has long been recognized as property and McNally does not distinguish btwn tangible and intangible property REASONING: The Court affirmed simply because it was divided w/respect to the convictions under the securities laws and for other reasons, affirmed the judgment with respect to the mail and wire fraud convictions The Ps argued that the Journal's interest in prepublication confidentiality for the column is no more than an intangible consideration outside the reach of 1341 Court says no--the Journal, as the P's employer, was defrauded of much more than contractual rights to honest and faithful service--which is an interest too etheral in itself to fall in the protection of this statute BUT here the object of the scheme was to take the Journal's confidential business information, a clear property right in the publication schedule and contents-and its intangible nature does not make it any less property protected by the mail and wire fraud statutes McNally did not distinguish tangible and intangible property rights Confidential information acquired or complied by a corporation in the course and conduct of its business is a species of property to which the corporation has the exclusive right and benefit and which a court will protect through the injunctive process or otherwise News matter, even though not really susceptible of ownership or dominion in absolute sense, is a stock in trade to be gathered at the cost of the business reporting it and to be distributed or sold to those who will pay money for it as for any other merchandise Does not matter that the Ps did not interfere with the use of the info or did not publicize it and deprive the Journal of the fist public use the confidential info was generated from the business and the business had a right to decide how to use it prior to disclosing it to the public The P promised not to reveal prepublication info about his column, which he then did in violation of his duty because he pass ed such info along to his co-conspirators info that was confidential and belonging to the journal Note 1--Securities Fraud The Court was equally divided and affirmed the securities fraud convictions The lower court accepted a theory of misappropriation as the basis of finding a breach of 10(b) and the Sup Ct held that the misappropriation theory outlaws trading on the basis of nonpublic info by a corporate outsider in breach of a duty owed not to a trading party, but to the so urce of the info Designed to protect the integrity of the securities markets against abuses by outsiders to a corp who have access to confidential info that will affect its security price when revealed but who owe no fiduciary or other duty to that corporation's shareholders b. Licenses Cleveland v. US FACTS: The P and others were prosecuted for making false stmts in applying to the LA state police for permission to operate video poker machines State law allows for certain businesses to operate video poker machines but the state does not run the machinery and the law requires prospective owners to apply for a license from the state which are nontransferable and must be renewed annua lly To qualify for said license, an applicant must meet suitability requirements designed to ensure that licensees have good char acter and fiscal integrity Goodson and family formed LP to participate in the poker business at their truck stop and the P, a lawyer, assisted Goodson in preparing the app which required identification of partners and submission of personal financial stmts for all

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 the P, a lawyer, assisted Goodson in preparing the app which required identification of partners and submission of personal financial stmts for all partners AND state that the listed partners were the sole beneficial owners of the business and that no partner held an interest in the partnership merely as an agent or nominee or intended to transfer the interest in the future The children of Goodson were listed as sole beneficial owners of the LP and that Goodson and the P's firm loaned them all startup capital and that Goodson was the GM App was approved and the license was successfully renewed for 3 years, with each app identifying no ownership interests other than the kids FBI discovers evidence that the P and Goodson had participated in a scheme to bribe state legislators to vote in a manner favorable to the video poker industry PROCEDURE: Gov't charged the P and Goodson with several counts of money laundering under 1957 as well as racketeering and conspiracy under 1962 and 4 counts of mail fraud under 1341 by fraudulently concealing that they were the true owners of the LP in the initial license app and 3 renewal apps mailed to the state (underlying crimes) That they concealed their ownership interests, b/c they had tax and financial problems that could have undermined their suitability to receive the license P moved to dismiss the mail fraud counts prior to trial claiming the alleged fraud did not deprive state of any property under the 1341 statute, which was denied by the Dist Ct, stating that licenses constitute property even before they are issued and the P was convicted on 2 counts of Mail Fraud and on money laundering, racketeering and conspiracy predicated on the mail fraud P appealed, same argument--no property, relying on several Court of Appeals decisions that the gov't does not relinquish property for purposes of 1341 when it issues a permit or license Ct of Appeals for the 5th Cir. Affirmed under the idea that the poker licenses are property in the hands of the state ISSUE: does 1341 (fed mail fraud statute) reach false stmts made in an application for a state license? HOLDING: No, reversed RULE: state and municipal licenses in general and the state video poker licenses in particular do not rank as property for purposes of 1341 in the hands of the official licensor. The thing obtained, for purposes of the 1341 statute, must be property in the hands of the victim.. It is not enough that the object of the fraud may become property in the recipient's hands. REASONING: Congress has been clear McNally and Carpenter were codified and then following Carpenter, Congress amended the law specifically to cover one of the intangible rights that lower courts had protected, the intangible right to honest service...even though Fed courts had dismissed for want of monetary loss to any victim, prosecutions under 1341 for diverse forms of public corruption, including licensing fraud In this case, no assertion of state's video poker licensing scheme implicates the intangible right of honest services and thequestion was whether for purposes of the fed mail fraud statute, a gov't regulator parts with property when it issues a license--Ct holds that it does not reach fraud in obtaining a state or municipal licenses of the kind here involved for such licenses are not property in the hands of the gov't regulator The interest held by the state with respect to these licenses and this scheme was regulatory entirely and not about property--the fact that the state receives money for them and has control over revocation, issuance and renewal does not make it a property interest There is an economic stake which is substantial in these licenses but there is not a property interest evidenced by the fact that the money does not not come in until the state parts with the license upon issuance the licenses entitle the state to collect a processing fee from applicants and nothing more not an upfront fee The gov't never alleged that the P defrauded the state of any money to which the state was entitled by law.the D paid the state its due revenue The gov't argued that the P frustrated the State's right to control the issuance, renewal and revocation of video poker licenses which is not a property interest--power to regulate Ct did not want to find mail fraud here because it was a predicate offense to the money laundering statute and would have led to very harsh penalties D. Intangible Right to Honest Services Congressional Overruling of McNally: as part of the Anti-Drug Abuse Act of 1988, 1346 was enacted which provides --for the purpose of this chapter, the term "scheme or artifice to defraud" includes a scheme or artifice to deprive another of the intangible right of honest services United States v. Skilling FACTS: Skilling, D, rose through the ranks of the Enron Corp, serving as President and Chief Operating Officer and then CEO and 6 months later resigned 4 months later, Enron went into bankruptcy, but had been the 7th highest-grossing co. in America Stock plummeted from $90 a share to pennies--cause the US Dept of Justice to launch and investigation to figure out what happened Uncovered elaborate scheme to prop up Enron's short-term stock prices by overstating the company's financial well -being Skilling was indicted in 2004 Charged with engaging in wide-range scheme to deceive the investing public, including Enron's shareholders about the true performance of Enron's business by Manipulating Enron's publically reported financial results and Making public stmts and representations about Enron's financial performance and results that were false and misleading Alleged that he enriched themselves as a result of the scheme through salary, bonuses, grants of stock and stock options, andother profits and prestige Skilling charged specifically with conspiracy to commit securities and wire fraud, seeking to deprive Enron and its shareholders of the intangible right of his honest services PROCEDURE: Dist Ct and Appeals Court ruled that the 1346 statute was not void for vagueness and that he committed Honest Services Wire Fraud ISSUE: Did the jury improperly convict Skilling of conspiracy to commit honest services wire fraud--what is this offense? HOLDING: Yes, Affirmed in party, reversed in part and remanded for findings on the other charges. RULE: The Honest Services Wire Fraud charge is limited in scope based on what Congress intended--meant only to reach schemes to defraud involving bribes and kickbacks--only covers these REASONING: Honest Services Statute 1346--the term scheme or artifice to defraud in these provisions to include a scheme or artifice to deprive another of the intangible right of honest services This theory targets corruption where the offender profits, and the betrayed party suffers no deprivation of money or property, instead a third party who has not been deceived, provided the enrichment. The actionable harm lay in the denial of that party's right to the offender's honest services Thus, when one tampers with the employer-employee relationship for the purpose of causing the employee to breach his duty to his employer he in effect is defrauding the employer of a lawful right the deception is in the continued representation of the e mployee to the employer that he is honest and loyal to the employer's interests must accept bribes or kickbacks McNally essentially stopped the development of the Honest Services Mail Fraud statute, explaining that if Congress wanted to speak on the matter to expand 1341, they could They responded with the new statute specifically to cover one of the intangible rights (not property rights) which was followed by the Cleveland case Obvious in the "the" language that the intangible right of honest services had a specific meaning to Congress when it enactedthe statute Congress was recriminalizing mail and wire fraud schemes to deprive others of that intangible right of honest services Court wont expand the reading of this statute outside of bribes and kickbacks the core of the McNally bribe and kickback--not conflict of interest prosecutions Principle of lenity--when construing 1346 because mail and wire fraud are predicate offenses under the RICO Act and the money laundering

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 Principle of lenity--when construing 1346 because mail and wire fraud are predicate offenses under the RICO Act and the money laundering statutes for instance DID Skilling's conduct violate 1346--he was charged with conspiring to defraud Enron's shareholders and he profited from the fraudulent scheme but the gov't never alleged that he solicited or accepted side payments from 3rd party in exchange for making these misrepresentations Indictment does not allege and the gov'ts evidence did not show that Skilling engaged in bribery thus we do not think that he committed honest services fraud Remanded to figure out if the juror convicted him for the honest services wire fraud or one of the other charges such as cons piring to commit securities need to show that the conspiracy conviction did not rest on the honest services theory Needs to be a bribery or kickback in a private sector fraud under 1346 Concurrence-Scalia Skilling's conviction must be reversed for honest-services mail fraud--agrees with court on that point Finds that 1346 is vague and therefore violating Due Process Clause the court was simply making up the confines of the meaning of the statute which it does not have the right to do the Congress needs to define the statute better Note 1--Vagueness--US v. Gray, indictment charged members of bball team coaching staff at Baylor with executing a fraudulent scheme to establish academic eligibility for 5 transfer students What is the honest service definition?--the Court ruled that 1346 was not unconstitutionally vague as applied to them Note 3--Private Sector Frauds- US v. DeVegter: alleged commission of honest services fraud by private sector Ds and not a defrauding of the public of the honest govt'al ser vices of public officlals Meaning of Honest Services as Intangible right means something different in the application to public officials and private sector misconduct Public officials inherently owe a duty to the public to make gov'tal decisions in the public's best interest Secretly making his decision based on his own personal interests instead, such as when accepting a bribe is a defrauding of t he public of his honest services Private sector different--such a strict duty of loyalty ordinarily is not part of this relationship and many relationships do not involve a right to the honest services of either party but rather obligations of good faith and fair dealing But the meaning of Honest Services must be given analogous meaning--the D would have to have violated the v's right to honest services by inherently harming the purpose of the parties' relationship Gov't must prove that the employee intended to breach a fiduciary duty and that the employee foresaw or rsbly should have tha t his employer might suffer an economic harm as a result of the breach the nature of the duty owed is a question of federal law Note 4--Private Political Officials Do they owe the same fiduciary duty as public officials? 2nd Cir. Sustained a conviction of a county chair who used power to construct contracts for payments scheme, 3rd Cir. Recently stated that prosecution of a private party official is a horse of a different color and thus not the same and later it said that there is no reason for treating private party officials in the same manner as public officials since such a loose interpretation of the statute creates a catch-all political crime that has no use but misuse Note 5--Breach of Fiduciary Duty When does a breach of fiduciary duty become criminal as mail fraud? US. v. Bronston--there must be a fiduciary duty AND a self-seeking motive.and perhaps also cause some loss to the victim or pecuniary gain to the D Or mail fraud requires: Mailings A scheme in which the D through knowingly deceitful behavior Intends an economic gain and Is at least negligent as to the economic harm to the V E. Intent to Commit Wire or Mail Fraud United States v. D'Amato FACTS: Gov't alleged that the D was hired by a rogue employee, Gardner, and that they both defrauded together Unysis in 2 ways Committed mail fraud by structuring his billings to conceal from those in control of corporate funds the nature of his relationship with Unisys and Fact that his actual services involved lobbying his brother, a US Senator and Committee member and That the D committed mail fraud by contracting with Unisys to provide written reports on Senate proceedings while never intending to provide those reports The D would prepare info stating that it was an analysis of business activity and then there would be nothing else listed aft er that and it sat on the desks that people needing to be able to say that a lawyer looked at it and the whole reason that they paid him was so that the company would have access to the D's brother PROCEDURE: D was convicted of Mail Fraud ISSUE: HOLDING: Evidence of Criminal Intent was insufficient and thus, Reversed. RULE: REASONING: Intent to undertake a scheme or artifice to defraud or to obtain money by means of false or fraudulent pretenses was the required intent needed to be convicted 2nd Cir says not shown--the victim of this crime was not the senate or the electorate that had elected the brother--it was Unisys corp that was the victim because the property that was deprived was all of the fees that had been paid out of Unisys' pocket F. Materiality Neder v. US Issue: Neder was taking out loans for commercial property at a predetermined value and then creating a straw company that so ld it back to him and then having an appraiser come in and defaulting on the loan and pocketing the difference "Flipping"--the appraiser would come in and then appraise the value at higher than it should be because you sold it to yourself for more than you initially bought it for Charged with mail, wire, and bank fraud and filing a false income tax return Materiality was not required for the income tax thing and the instructions about materiality was not given to the jury for th e fraud charges Thus the fraud convictions were overturned because he was convicted without the issue of materiality was dealt with If the nature of the fraudulent representation being made is immaterial, than you don't have a federal crime --in commercial transactions you will often experience representations made by sellers that the law has stated is mere puffery and thus not material, such as the true va lue of something or the performance of something or condition of something Thus judges cannot decide issues of materiality as it is an element of a crime and thus the jury must decide if this element is present or not!

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Lecture Week 3
Thursday, September 08, 2011 6:32 PM

Wire Fraud-1343--can be accomplished through use of television too--and case can be made out even if the D is not the one utilizing wires to send the stmts press outlets sending out the stmts and implementing the conveyance of the information, the person who it is done on behalf of is on the hook for it Mail Fraud-1341 The 2 statutes are construed the same, with the exception of the method of using either the mail or wire services--the same law applies to wire fraud and mail fraud One difference other than the means/method that mail fraud does not require the mailed piece to cross state lines commerce clause not relevant, but with wire fraud, the wiring must occur in interstate commerce (cross state lines) McNally Case In order to get to today's law (Skilling), you need to understand the cases that were happening when McNally was decided Pay attn to the mistakes and how the case was charged out What did the Sup Ct identify as the problem that caused this conviction to go wrong? ANSWER: the statute requires to defrau d OR to obtain money or property but the court construed the statute to say AND and not OR In the facts of McNally, there was no deprivation of any property interest that the Victim held in the offense Why was the Sup Ct concerned about the application of this statute? Concerned about the void for vagueness issues of proper notice and arbitrary application--the Rule of Lenity applied it wanted to narrow the application of the statute What if the prosecutor had said that the elected official was getting paid and the people of the state of KY deserved to get their money worth because they thought he was going to be honest with them? Would this have allowed the conviction with today's law?... Well was there scheme to defraud and bribery or kickback involved there was a kickback involved and thus probably there would have been a conviction Congress responds by passing 1346-Honest Services Mail Fraud--essentially enacted to reverse the Sup Ct's ruling in McNally--has direct application to what the court was attempting to address BUT you could also argue that McNally would have come out the same way had 1346 been on the books (if you take a look at Skilling) (because of the harm lacking?) The public has a right to public official's honest services (public sector) v. Private Sector Within public sector fraud, interests are at stake which the gov't deems to be sufficiently important to the US to vindicate even when the gov't official is not a federal official--b/c there are separation issues and intrusion of state's rights issues There has to be some property right impacted that is affected by virtue of the fraud scheme undertook by the D Carpenter Case Wall Street Journal Column case--re: stock tips and policy was that the info would be confidential until it was published Insider trading--what is illegal about insider trading? Because if there is no crime in this, regular people wont invest in the market and it is deprived of the capital and this caused Congress to think it important enough to make it illegal (securities fraud-Title 15 of the US Code) The property lies the information before it is published and that it takes time and money to get this information--and the company had a specific policy in place about the use of this information that does not belong to the public, the employees, but to the wallstreet journal itself Intangible property right like the type of intangible right you would have in your Intellectual property Compare this to the intangible right of Honest Services in McNally because in Carpenter, intangible property is just fine Intangible property rights are fair game where as Honest Services as a right may not be Cleveland Case This case refines the nature of what is property within the confines of a mail and wire fraud context and what is not--this is the video poker licensing cases When you assess, ask if the thing at issue is cognizable property, you must also ask property in the hands of who? Has to be the person who is being defrauded when they lose it --and the property has to be an interest that they hold in their hands and not somebody elses and the property lost must be the nature of the thing that is defrauded The "property" at stake was the license that was granted to the parties from the state but this is not property the Court rules The purpose of the licensing scheme is regulatory in nature and not property.they have only the ability to earn income from the release of the license to various parties Thus, no mail fraud on the license applications that contains the misrepresentations--the licenses in the hands of the state were not property but were regulatory devices because The fact that the thing of value to the perp does not mean that the V has suffered any damages Skilling Case There is a problem with how the Prosecutor charged out the crime against Skilling There was no bribery or kickback because there was no 3rd party involved--the Court interprets the statute to include only these b/c of statutory history--words used by Congress have their ordinary meaning as historically used and discussed by the drafters who were acting on the cases that were coming into the Court We are focusing on the opposite party than we did in Cleveland--not the hand of the victim but here we are not talking about what is deemed property in the hands of the victim, but we are talking instead about the statute interpretation to save the statute Think about the difference allowances that the law makes in regards to a public sector fraud compared to a private sector fraud The two are treated differently by the Court and its because there are different duties inherent in public and private relati onships and when there is a fiduciary duty and when there isnt in private, there is no duty unless there by contract generally If there is one, there are obligations that increase in regards to fairness in conduct, honesty, etc Skilling's duty to the company and shareholders as an officer of the company--it was not just an arm's length relationship and thus implicated the fiduciary duty and this is not present as an issue when dealing with the public sector because the duty is inherently owed to the public as a public actor because the public is playing his salary Thus the publics right to receive fair and honest conduct for the salary paid --the public has a right now to be ripped off D'Amato Case Private sector fraud where the victim gave authorization to go forward with the fraud thus this is a case of limited context and application Conviction invalidated because there was no duty on the part of the D to disclose the information There was no obligation to disclose anything to the company--no fiduciary duty as a contractor and thus the failure to disclose would only matter in one of these 3 instances 3 Circumstances in which regardless of these factual predicates, you could still have a valid conviction Pg. 193 bottom paragraph Just need 1 of the 3 Also look at the Business Judgment Rule Elements at the top of 193--an elastic range of permitted scope of conduct for mgmt Neder v. US For Schmuck, look at the 3 prior cases to understand the distinction and why they don't apply

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For Schmuck, look at the 3 prior cases to understand the distinction and why they don't apply

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Ch. 5 Cont.-Week 4
Wednesday, September 14, 2011 7:21 PM

H. In Furtherance Schmuck v. United States FACTS: P/D was indicted on 12 counts of mail fraud in violation of 18 USC 1341 and 1342 Alleged fraud was straightforward and common--bought used cars, rolled back the odometers, and then sold the cars to retail dealers for artificially inflated prices that would accompany the low-mileage reading Car dealers, unknowing, would then sell the cars to customers, who in turn paid prices reflecting the fraud of the P/D To resell the car, each dealer who bought it from the P/D would submit title-application form to the State DOT for the retail customer and the receipt of the title was a prereq to completing the resale--this element supplied the mailing element of each of the alleged mail frauds P/D before trial moved to dismiss indictment on ground that the mailings at issue were not in furtherance of the fraudulent s cheme and thus did not satisfy that element of mail fraud crime Also moved for jury instruction that he could be found guilty of the lesser offense of tampering with an odometer even though elements of that crime were part of the alleged crime of mail fraud PROCEDURE: Dist Ct denied both motions and jury convicted D/P on all 12 counts Ct of Appeals reversed and remanded case for new trial --rejected the claim that he was entitled to acquittal because mailings were not made in furtherance of his scheme, but ruled that the court should have instructed the jury on the lesser offense of odometer tampering and applied so -called "inherent relationship" test for determining what constitutes a lesser included offense for purpose of the civ pro rule Sup Ct granted cert to define further scope of mail fraud statute and resolve conflict among circuits over which test to appl y in determining what constitutes a lesser included offense for Rule 31(c) ISSUE: HOLDING: RULE: REASONING: To commit mail fraud, the use of mails need not be an essential element of the scheme, it is sufficient for the mailing to be incident to an essential part of the scheme, i.e. a step in the plot D argued that this mailing cannot be satisfied by such as the mailing that occurred here which was routine and innocent in of itself and that far from furthering the execution of the fraud, occurs after the fraud has come to fruition and is merely tangentially related to the fraud and is counterproductive in that it creates a papertrail allowing discovery of the fraud Ct disagrees with this characterization of the mailings in present case and this description of the applicable law (that mail fraud can be predicated only on a mailing that affirmatively assists the perpetrator in carrying out the fraudulent scheme) P/D was charged with devising and executing a scheme to defraud state retail auto customers who based their decision to buy certain cars at least in part on the low-mileage readings provided by the tampered odometers and he was involved in an ongoing fraudulent venture and thus jury could have concluded that success of his venture depended on his continued relation and good reputation among retail dealers who sold to the state customers Rational jury could have concluded title-registration mailings were part of the execution of the fraudulent scheme which did not reach fruition until the retail dealers resold the cars and effected transfer of title B/C these resales and the P/D's relationships with the retail dealers naturally depended on the successful passage of title among various parties The fact that the mailings may not have contributed directly to the duping of either the retail dealers of the customers, the y were necessary to the passage of title, which in turn was essential to the perpetuation of the P/D's scheme --thus the mailings here fit the description --the key here is that the success of the scheme did actually rely on the mailings (but did it really) Note 1-Limitations to "In Furtherance"--prior to Schmuck, the cases reflected 4 types of limitations to a mailing be in furtherance of a scheme to defraud 1) Mailings that conflicted w/the scheme to defraud, that aided in detection, or were diametrically oppose to the D acting with an evil mens rea, were deemed not in furtherance of the scheme to defraud 2) Mailings that were part of an imperative duty to the state were not considered in furtherance 3) Mailings that were prior to the commencement of the scheme to defraud were not in furtherance 4) Mailings after fruition of the scheme to defraud were not considered in furtherance United States v. Czubinski FACTS: D was employed as Contact Rep in Boston office of Taxpayer Services Division of the IRS D had to routinely access info from one of the IRS's computer systems known as IDRS to answer questions from taxpayers Enabled him access to income tax return information for virtually any taxypayer, which was info permanently stored in the system at its master file in WV Policy was that such records are not to be accessed outside of the course of official duty D carried several unauthorized searches of IDRS and looked at confidential information and audit trails show that he looked a t specific people, including an assistant DA who was prosecuting his father on an unrelated felony offense and his wife and other various people to whom he h ad been connected to in various ways Nothing indicates that D did anything more than disregard knowingly the IRS rules and the gov't does not contend that the D disclosed the confidential info he accessed to any third party Only evidence that demonstrated any intent to use the confidential info for nefarious purposes was the trial testimony of Murray, an acquaintance of the D who briefly participated in the local KKK chapter with the D and he said that the D once state he intended to use some of that info to build dossiers on people involved in the white supremacist mvmt, not evidence though that such dossiers were created or that steps were taken to do so No unauthorized searches took place after 1992 and that D continued to be employed until the 1995 Grand Jury indictment again st him on 10 counts of wire fraud and 4 of federal interest computer fraud PROCEDURE: Indictment alleging wire fraud states that the D defrauded the IRS of confidential property and defrauded the IRS and public of his honest services by using valid password to acquire confidential taxpayer info as part of a scheme to 1) build dossiers on associations in the KKK and 2) see k information regarding an assistant DA who was then prosecuting his father and 3) perform opposition research by inspecting the records of political opponents in the race for the Boston City Councilor seat Articulated particular personal ends to which unauthorized access to confidential info through interstate wires was allegedly a means D appeals conviction of 9 counts of wire fraud under 18 USC 1343 and 1346 and 4 counts of computer fraud, 18 USC 1030(a)(4) ISSUE: Has the IRS been deprived of any intangible property rights or the gov't shown how the D has gained anything from the accessing of the info? HOLDING: No, Reversed. RULE: without actually taking or using the confidential info so that the owner is actually deprived of the intangible property, there is no wire fraud.. Or without showing of intent for some kind of gainful use REASONING:

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REASONING: Wire Fraud requires: D knowing and willing to participate in a scheme or artifice to defraud with specific intent to defraud and Use of interstate wire communications in furtherance of the scheme Both must be proved beyond a rsble doubt Claims based on 2 theories--1) D defrauded IRS of property under 1343 by acquiring confidential info for certain intended personal uses and 2) D defraude d the IRS and public of the intangible right to honest services, under 1343 and 1346 Where such deprivation of confidential info/intangible property is effected through dishonest or deceitful means, a scheme to defraud within meaning of wire fraud statute is shown Thus in this context, must show that the D intended to deprive another of their protected right However in this case, the gov't does not show how merely accessing confidential info without doing or clearly intending to do more with it and this is tantamount to showing a deprivation of IRS property for purposes of wire fraud statute The unauthorized browsing even if done with intent to deceive the IRS into thinking he was performing only authorized searches constitutes a deprivation of property within the meaning of wire fraud There is no articulable harm to the holder of the information as a result of the D's activities and no gainful use was intended clearly by the person accessing the information No taking of the IRS' right to exclusive use of the confidential info was shown and neither was the D's gain from access to the information Additionally, this case falls outside of the core of honest services fraud because the D was not bribed or otherwise influenc ed in any public desicionmaking capacity and he did not embezzle funds and did not receive nor can it be shown that he intended to receive any tangible benef it He violated his work policy at best and he should not be criminally punished for this particular policy violation because he did not use it to commit a crime The gov't did not prove that the D deprived or intended to deprive the public or his employer of their right to his honest se rvices he committed wrongdoing and thus he has not obtained valuable information in furtherance of a fraudulent scheme for the purpose of sectio n 1030(a)(4) J. Money Laundering United States v. Yusuf FACTS: 7 Ds in the case, 1 located in US Virgin Islands, Yusuf, the primary shareholder of United, the 1st co. Because the D conducts business through its Virgin Islands supermarkets, it is required to comply with statutorily-mandated monthly reporting of gross receipts and payment of tax on those of 4% FBI received a suspicious activity report from the Bank of Nova Scotia in St. Thomas, US Virgin Islands Claimed that over 4 day period, $1.92 million in $50s and $100s was deposited into United's bank Investigation revealed that the D allegedly conspired to avoid reporting $60 million of the gross receipts on United's gross receipts monthly tax returns and failed to pay the gov't the 4% AND that Ds allegedly engaged in various efforts to disguise and conceal the illegal scheme and its proceeds by depositing money into bank accounts, controlled by the Ds, outside of the US PROCEDURE: Grand Jury indicted on 78 counts superseding indictment charging various counts relating to mail fraud, tax evasion, and int' l money laundering Relied on mail fraud as the predicate offense or "specified unlawful activity" to support the money laundering charges against the Ds Ds moved to dismiss the substantive money laundering charges on basis that any unpaid taxes disguised and retained as a result of filing false tax returns through US mail do not equate to proceeds of mail fraud Gov't appeals Dist Ct pretrial order dismissing from the indictment various counts and allegations based on int'l money laund ering ISSUE: were the unpaid taxes, which were unlawfully disguised and retained by means of the filing of false tax returns through the US mail are proceeds of mail fraud for purposes of sufficiently stating a money laundering offense under 18 USC 1956(a)(2) HOLDING: Reversed. Yes. RULE: REASONING: The federal money laundering statute does not define what constitutes "proceeds" of a specified unlawful activity, but it doe s specifically identify which criminal offenses constitute specified unlawful activities "specified unlawful activities" cover broad array of offenses, i.e. fraudulent concealment of a bankruptcy estate's assets is categorized as a specified unlawful event ALSO, just because funds are originally lawfully procured does not mean that one cannot thereafter convert those same funds into the "proceeds" of an unlawful activity (money laundering conviction can be sustained where the D concealed income derived from lawful operated store) Thus, Court rejects the suggestion that to qualify as proceeds under money laundering statute, funds must have been directly procedure by or through a specified unlawful activity and Court agrees that funds retained as a result of the unlawful activity can be treated as the proceeds of such crime Proceeds=criminal profits, not criminal receipts, derived from a specified unlawful activity as it pertains to the money laundering statute Proceeds are derived from an already completed offense or a completed phase of an ongoing offense, before they can be laundered Unpaid taxes, which are unlawfully disguised and retained by means of the filing of false tax returns through US mail, consti tute proceeds of mail fraud for purposes of supporting a charge of money laundering --daisy chain scheme The mailings of the fraudulent tax returns resulted in proceeds of mail fraud based on the nature of the entire ongoing fraudulent scheme because the unpaid taxes unlawfully retained by the Ds represented the proceeds of a fraud that was also furthered by previous mailings and the retained taxes were the proceeds of the D's overall scheme to defraud the gov't Note 1-Money Laundering as White Collar Crime--significant tool used by prosecutors of white collar crime and the charges appear in a wide array of different contexts including mail fraud, as in Yusuf. BUT Money Laundering must be a crime distinct from the crime by which the money is obtained--the money laundering statute is not an addition of a further penalty to a criminal deed, it is a prohibition of processing the fruits of a crime or of a contemplated phase of an ongoing offense Note 2-Sentencing Ramifications--addition of money laundering can increase sentence under guidelines, a conviction for money laundering increases the offense level used to calculate the sentence

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Ch. 6-/Racketeer Influenced and Corrupt Organization Act-Week 4/

Wednesday, September 14, 2011 9:57 PM

RICO

9/15/2011

A. Introduction 1. Statutes RICO Act enacted by Congress as part of Title 9 of the Organized Crime Control Act of 1970 Originally was seldom used, but today is charged by federal prosecutors and Ps seeking civil relief Originally focused on organized crime, but now goes beyond such limitation partially due to inability to define who and what is encompassed within the term of organized crime and in part product of the expanded prosecutorial authority made available through RICO Allowed Fed Prosecutors to: 1. Reach certain activity that otherwise would not violate either federal or state crim law 2. Reach activity particularly violent activity that otherwise would violate only state law 3. Gain enhanced penalties including asset forfeiture for activity that violated other provisions of the federal criminal law and 4. Gain broader joinder and more flexible venue than was available in prosecution under other federal code provisions 18 USC 1962: 4 types of prohibited conduct enumerated and often RICO acts can and often do include more than one type of pro hibited conduct 1. D must have invested in 2. maintained an interest in 3. participated in the affairs of an enterprise, or 4. conspired to engage in conduct constituting a pattern of racketeering activity or collection of unlawful debt 1962 allows prosecutions to be premised upon patterns or racketeering of the collection of an unlawful debt, with definitions of terms outlined in sec. 1961 Majority use a pattern of racketeering as the focus of the unlawful conduct--2 activities of racketeering at least 9 possible state offenses and over 30 federal offenses can serve as predicate acts for a RICO prosecution 1963 provides criminal penalties available in RICO, including incarceration, fines, and the forfeiture of property 1964 extends RICO outside the criminal context allowing its use in civil proceedings, but subject of significant controversy in its allowance of garden variety frauds to be subject to treble damages and atty fees 2. Civil RICO RICO actions brought by gov't require prior approval from Crim Division, but private RICO cases are not subject to any gov't review or restrictions Courts have been fairly hostile towards private RICO claims but broad statutory language makes direct restrictions on filing such claims difficult to impose For example, Sup Ct has held that there is no requirement in a private civil RICO action that the D previous have been crimin ally convicted of the predicate offense that constitutes that pattern of racketeering or of the RICO violation itself It was stated that RICO was an aggressive initiative to supplement old remedies and develop new methods for fighting crime and the statute's provisions should be read broadly to accomplish this goal Opponents argue that the civil RICO statute stretches the mail and wire fraud statutes to their absolute limits and federalizes important areas of civil litigation that until now were solely within the domain of the states B. The Enterprise 1. The Nature of the Enterprise United States v. Turkette FACTS: D/Rs were charged with 9 counts of conspiracy to conduct and participate in the affairs of an enterprise engaged in interstat e commerce through a pattern of racketeering activities in violation of 1962(d) The Enterprise was described as a group of individuals associated in fact for the purpose of illegally trafficking in narcotics and other dangerous drugs, committing arsons, utilizing the US mails to defraud insurance companies, bribing and attempting to bribe local police officers, and corruptly influencing and attempting to corruptly influence the outcome of state court proceedings The other 8 counts charged commission of various substantive criminal acts by those engaged in an associated with criminal en terprise, including possession with intent to distribute and distribution of controlled substances and several counts of insurance frau d by arson Common thread to all counts was the D/Rs alleged leadership of this criminal organization in which he orchestrated and partic ipated in the commission of the various crimes delineated in the RICO count or charged in 8 counts PROCEDURE: Evidence of trial focused on professional nature of this organization and the execution of a number of distinct criminal acts and D/R was convicted on all 9 counts, sentenced to 20 years on substantive counts and 2 years special parole term on drug count and 20 year concurrent te rm for the RICO conspiracy count and fined $20K Appeal, D argued that RICO was intended solely to protect legitimate business enterprises from infiltration by racketeering a nd that RICO does not make criminal the participation in an association which performs only illegal acts and has not infiltrated or attempted t o infiltrate a legitimate enterprise Ct of Appeals agreed and reversed ISSUE: HOLDING: Reversed-conviction stands. RULE: neither the language nor the structure of the RICO statute limits its application to legitimate enterprises because applying it to criminal organizations does not render any portion of the statute invalid or useless REASONING: 1961 describes 2 categories of associations that come within the purview of the "enterprise" definition 1. Organizations such as corporations and partnerships and other "legal" entities 2. Any union or group of individuals associated in fact although not a legal entity (Ct of Appeals incorrectly assumed that this category was a more general description of the 1st category) Court of Appeals also incorrectly stated that the given definition of "enterprise" of the ordinary meaning would create sever al inconsistencies in the Act, claiming that if a pattern of racketeering can itself be an enterprise for purpose of 1962(c), then the 2 phrases "employed by or associated with any enterprise" and "the conduct of such enterprise's affairs though a pattern of racketeering activity" add nothing to the meaning of the section the words of the statute are coherent and logical only if they are read as applying to legitimate ent erprises Appeals Ct wrong--the fact that a wholly criminal enterprise comes within the ambit of the statute does not mean that a pattern of racketeering activity is an "enterprise" The RICO conviction requires the gov't to 1) prove both existence of an enterprise and 2) the connected pattern of racketeering activity The enterprise is an entity for present purposes a group of persons associated together for a common purpose of engaging in a course of conduct--proved by evidence of an ongoing organization formal or informal and by evidence that the various associates function as a continuing unit The pattern of racketeering activity is a series of criminal acts--proved by evidence of the requisite number of acts of racketeering committed by the participants in the enterprise Proof of one does not necessarily establish the other the "enterprise" is not the "pattern of racketeering activity" it is an entity separate and apart from the pattern of activity which it engages existence of an enterprise at all times remains a separate element which must be proved by the gov't RICO also proscribes the investment of income derived from racketeering activities in an enterprise engaged in or which affec ts IC as well as the
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 RICO also proscribes the investment of income derived from racketeering activities in an enterprise engaged in or which affec ts IC as well as the acquisition of an interest in or control of any such enterprise through pattern of racketeering activity Ct does not see how 1962(a) and (b), which clearly do apply to infiltration by organized crime of legitimate businesses, do n ot at the same time apply to wholly illegal enterprises or from acquiring through a pattern of racketeering activity wholly illegitimate enterprises such as an illegal gambling house There is no inconsistency or anomaly in recognizing that 1962 applies to both legitimate and illegitimate enterprises The remedies that are available within 1964 such as treble damages, which are thought only to have use with respect to legitimate enterprises as civil remedies, is in accurate because they can have use to eradicating organized crime with the aim of divesting the association of the fruits of its ill-gotten gains just because one of the civil remedies may be inapplicable to a particular illegitimate enterprise does not serve to limit the enterprise concept Note Courts have also permitted state and local gov't offices to be the enterprise in a RICO case as well as the state itself, but all courts do so with great caution where the prosecution may have no real alternative to naming such party as the RICO enterprise 2. Association-In-Fact Enterprise "enterprise" is not limited to individuals or legal entities--1641(4) defines "enterprise" and also includes in it "any union or group of individuals associated in fact although not a legal entity" Lower courts generally agree that an association-in-fact enterprise must have a common purpose and function as a continuing unit but from this point on they divide Sup Ct is considering the issue of whether "in order to establish the existence of an "enterprise" within meaning of the RICO statute" "the gov't must prove the existence of an entity with an ascertainable structure apart from the pattern of racketeering activity in which its members engage US v. Boyle-P convicted of RICO, conspiracy to commit RICO, etc and Sup Ct accepted cert P asked the Court to make explicit what it implied in Turkette--that an association-in-fact must have some sort of structure beyond that attending the pattern of racketeering activity--the series of predicate offenses - in which participants engage Gov't has to prove existence of an "enterprise" and the connected pattern of racketeering activity "enterprise" is an entity, for present purpose of engaging in a course of conduct Proved by ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit Evidence of the series of events of racketeering activities shown by evidence of the requisite number of acts of racketeering committed by the participants in the enterprise An association in fact may be composed as few as one person and thus it would not make sense to think that Congress intended that such a group must reflect the formalistic structure suggested by some courts 3. Distinctiveness of the Enterprise and the Defendant Cedric Kushner Promotions, Ltd. v. King FACTS: 1961-unlawful for any person employed by or associated with any enterprise to conduct or participate in the conduct of such enterprise's affairs through the commission of two or more statutorily defined crimes--which RICO calls a pattern of racketeering activity (1962(c) ) foresees two separate entities, a person AND a distinct enterprise This case involves a sole person who is the president and sole shareholder of a closely held corporation P claims that the President has conducted the corporation's affairs through the forbidden pattern though for present purposes , it is conceded that in doing so he acted within the scope of his authority as the corporation's employee P is a corporation that promotes boxing matches, who sued Don King claiming that he had conducted the boxing-related affairs of Don King Productions in part through instances of fraud and other RICO predicate crimes PROCEDURE: Dist Ct, citing Ct of Appeals precedent, dismissed the complaint and the Court of Appeals affirmed the dismissal Explaining that 1962 applies only where a P shows the existence of two separate entities a person and a distinct enterprise, the affairs of which that person improperly conducts It was undisputed that King was an employee of his own corporation and also acting within the scope of his authority and that King was in a legal sense part of and not separate from the corporation as the enterprise and that thus there was no distinct person from the enterpris e who improperly conducted the enterprise's affairs and that 1962(c) did not apply Other circuits ruled the opposite way and this was the issue that the Court had to decide P appeals again ISSUE: in these circumstances, are there two entities, a "person" and a separate "enterprise"? HOLDING: The person and enterprise here are distinct and RICO applies -Reversed. RULE: The corporate owner/employee, a natural person, is distinct from the corporation itself, a legally different entity wi th different rights and responsibilities due to its different legal status REASONING: The Dist Ct and Appeals Ct of the 2nd Circuit's reading and interpretation of 1962(c) is erroneous Yes, you must prove the existence and distinction of two separate entities, the person and the enterprise, who are more disti nct than the same being referred to be a different name The Act says that it applies to persons who are employed by or associated with the enterprise, which was the case here Court agrees with gov't argument that 1962(c) requires some distinctiveness btwn the RICO defendant and the RICO enterprise a nd that liability depends on a showing that the Ds conducted or participated in the conduct of the enterprise's affairs and not just their own affairs The Court just disagrees with the lower court's application of that principal to the present circumstances Here, a corporate employee, acting within the scope of his authority allegedly conducts the corporation's affairs in a RICO -forbidden way.. There is nothing in the statute that requires more distinctiveness than that An employee who conducts the affairs of a corporation through illegal acts comes within the terms of a statute that forbids any "person" unlawfully to conduct an enterprise, particularly when the statute explicitly defines "persons" to include "any individual capable of holding a legal or beneficial interest in property" The employee and the corporation are different persons even where the employee is the corporation's sole owner, after all inc orporation's basic purpose is to create a distinct legal entity, with legal rights, obligations, powers, and privileges different from those of the natural individuals created it who own it or whom it employs Also, RICO protects both a legitimate enterprise from those who would use unlawful acts to victimize it, and also protects the public from those who would unlawfully use an enterprise whether legitimate or illegitimate as a vehicle through which unlawful activity is committed Thus, a corporate employee who conducts the corporation's affairs through an unlawful RICO pattern of activity under 1962(c) uses that corporation as a vehicle whether he is or is not its sole owner 4. Interstate Commerce i. Engaged in Interstate Commerce--Different types of RICO violations in 1962 apply to any enterprise which is engaged in or the activities of which affect, int erstate or foreign commerce In US v. Roberston, Sup Ct overturned a lower court decision finding that a claimed violation of 1962(a) involving a gold mining operation in Alaska did not meet the interstate commerce element Court did not need to consider whether the enterprise affected interstate commerce holding instead that whether or not these activities met and whether or not to bring the gold mine within the affecting commerce provision of RICO, they would have to meet the requirement of substa ntially affecting interstate commerce, they assuredly brought the gold mine within 1962(a)'s alternative criterion of any enterprise engaged in interstate or foreign commerce ii. Affecting Commerce--if the Court had used the "affecting interstate commerce" alternative of the statute in Robertson, opposed to finding the ent erprise engaged in interstate commerce, what level of proof would be necessary to show that the enterprise affects interstate commerce?

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interstate commerce, what level of proof would be necessary to show that the enterprise affects interstate commerce? Courts have found a sufficient nexus with IC when there is some minimal connection with IC, i.e. by soliciting and accepting various amounts of cash from a bailbondsmen in consideration for D's favorable recommendations and exercise of discretion in his official decisions iii. Affecting Commerce: Predicate Acts or Enterprise--Should court look to whether the predicate acts or the enterprise is affecting or engaged in interstate commerce when dealing with a RICO prosecution? In Rone, the Court held that the statute requires that the activity of the ENTERPRISE, not each predicate act of racketeering, have an effect on interstate commerce the IC nexus must result from the enterprise and it is permissible to find that nexus from acts also charged as predicate acts when those constitute the activities of the enterprise 5. Economic Motive Nat'l Org for Women v. Scheidler FACTS: P is NOW which is a national non-profit organization that supports legal availability of abortion The other Ps are various health care centers that perform abortions and other medical procedures in connection with NOW clients Rs are a coalition of anti-abortion groups called Pro-Life Action Network or PLAN Scheidler and others and other ogranizations that oppose legal abortion and a medical laboratory that formerly provided services to the 2 P healthcare centers Charge under 1962(c) which prohibits any person associated with the enterprise from conducting its affairs though a pattern o f racketeering activity PROCEDURE: Ps sued the Rs in Dist Ct alleging violation of Sherman Act 15 USC sec. 1 and RICO 1962(a) (c) and (d) as well as several pen dent state-law claims stemming from the activities of antiabortion protestors at the clinics The amended complaint alleged that Rs were members of a nationwide conspiracy to shut down abortion clinics though a pattern of racketeering activity including extortion in violation of the Hobbs Act under 1951 Dist Ct dismissed case under 12(b)(6) for failure to state a claim holding that since the activities alleged involved political opponents, not commercial competitors, and political objectives, not marketplace goals so that Sherman Act did not apply and Dismissed RICO claims under 1962(a) because the income alleged by Ps consisted of voluntary donations from persons opposed to abortion which in no way were derived from the pattern of racketeering alleged in the complaint And failed to state a claim under 1962 (c) since an economic motive requirement exists to the extent that some profit-generating purpose must be alleged in order to state the RICO claim and this was not shown and Dismissed 1962(d) since the other RICO claims could not stand Ct of Appeals affirmed Appeal to Sup Ct ISSUE: Ct granted cert to determine whether RICO requires proof that either the racketeering enterprise or the predicate acts of racketeering were motivated by an economic purpose HOLDING: No. Reversed--Ps may maintain this action if the Rs conducted the enterprise through a pattern of racketeering activity RULE: Nowhere in either 1962(c) or the RICO definitions under 1961 is there any indications that an economic motive is required REASONING: Court does not believe that the usage of the term "enterprise" in subsection (a) and (b) leads to the inference that an econo mic motive is required in subsection (c) The word "enterprise" plays a different role in (a) and (b) than in (c) The "enterprise" referred to in (a) and (b) is something acquired through the use of illegal activities or by money obtained from illegal activities .. The enterprise is the victim of unlawful activity and may very well be a profit -seeking entity that represents a property interest and may be acquired But does not mandate that the enterprise be profit-seeking entity, simply states that the enterprise be an entity acquired through illegal activity or with money obtained through illegal activity The "enterprise" in subsection (c) connotes generally the vehicle through which the unlawful pattern of racketeering activity is committed rather than the victim of that activity think of the King case from above Because the enterprise discussed in subsection (c) is not being acquired through ill-gotten gains, it need not have a property interest that can be acquired nor an economic motive for engaging in illegal activity Need only be an association in fact that engages in a pattern of racketeering activity NOTE Following the above decision, the case proceeded to a 7 week trial 6 member jury concluded that the Ps violated the civil provisions of RICO and that the racketeering activity included 21 viol ations of the Hobbs Act, 25 violations of state extortion law, etc The Sup Ct reviewed this decision to determine whether Ps committed extortion within the meaning of the Hobbs Act and Rhenquist stated that because of all the predicate acts supporting the jury's finding of a RICO violation must be reversed, the judgment that the Ps violated RICO must also be reversed without an underlying RICO violation, the injunction issued by the Dist Ct must necessarily be vacated Came back to the Sup Ct 3rd time when 7th Cir determined that it need not direct the Dist Ct to dissolve the injunction because the alleged acts of violence could be the basis for a Hobbs Act violation Then the Court rejected that reading of the Hobbs Act and directed entry of a judgment in favor of the D because of the failu re to allege a RICO violation though the Hobbs Act 6. RICO Injury Anza v. Ideal Steel Supply Co FACTS: RICO Act prohibits certain conduct involving a "pattern of racketeering activity" One enforcement mechanism is a private right of action, available to any person injured in his business or property by reason of a violation of the Act's substantive restrictions 1964(c) R sells steel mill products along with supplies and services with 2 stores in NY, in Queens and the Bronx P owned National Steel Supply, with the D as its principal competitor and offers a similar array of products and services and it too operates in Queens and the Bronx PROCEDURE: Rs sued Ps in US Dist Ct claiming Ps were engaged in an unlawful racketeering scheme aimed at gaining sales and market share at the R's expense R claimed that P adopted a practice of failing to charge the requisite state sales tax to cash-paying customers, even when conducting transactions that were not exempt from sales tax under state law This practice allowed the P to reduce its prices without affecting its profit margin and Ps allegedly submitted fraudulent tax returns to the NY state Dept of taxation and Finance in an effort to conceal their cond uct Rs amended complaint contains 2 RICO claims Ps, but submitting the fraudulent tax returns committed mail fraud and wire fraud when they were sent electronically and such criminal acts as mail and wire fraud are forms "racketeering activity" for purposes of RICO and this conduct was a pattern of racketeering behavior because the returns that were fraudulent were submitted on an ongoing regular basis Claimed Ps violated 1962 (c) which makes it unlawful for any employed person by or associated with any enterprise engaged in or the activities which affect IC to conduct or participate directly or indirectly in the conduct of such enterprise's affairs throu gh a pattern of racketeering activity or collection of unlawful debt The alleged goal of the Ps which was achieved was to give National a competitive advantage over the R 2ndly claimed that 1962(a) was violated which makes it unlawful to take money derived from the racketeering activity to use o r invest that income in the acquisition of any interest in or establishment or operation of an enterprise engaged in or affecting IC

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income in the acquisition of any interest in or establishment or operation of an enterprise engaged in or affecting IC Ps allegedly used the funds generated or retained by the fraudulent tax scheme to open the Bronx location of Nat'l and that opening this location caused the R to use significant business and market share Ps moved to dismiss and was granted under 12 (b)(6) which was denied, which the Dist Ct stated that in order to assert a RICO claim predicated on mail or wire fraud, a P must have relied on the D's misrepresentation R did not allege that and relied on the false tax returns, thus the court concluded the R could not go forward with its RICO claims R appealed and Court of Appeals vacated Dist Ct judgment, finding the allegation alleged a pattern of racketeering activity t hat was intended to and did give the D a competitive advantage over the P and thus proximate cause is pled and P has standing ISSUE: does the RICO claim need to be more than the "but-for" cause, and actually the "proximate" cause of the harm allegedly caused by the activity to find a RICO violation against that victim? HOLDING: Yes, and the R's 1962(c) claim does not satisfy the requirement of Proximate Cause RULE: REASONING: Court has previously held that a P may sue under 1964(c) only if the alleged RICO violation was the proximate cause of the P' s injury The Court had rejected that idea that the claimed violation need to be the "but-for" cause of the injury noting the unlikelihood that Congress meant to allow all factually injured plaintiff's recover Proper interpretation of 1964(c) required consideration of the statutory history, which revealed that Congress modeled it on the civil action provision of the federal anti-trust laws of the Clayton Act Need to show that the crime was the "but-for" cause and the "proximate" cause as well Rs theory was that the Ps had harmed it by defrauding the state tax authority and using the proceeds from the fraud to offer lower prices to attract more customers...RICO violation alleged by R is that the Ps conducted its affairs through a pattern of mail and wire fraud, the di rect V being the state of NY and not the R it was the state defrauded and not Ideal The harm suffered by the R is entirely distinct from the alleged RICO violation (offering lower prices) v. (defrauding the state) The prices by Nat'l could have been lowered for any number of reasons unconnected to the asserted pattern of fraud Thus the connection btwn the R's injury and the injurious conduct committed by the Ps is too attenuated not the legal cause, only the literal cause C. Pattern of Racketeering H.J. v. Northwestern Bell Telephone Co. FACTS: Ps are customers are the R State body responsible for determining rates that the Rs may charge PROCEDURE: Ps filed class action alleging violations of 1962(a-d) by the Rs and sought an injunction and treble damages under RICOs civil liability provisions 1964(a) and (c) Alleged that for 6 years, the Rs sought to influence members of the agency in the performance of their duties and in fact cau sed them to approve rates for the company in excess of a fair and rsble amount by making cash pymts to commissioners, negotiating with them regarding futur e employment and paying for parties and meals, for tickets to sporting events and airline tickets RICO charge based on the Rs allegedly deriving income from racketeering pattern involving the predicate act of bribery and used this money to engage in business as an interstate enterprise and participated in the conduct and affairs of the agency through this pattern of racketeering and also conspired to violate these 3 subsections of 1962 which is (d) Dist Ct granted Rs 12(b)(6) motion request finding that each of the fraudulent acts alleged by Ps was committed in furtherance of a single scheme to influence the agency commissioners to the detriment of customers Ct of Appeals for 8th Cir. Affirmed, citing a single fraudulent effort or scheme is insufficient to establish a pattern of racketeering activity only a single scheme But most courts of appeals have rejected this interpretation of RICO's pattern concept to require an allegation and proof of multiple schemes and this Court grants cert to resolve conflict ISSUE: Does the RICO pattern concept require an allegation and proof of multiple schemes ? HOLDING: No, reversed and remanded. RULE: requires instead that the racketeering predicate offenses are related and that they amount to or pose a threat of cont inued criminal activity and criminal conduct forms a pattern if it embraces criminal acts that have the same or similar purposes, results, participants, victims, or methods of commission or otherwise are interrelated by distinguishing characteristics and are not isolated events REASONING: Pattern of racketeering requires at least 2 acts of racketeering activity and 1961(5) does indicate that Congress envisioned circumstances in which no more than 2 predicate offenses would be necessary to establish a pattern of racketeering but at the same time, the stmt that a pattern requires at least 2 predicate offenses implies that while two acts are necessary they may not be sufficient--this only speaks to what is necessary to establish a pattern based on min number of predicate offenses Rsble to infer from this absence of any textual identification of sorts of pattern that would satisfy 1962's requirement in combination with the very relaxed limits limits to the pattern concept fixed in 1961(5) that Congress intended to take a flexible approach and envisaged that a pattern might be demonstrated by reference to a range of different orderings principles or relationships btwn predicates within the expansive bounds set But a pattern is not formed by sporadic activity and a person cannot be subjected to the sanctions of RICO for committing two widely separated and isolated criminal offenses Continuity is both a closed period of repeated conduct or past conduct that by its nature projects into the future with a threat of repetition The acts of bribery alleged are said to be related by common purpose to influence commissioners in carrying out their duties in order to win approval of unfairly and unreasonable high rates for the Rs and that the racketeering predicates occurred with some frequency over at least 6 years which may be sufficient to satisfy continuity requirement Concurrent: Continuity plus relationship Where Congress includes particular language in one section of a statute but omits it in another section of the same Act, it i s generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion Note 1 Pattern--what constitutes the requisite continuity for a pattern--to prove a pattern of racketeering one must show separate predicate acts that are 1) related and 2) amount to or pose a threat of continued criminal activity and this definition does not encompass a single criminal event, a single criminal episode, a single crime Some of the separate parts may themselves constitute separate criminal acts or crimes yet those several separate criminal parts taken together do not generally make out a pattern AND A single episode does not constitute a pattern even if that single episode involves behavior that amounts to several crimes Note 2

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Lecture Week 4-RICO

Thursday, September 15, 2011 6:34 PM

Mail/Wire Fraud--there has to be a nexus btwn the mail and depriving the victim of a property interest or giving to the D even just an intangible property interest and the mailing has to be in furtherance of the scheme to defraud or intended scheme to defraud

1961 (1) Predicate Acts for the charge of RICO Bribery is important as one of the predicate offenses
Ch. 5 Continued What Happens in Schmuck that distinguishes it from the 3 mentioned cases and causes the conviction to be affirmed? What was the scheme, who was defrauded, what have they relied upon, what property interest have they lost? This will make the application of the statutory elements placed into a system of looking at facts These are the questions to ask to be sure you have the elements of the fraud In this case, the customers and dealerships were being defrauded The mailing that occurred was the mailing of the title to the state by the dealership to have new title issued to the buyers of the cars But the D tried to argue that "in furtherance" of the scheme was not completed by the mailings at issue because he argued tha t the crime of defrauding had already come to fruition Ct says no. The mailings in this case was an essential piece to the scheme to defraud continuing because had they titles not been mailed and the state not transferred the title, the dealership would not have continued to work with the D and the D's scheme would be halted In the previous cases mentioned the actual frauds were actually already completed and the mailings were only incidental to th e scheme if relevant at all The prosecutor was smart in how he phrased the scheme because this case could come out differently if the scheme had been fra med and portrayed differently Lulling Mailings: think Bernie Madoc--the investors were being sent account stmts, but there was no actual accounts and thus the people were being lulled into thin king things were okay

How to Stack Cases/Charges on Each Other, based on an Artifice or Scheme to Defraud Happens a lot with RICO cases, with someone undertaking a fraud and then a racketeering and RICO charge for example There is an interim step to know--Money Laundering--which juries hate. 2 statutes 18 USC 1956: classic money laundering--different from 1957--(there will be a question on the exam about money laundering, either 1956 or 1957) 2 Specific Different Types of Crimes Contained within in (a)(1)(A)(i) Promotion Money Laundering: taking money and use it with the intent to promote another crime Viewed as worst because its promoting yet another crime (a)(1)(B)(i) Concealment Money Laundering: effort to wash/conceal the money or hiding its source or the purpose for having it --transaction designed in whole or part to conceal or disguise the nature, location, the source, the ownership or control of the proceeds o f specified unlawful activity Necessary that money being laundered by derived from a specified unlawful activity the money must be the proceeds of a SPECI FIED crime not just any crime Person undertaking the money laundering MUST KNOW that the money's source is tainted or from some unlawful activity Then promotes another crime with the money OR Conceals the money, then he has committed the crime 18 USC 1957--Not really money laundering because there is no element about using bad money for purpose of concealing or for using it to pr omote another crime ALL that is required is that the person takes money he knows is ill-gotten (doesnt matter if he knows what crime gained the money)and then engages or attempts to engage in any monetary transaction in criminally derived property of a value grater than $10k Thus, just receiving the money does not violate this statute, but taking the money and then depositing it into a bank account for ex. Would be a violation of the statute The reason for stacking the crimes is ---it gives you a bargaining chip for plea negotiations and it gets a lot of attention
Hypo Two Palin Campaign and Promise not to Raise Taxes Hypo Three Assuming that Palin has committed Mail Fraud, answer the following: After successful campaign, swearing in and Palin receives monthly checks , etc. ---No crimes committed No crime--drawing on paychecks from checking account to repay loans that she obtained to finance her campaign for the Presidency --no defrauding no concealment, no laundering No Crime by sending money to daughter for granddaughter No Money Laundering because the money is not the proceeds of any specified unlawful activity you have to establish that the money being laundered is dirty money the transaction that money is being used for is itself dirty is not enough --structuring the transactions crime may be present here because she split the amounts up or even if you only pay so much to avoid the $10k hurdle You would have to prove that 10K was not due here RICO 18 USC 1961: does not define any crimes or specify what is unlawful it just defines the terms of what describes what is unlawful in the s tatutes that follow Among legal acts that comprise a pattern: murder, robbery, bribery, arson, kidnapping, extortion, gambling Includes mail, wire, bank fraud, money laundering, engaging in transactions with proceeds of specified unlawful activity, Hob bs Act violations In looking at showing the Enterprise you want to show that the patterned activity is separate from the enterprise --show some ascertainable distinct structured group/organization 18 USC 1962: all require the existence of an "enterprise" and each one of the substantive offenses requires a "pattern of racketeering activity" a. Investing money in an enterprise b. Obtaining control over an enterprise c. Conducting the affairs of an enterprise: the crime that is most often alleged in a criminal and civil case of RICO violation Because this statute describes engaging in a pattern in racketeering activity to conduct the activities of an Enterpise There must be a separation btwn the D on one hand and the Enterprise on the other hand because the conduct of a person is wha t is criminalized and this is necessary to give meaning and context to those separate terms--King case--this is not the case in (a) or (b) d. Conspiring to do any of the foregoing--dont need an overt act to consummate the agreement 18 USC 1963: Penalties Provision 18 USC 1964: Vests in those injured in their property by the conduct a civil remedy in federal jurisdiction

Turkette Enterprise may be an association-in-fact

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 Enterprise may be an association-in-fact How can the enterprise be different and separate from the group of people just getting together? This can be an enterprise, though not a legitimate enterprise, because the statutory definition of enterprise includes also "any union or group of individuals associated-in-fact But not just any group can be an enterprise it is very difficult to define when a group like this is able to be deemed an as sociation-in-fact You need an enterprise separate and apart from the pattern of racketeering activity You can use a violation of RICO for the purpose of forfeiting property from a convicted party King What made this a close case? Court had to decide if the D, King, was a separate entity apart from the Enterprise corporation to which he was the sole sha reholder and President NOW case Is an economic motive required in order for there to be a RICO violation? Ct holds that economic motive is not required. That a political motive can be sufficient to show the existence racketeering enterprise or predicate acts of racketeering This is not like the Sherman Act no economic motive is provided for in the statute and thus you can have a RICO act claim i n the absence of such economic motive Civil RICO cases and the Proximate Cause issue Anza Case Cont. 9/22/2011

Lecture Week 4-RI...

Audio recording started: 6:31 PM Thursday, September 22, 2011

Because there are 4 injuries to RICO, a violation of any one of the subsections is going to be a different harm 1962(a) and (b) are similar (b) viewed as a statute addressed to illegitimate enterprises such as the mob or a motorcycle gang (c), which is the most common.. The issue of proximate cause becomes much more attenuated ---Anza case What is the difference? The proximate cause needs to be alleged and proven at trial with respect to the damages to show the damage caused by the patt ern of racketeering activity Nature of the harm in Anza--what gave the P standing ? Because Ideal Steel was not paying taxes, they were charging less and as an effect of that, Anza lost business because the cu stomers went to Ideal Sounds good mail fraud as the predicating offense So why no adequate showing by reason of the underlying conduct? The Court did not think that you could evaluate the harm actually caused to the competitor Plaintiff as a result of the price changes resulting from the failure to pay sales tax to the gov't The gov't should have been the one suing Court talks about there is a proximately injured party--its the taxing authority. Why does this matter with regards to showing another party was injured----well they were injured indirectly ---no proximate cause because there are too many variables involved to make the chain of events connected for purposes of ascertaining damages. It was too attenuated b/c Ideal could have charged these prices either way Soo many events that could have intervened btwn the harm caused and the tortious conduct to attribute it for sure or more lik ely than not to the acts of the D It is easier to find proximate cause when you are the enterprise invested in or when you the person in control of the enterpr ise its tough under (c) to show the proximate cause --is a question of law--and not legal duty which is the jury--because there is an intervening problem and a more directly injured plaintiff that as a matter of law may not comprise as a matter of law Taking an enterprise through a pattern of racketeering activity Unique Concept of RICO--there needs to an enterprise, existence of racketeering (a, b or c) AND the racketeering activity that takes place MUST COMPR ISE A PATTERN HJ Inc. Case Sup Ct determine that there was a case In looking at the pattern of racketeering, the Court of Appeals said that because there was only one scheme, there could not be a pattern But its about multiple acts and not multiple schemes Sup Ct provides guidelines There has to be some continuity or a threat of continuity requires instead that the racketeering predicate offenses are related and that they amount to or pose a threat of continued c riminal activity and criminal conduct forms a pattern if it embraces criminal acts that have the same or similar purposes, results, p articipants, victims, or methods of commission or otherwise are interrelated by distinguishing characteristics and are not isolated events Some sort of distinguishing characteristic of the events, other than being the same defendant Just about anybody could say that it would be easy to find a RICO violation simply when looking at any two bank robberies whi ch were committed the same way BUT you generally don't see these simplistic of cases because all RICO cases are only permitted to be brought after those ca ses have going through the Racketeering Criminal Division in DC and the Prosecutor has to submit a memorandum stating what the evidence of the case is a nd why it should be brought as RICO case The Racketeering section will not allow simple cases to be brought and made into a RICO case because they dont want to abu se the statute and create an invitation to judges to make bad law FOR THE EXAM, DONT GET CONFUSED BTWN THE TWO DIFFERENT ELEMENTS USED TO PROVE WHAT THE PATTERN OF RACKETEERING HAS TO DO TO THE ENTERPRISE WITH THE TWO THINGS YOU HAVE TO SHOW THAT AN ENTERPRISE EXISTS THE PATTERN OF RACKETEERING DIFFERENT FROM SHOWING THE 2 ELEMENTS NECESSARY TO SHOW THERE IS AN ENTERPRISE CONTINUITY AND RELATEDNESS=SHOWING OF PATTERN--AND IT CAN BE NOTHING MORE THAN THE ASSOCIATION IN FACT OF ITS ACTORS DIFFERENT THAN THE 2 ELEMENTS NEEDED TO SHOW THE EXISTENCE OF AN ENTERPRISE ENTERPRISE--EXISTENCE OF SUCH ENTERPRISE SEPARATE AND APART FROM THE PATTERN STATIC ELEMENT TO ALL 4 SUBSECTIONS IS THE DEFINTION OF THE PATTERN

Reves v Ernst & Young The Nexus Requirement Suit brought against Jack White, CEO of White Plain because he asked the board to buy the coop and then the Board realized it had already purchased the Coop
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 Suit brought against Jack White, CEO of White Plain because he asked the board to buy the coop and then the Board realized it had already purchased the Coop White and Accountant were convicted of tax fraud And an audit was brought to Board by Young and that the Coop was solvent but did not tell them that the Coop was solvent only because of White Plain The Coop declared bankruptcy and sued 40 people including Young for not fully disclosing the necessary information Reves is the bankruptcy is trustee And it would not settle with Young which was a large financial firm The Accountants, including Young, were branded as racketeers!!! This was upsetting to them The holding of this case does not apply to 1962(a) or (b) because the Court is talking about conduct under (c) ----and the Court stated that you had to have conduct the affairs of the enterprise in the conduct of enterprises affairs Why couldnt Young conduct the affairs of the enterprise? They only had an advisory role not enough control to direct the corporation only ability to alter a few decisions AND they were only looking at the financials given to them---not making the records The coop was suing only because the account firm had deep pockets To conduct the affairs of the enterprise, they have to some capacity to conduct its affairs outside the advisory role the ac counts played Conspiracy to Commit RICO Offense 1962(d): there has to be an injury by reason of the RICO violation for 1964(c) --conspiracy to commit any of the acts covered by (a -c) Beck v. Prupis Employee discovers a RICO violation in the company and he is fired for reporting it and he sues them as part of a conspiracy to further the RICO scheme If injury caused by an act not permitted by RICO, it is not sufficient to violate (d) ---you have to have a injury that arises by virtue of a violation of 1962(a-c) and an injury committed that is listed in 1961(1) Professor likes the dissent, but its not the law The employee still has a wrongful termination suit but not RICO How the issue of forfeiture is addressed within the context of a RICO violation is very important to understand Title to property that either constitutes proceeds or are instrumentalities of the crime vests in the sovereign.and the relation back.. Not at the time of the sentencing or the time of the verdict as of the commission of the offense before any legal action is taken There is a provision with regard to substitute assets ---an order of forfeiture allows the taking of funds of the bank account whether those are the bad dollars or not --- its the Substitution Asset Provision US v. Soccoccia Gov't does not have to trace funds back--there is the Substitute Asset Provision in forfeiture but it does not apply to nondefents and thus the gov't could not take the money already paid to them as being on retainer

Questions about groups of people/aggregation of people--on the final exam--you think RICO

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Ch. 3-Week 5-Corp. & Indiv. Responsibility

Thursday, September 22, 2011 4:48 PM

Model Penal Code Instruction (p. 64-65) (you also will be receiving an alternative instruction in class for discussion purposes). Notes 1 & 2 (pp. 65-66) (skip notes 3 & 4) Bank of New England (pp. 66-71).
9/22/2011 A. Corporate Liability a. Introduction NY Central & Hudson River RR Co. v. United States FACTS: Case about attack on constitutionality of certain parts of the Elkins Act "anything done/not by a corporation common carrier subject to Act to regulate commerce and future amendatory acts which if done/not by any director or officer or any receiver, trustee, lessee, agent or person acting for or employed by such corporation would constitute a misdemeanor under Act or others SHALL be held to be a misdemeanor committed by such corporation and said corporation will be subject to the same penalties as the individuals for the prescribed said acts except as such penalties are changed The act, omission or failure of any officer, agent, or other person acting for or employed by any common carrier, acting with in scope of his employment, shall in every case also be deemed to be the act, omission, or failure of such carrier as well as the person Argued that this provision of the Act is unconstitutional b/c Congress has no authority to impute to a corporation the commis sion of criminal offenses or to subject it to criminal prosecution by reason of the things charged against an individual To punish the corporation is to punish the innocent stockholders and deprive them of their property without opportunity to be heard and without due process PLUS deprives the corporation of the presumption of innocence which is a part of due process Because there is no showing that the board of directors or the stockholders gave authority for the criminal acts of its agents acting for the company in the contracting for and giving of rebates at issue Thus they should not lawfully be charged because no action of the board of directors could legally authorize a crime and the stockholders could not do so either and thus a corporation cannot commit a crime based upon the acts of its agents D admitted at trial that at the time of the indictment, the general freight traffic manager and assistant freight traffic man ager were authorized to establish rates at which freight should be carried over the line of the NY Central & Hudson River Co. and to unite with other companies in the establishing, filing, and publishing of through rates including btwn NYCentral and Detroit Thus the subject matter of making and fixing rates was within the scope of the authority and employment of the agents of the company, whose acts in this connection are charged PROCEDURE: ISSUE: should the corporation be held responsible criminally for an act done while an authorized agent of the company is exe rcising authority conferred upon him? HOLDING: RULE: in actions for tort/criminal actions, a corporation may be held responsible for damages of the acts of its agents who are acting within the scope of his or her employment and applies even if the act is done wantonly or reckless or against the express orders of a principa l, in this case the corporate officerREASONING: Earlier commentators on common law held the law to be that a corporation could not commit a crime the members of a corporation are indictable but not the corporation itself because it is a corporate entity its members can commit crimes But this is not the current state of the modern law--since a corporation acts by its officers and agents, their purposes, motives and intent are just as much those of the corporation as are the things done. A corporation may be held liable criminally for certain offenses of which a specific intent may be a necessary element even b ecause you can fairly impute to a corporation a specific intent in a criminal proceeding as in a civil one.and its property may be taken as compensation for a private wrong or a public one because the corporation cannot itself be imprisoned A corporation is held responsible for acts not within the agent's corporate powers strictly construed, but which the agent has assumed to perform for the corporation when employing the corporate powers actually authorized The agents were bought to respect the regulation of interstate commerce enacted by Congress which required the filing and pub lication of rates and punishing all deviations from it. And the act of an agent, while exercising the authority delegated to him to make the r ates for transportation, is imputed to his employer and the penalties may be imposed upon the corporation for which he is acting on be half of Public policy argument.in the interest of public policy to impute the criminal act because the employee was acting on what h e was told to by the corporation Ct states some crimes by their nature cannot be committed by a corporation but a large class of crimes can Makes sense to charge and hold liable corporations who have knowledge of and required their agents to commit an act because t he corporation is conferring upon the agent the power to partake in the act and is profiting from the act Notes and Questions 1. Development of Corporate Criminal Liability Common law, corporations NOT liable for criminal acts of agents b/c no mind thus incapable of criminal intent required for all crimes and had no body and could not be imprisoned Development of liability--occurred in regulatory offenses involving acts of omission consistent with arguments that corporation could not form intent and not be imprisoned b/c these offenses were strict liability crimes without intent requirement and instead of imprisonment, fin es were the punishment 2. Corporate Sentencing At time of NY Central, finding a corporation criminally liable meant that fines could be imposed against the corporation Today=broader range of sanction--increasing of fines and also sanctions such as restitution and court-ordered compliance programs 3. Pros/Cons of Corporate Criminal Liability Does it make sense as a matter of legislative policy? Is it really imposing a punishment on innocent shareholders Will the consumer face the real brunt of the punishment by an increase in cost of the products in the market. Some say this is not likely 4. Deterrence Does imposing liability deter any future criminality? Some say they are largely undeterrable, that fines are ineffective and only the imprisonment of guilty officials achieves det errence Would civil remedies be better if they were added on? Corporate conviction punishes lots of parties, including shareholders, innocent employees both of which had no involvement in the wrongful conduct and may not have even benefitted from it Therefore unjust to punish them along with the truly culpable parties AND These people probably lacked the ability to prevent the wrongful conduct and thus punishing them does not provide any deterre nce on
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 These people probably lacked the ability to prevent the wrongful conduct and thus punishing them does not provide any deterre nce on other similarly situated persons 5. Gov't Position on Corporate Criminal Liability Do it sparingly, but dont hesitate when the circumstances warrant it Corporations are economic and cultural facts in society and employees act on behalf of corporations all the time There is generally a corporate culture that is formed and that culture may instill respect for the law or breed contempt or m alfeasance and thus Organization should be held accountable for the culture and conduct it promotes But the Justice Dept has long recognized that the employee's wrongdoing does not mean that the organization should automatically be charged with a crime especially where its culture does not create such contempt for the law naturally It should only be charged when doing so would serve a substantial federal interest and there are no adequate non -criminal alternatives Generally speaking, only prosecuting companies that have a history of flagrantly crossing the legal line that shows such acts are a product of the culture of the corporation Civil Sanctions not enough--often viewed by such companies as a cost of doing business and that is easily passed onto the consumer or the harms to not create quantifiable harms Without corporate criminal liability, there would be no effective deterrent to a corporate culture that expressly or tacitly condones criminal conduct 6. Good Faith Defense Should there be a defense for a corporation who acts in good faith when a rogue employee within the corporation fails to abide by corporate compliance programs that were properly administered? Used in civil actions by companies facing respondeat superior claims in tort Some courts have suggested such defense in criminal liability cases, but the 2nd Cir. Stated that regardless of Sup Ct cases in other areas of the law, there was no precedent for an affirmative defense for corporate criminal liability A corporate compliance program may be relevant to whether an employee was acting with in the scope of his employment, but not a separate element--if not acting in scope of employment, no criminal liability for the corporation Good Faith may be considered by court when imposing sentence on the corporation b. "For the Benefit" Stnd Oil Co. of Texas v. United States FACTS: Stnd's interest was limited to that of purchaser having a statutory duty of buying oil tendered to it by Thompson and other producers in the field Thomson, the other D, has 9 wells producing oil, some at their full daily allowance under the rules of the Texas RR Commission The laws held that under production from one may not be made up from another commonly owned lease which have a capacity capab le of excess in their assigned allowances Oil swapped in this fashion is considered hot oil under the Connally Act--forbids transportation of "hot oil" in interstate commerce 12 month period, Hart/Morgan, issued false run tickets covering oil supposedly received at Station 2 from or produced by Thompson's wells Some of these shows that the oil actually received and receipted for was produced by a given well rather than the one from wh ich it was known by Morgan or Hart to have come from (they were lying about the production of the wells) And other times a false run ticket was used showing receipt of Thompson oil which had never been produced or received at all The two employees were benefiting Thomson, but not Stnd and they were paid or received substantial sums of cash and merchandise from Thomson Stnd operated all of the wells and Stnd was an owner of a substantial undivided interest (19%) in all such oil Purcell was in charge of station 1, where the shortage of oil for station 2 was taken from--gave instructions to pumpers to increase production from Segment 1 to make up the shortage because 2 was lacking which amounted to 6k or so barrels every month for a long time Records were falsified so that this excess oil moving through 1 to station 2 would be concealed Because Stnd was the buyer of the oil and the make up of station 2 was the only way that Stnd was getting oil ostensibly purc hased earlier by it from Thompson at Station 2, Stnd was essentially paying Thompson for oil which already belonged to it PROCEDURE: Appeal by 2 corporate defendants from fines imposed on judgments of conviction under the Connally Hot Oil Act ISSUE: May a corporate employer be held liable for a crime committed by employees, who although ostensibly acting in the per formance of their duties, were really cooperating with a third party in the accomplishment of a criminal purpose for the benefit of the third p arty and whose acts did not benefit the employer but actually resulted in some harm by way of theft? HOLDING: REVERSED. RULE: to impose criminal liability on a corporation with these facts, you must show that the acts of these employees were being committed under a statute requiring a specific intent and the presence of a culpable intent the corporation does not acquire that knowledge or possess the state of mind needed through the activities of employees whose conduct was undertaken to benefit the interests of third parties and not the employer itself. REASONING: Stnd and its subsidiary reported the fraud immediately to the RR Commission No benefit from the conduct of the employees was intended nor received The statute prescribes a mental state as an element of the crime and thus in order to impute the crime onto the corporation, must determine whether the corporation had knowledge of the actions which constituted the crime The corporation, based on the requisite intent of "knowing" in this case can only be found liable criminally if evidence sho ws that each, acting through its human agents, deliberately did these acts, that is, with the corporation "knowing" that they were being do ne for it Knowledge can be imputed if 1) the purpose of the conduct was to benefit the corporation and 2) the act was committed by an a gent in the line of his duties There does not necessarily have to be benefit to the corporation in fact however. There can be cases where the corporation is criminally liable even though no benefit is received in fat the purpose has to be to benefit the corporation though at a minimum because an act of an agent is not within the scope of employment if it is done with no intention to perform it as a part of or incident to a servi ce on account of which he is employed In the present case, there is no evidence of any intended benefit as a purpose and no benefit was derived to or from such con duct by the bad employees Stnd's oil was either stolen from it or Stnd was required to pay twice for its oil however you look at it Their purpose was to aid Thompson, a third party, in its criminal enterprise United States v. Hilton Hotels Corp. FACTS: Operators of Hilton hotels, restaurants, etc organized as an association to attract other businesses to the Portland OR area Finance--members asked to make contributions in predetermined amounts Companies selling supplies to hotels were asked to contribute amount equal to 1% of their sales to hotel members To aid in collections, hotel members including the Appellant, agreed to give preferential treatment to suppliers who paid their assessments and to curtail purchases from those that didn't Anti-competitive behavior alleged PROCEDURE: Appellant's President testified it would be contrary to policy of the corporation for the manager of one of its hotels to con dition purchases upon pymt of a contribution to a local association Manager and assistant of the Portland area hotel of the D stated it was the policy of the hotel to buy supplies solely on the basis of price, quality, and service AND told the purchasing agent for the hotel NOT TO partake in this boycott
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and service AND told the purchasing agent for the hotel NOT TO partake in this boycott Purchasing Agent confirmed these instructions, but threatened the supplier with loss of the hotel's business unless he paid t he association assessment. Disregarded the instructions of the employer because he did not like the supplier Appellant requested instructions bearing upon criminal liability of the corporation for the unauthorized acts of its agents ---rejected by the trial court Told the jury a corporation is liable for acts and stmts of agents within the scope of their employment .. Acting on its beha lf in performance of the agent's general line of work including but not limited to that which has been authorized and that which an outsider could rsbly assume the agent would have authority to do Even told jury that it included acts and stmts of the agents made within the scope of employment even if contrary to their ac tual instructions or contrary to the corporations stated policies Appeal from conviction under charged violation of sec. 1 of the Sherman Act ISSUE: HOLDING: Affirmed RULE: REASONING: Ct notes the historic importance of the Sherman Act and the public policy interests at stake in such violations of it--b/c of the nature of the Sherman Act offenses and context in which they normally occur, the factors that militate against allowing a corporation to disown the cri minal acts of its agents apply with special force Usually offenses which are motivated by a desire to enhance profits Collective Knowledge
The doctrine of "collective intent" allows courts to find intent on the part of a corporation even when it is not possible to identify a corporate agent with criminal intent.

U.S. V. Bank of New England

The Bank of New England was convicted of failing to file U.S. Treasury reports of cash transactions over $10,000. On thirty-one occasions, a bank customer withdrew more than $10,000 in cash from a single account by simultaneously presenting multiple checks in sums less than $10,000 to a single bank teller. Acknowledging that under applicable law a corporation's criminal intent is imputed from an agent's intent, the bank argued that it was not liable because there was no bank employee with sufficient criminal intent to violate the reporting requirements. According to the bank, the teller who conducted the transactions did not know that the law required the filing of the reports in the circumstance presented by the customer. And, the bank employee who knew of the reporting requirements did not know of the customer's transactions. Thus argued the bank, there was no single bank employee with sufficient mens rea to impute to the corporation. The trial court rejected the bank's argument because of the "collective intent" of bank employees. The court explained that "the bank's knowledge is the totality of what all of the employees know within the scope of their Employment. See also page 74-76 for Government Policy.

Individual Responsibility United States v. Park The Supreme Court next addressed the RCO doctrine in United States v. Park. In Park, a company and its chief executive officer were charged with five misdemeanor violations of the FDCA. Each count alleged that the defendants exposed food in warehouses to rodent contamination and thus allowed the food to become adulterated. Id. The company pleaded guilty; the CEO was tried before a jury. The evidence at trial established that the FDA had advised the company (including the CEO in at least one instance) of unsanitary conditions at company warehouses on numerous occasions over several years. The CEO testified at trial, among other things, that as [the companys] chief executive officer he was responsible for any result which occurs in our company. The jury returned guilty verdicts on all five counts. The court sentenced the CEO to a $50.00 fine per count. The individual defendant in Park challenged the conviction by arguing that the jury instructions failed to define the requisite responsible relationship properly under Dotterweich and that his conviction wrongly rested on nothing more than his status as CEO. In affirming the conviction, the Court held that it is enough for the government to show that a defendant had, by reason of his position in the corporation, responsibility and authority either to prevent in the first instance, or promptly to correct, the violation complained of, and that the jury could not have failed to be aware that the main issue for determination was not respondents position in the corporate hierarchy, but rather his accountability, because of the responsibility and authority of his position, for the conditions which gave rise to the charges against him. The Court identified only one possible defense under the responsible corporate office doctrine, stating that a defendant may present evidence at trial that he was was powerless to prevent or correct the violation in other words, an affirmative defense of objective[] impossib[ility]. 1. Corporate Ethos Theory Whole concept of changing culture within corporation. Corporations have guidelines that indicate what they should do to avoid criminal liability. 2. Corporate Self-Identity Theory is that a large organization is not only a collection of people who shape it and activate it, but also a set of attributes and positions, which influence, constrain, and at times even define the modes of thinking and behavior of the people who populate

Federal Prosecution of Corporations 1. Corporations should not be treated leniently because of their artificial nature nor should they be subject to harsher treatment. 2. Factors to consider in determining whether to charge corporations i. In addition to sufficiency of the evidence, the likelihood of success at trial, probable deterrent, rehabilitative, and other consequences of conviction, and the adequacy of non-criminal approaches: a. Nature and seriousness of the offense, and applicable policies and priorities governing the prosecution of corporations for particular categories of crime. b. The pervasiveness of wrongdoing within the corporation. c. The corporations history of similar conduct. d. The corporations timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation of its agents. e. The existence and adequacy of the corporations compliance program. f. The corporations remedial actions. g. Collateral consequences, including disproportionate harm to shareholders and employees not proven personally culpable. h. The adequacy of the prosecution of individuals responsible for the corporations malfeasance. i. The adequacy of remedies such as civil or regulatory enforcement actions.

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Ch. 7 Regulatory Offenses

Friday, December 02, 2011 1:07 PM

I. Regulatory Offenses A. Crimes involving a violation of government regulation. B. Sometimes, may involve public welfare offenses. However, this is not all of the crimes. C. Voluntary Disclosure 1. If you voluntarily disclose to government that you have violated regulation, the DOJ guidelines offer several factors to be c onsidered in determining whether to proceed with criminal prosecution. i. Voluntary disclosure ii. Cooperation iii. Preventive measures and compliance programs iv. Pervasiveness of noncompliance v. Internal disciplinary action vi. Subsequent compliance efforts 2. This will often help mitigate the penalty imposed. D. Prosecutorial Discretion 1. There is a great deal of discretion in what prosecutor can bring. 2. If you are going after a corporation, however, there may be some limits. i. Thompson Memo a. Regulatory Offenses are often charged against corporation and not an official. b. Cooperation and Voluntary Disclosure are specifically mentioned as mitigating penalties. E. Mens Rea Element 1. Strict Liability i. United States v. White Fuel Corporation a. White Fuel operated a tank farm near a cove of Boston Harbor. b. Oil was leaking into the harbor and it was determined that the oil was leaking from White Fuels property. c. White Fuel was convicted under Refuse Act. d. White Fuel argued that government had to prove a mens rea element. e. Question is whether this is a strict liability crime. f. White Fuels Arguments 1). Not Covered under Refuse Act because they did not discharge, throw, or deposit oil. i). Court finds that statute does cover this type of seepage. 2). Mens Rea must be proven i). Court says that Refuse Act is termed a strict liability offense because it falls into the category of public welfare offenses. 3). Government must prove negligence. i). Court says that facts inferring negligence were there but Congress did not require negligence in the statute. g. There are defenses available 1). Someone else is responsible. 2). Acts of God 3). Independent contractors acting outside defendants control 2. Willfulness i. United States v. Dye Construction Company a. Workman died in a trench cave-in. b. Dye was charged with willfully failing to shoresides of trenches sufficient to protect employees. 1). Violation of OSHA. c. Tried by jury. d. Dye claimed that jury should have been instructed that willfulness instruction should have included an evil intent element. e. Question is how willfully is defined. f. Supreme Court has said that evil intent is necessary for moral turpitude offenses, but not for acts that are not in themselves wrong. g. Statute here does not require moral turpitude; thus, there is no evil intent requirement. h. Still have to know that what you are doing is wrong, however, there is no requirement that there is evil intent. ii. No Knowledge Proviso a. A violation of the Securities Exchange Act can become a felony offense when the defendant acts willfully. The Act specifically indicates that if there is no knowledge of the rule or regulation violated, the defendant cannot be imprisoned. iii. Mens Rea determined by Misdemeanor or Felony a. The mens rea for acts under the FDCA may depend on the level of the offense. b. Misdemeanor would not have conscious fraud. c. Felony would have conscious fraudulent activity. 3. Knowingly i. United States v. Bronx Reptiles, Inc. a. Issue is what must the extent of the defendants knowledge be to permit conviction when a criminal statute renders unlawful a n act knowingly undertaken by the defendant. b. Bronx Reptiles was convicted of violating the Lacey Act making it a misdemeanor for any person to knowingly to causeany wild animalto be transportedto the U.S.under inhumane or unhealthful conditions c. Bronx Reptiles argued that the government did not prove that defendant knew conditions were inhumane or unhealthful. d. Court indicates that knowledge of conditions was required. e. Rationale 1). If knowingly did not apply to language about treatment, a vast range of behavior is criminalized.

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1). If knowingly did not apply to language about treatment, a vast range of behavior is criminalized. 2). Nothing in structure of statute that indicates knowingly does not apply to phrase of inhumane or unhealthful. 3). Criminal statutes are presumed to contain a mens rea element. If Congress had meant to impose strict liability, it could have said so. 4). Court also indicates that this is not a public welfare offense involving harmful or injurious items because frogs are not that type of article. f. Dissent argues that this is a public welfare statute and should be affirmed. 4. Willful Blindness i. United States v. Buckley a. Buckley was convicted of Clean Air and CERCLA violations when asbestos was released during a demolition project. b. Both statutes have specific requirement of knowledge. c. Buckley argued that the jury instructions as to the knowledge requirement made the offense strict liability. d. The instructions indicated that Buckley could be found to have knowledge by finding that he acted with a conscious purpose to avoid learning the truth about the presence of asbestos. e. Rule Government can establish knowledge by proving that defendant closed his eyes to obvious facts or failed to investigate when facts demanded investigation. 5. Negligently i. United States v. Hanousek a. Clean Water Act has different levels of intent includes both knowledge and negligence standards. b. Hanousek was a roadmaster with a railroad company that was also responsible for a quarry project. c. While working at the quarry, a contractor backhoe operator ruptured a pipeline and it resulted in discharge of 1-5,000 gallons of heating oil. d. Hanousek was convicted of CWA violations by negligently discharging a harmful quantity of oil into navigable waters. e. Hanousek appealed, arguing that the statute required criminal negligence as opposed to the ordinary negligence instruction given at trial. f. Court indicates that plain language of statute indicates that ordinary negligence is appropriate. g. Congress had ability to define the negligence at a higher level, but chose not to. h. Court also says that it is well established that a public welfare statute may subject a person to criminal liability for his or her ordinary negligence without violating due process. 6. Advice to give to legislature in drafting statutes is that you should clearly set out the mens rea requirements or the courts will set it for you. F. Individuals Liable 1. Persons in Charge i. Apex Oil Company v. United States a. Apex Oil transported and stored oil. b. The company was convicted of failing to notify government authorities of a known oil spill. c. Company argues that person in charge language of the statute should not be read in the same manner as person is defined in same statute. d. This case came down before the collective knowledge theory had been accepted in lower courts. ii. United States v. Carr a. Question becomes who has the responsibility of reporting environmental violations and who to report the violations to. 2. Responsible Corporate Officer i. United States v. MacDonald & Watson Waste Oil Company a. Appellants were convicted of violating RCRA and CERCLA. b. RCRA Cradle to grave Act dealing with waste disposal. 1). Very comprehensive statute. c. President of company contended that there was an erroneous jury instruction. d. Jury instructions indicated that knowledge that could be shown by responsible corporate officer doctrine. e. Three Criteria for Responsible Corporate Officer Doctrine 1). The person is an officer of the corporation, not merely an employee. 2). The officer had direct responsibility for the activities that are alleged to be illegal. 3). The officer must have known or believed that the illegal activity of the type alleged occurred. ii. United States v. Iverson a. Violations of CWA b. Act defines person, among other things, as a responsible corporate officer. c. Rule Under CWA, a person is a responsible corporate officer if the person has authority to exercise control over the corporations activity that is causing the discharges. No requirement that the officer in fact exercises such authority or that the corporation expressly vest a duty in the officer to oversee the activity. 3. Aiding and Abetting i. United States v. Doig

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Ch. 9 Grand Jury Investigations

Friday, December 02, 2011 1:47 PM

I. A. B. C.

D.

E. F.

G.

Grand Jury Investigations In white collar crime cases, the police do not do all of the investigating FBI/US Attorney/Grand Jury also investigate. Grand Jury is the basic way to bring in evidence and evaluate it. Grand Jury is a way to get compulsory process to make individuals testify. 1. If they do not want to testify before grand jury, the witness can be granted immunity from prosecution then they must talk or they sit in jail on charges of contempt. Target: when they call that individual before grand jury 1. You can almost bet thats the person they want to indict 2. Rare for them to testify in front of the grand jury. 3. US Attorneys office has policy to give a target an advice of rights form like Miranda form telling them that anything they say can/will be used against them. 4. Only time they will is if theyve been granted immunity, theyre not a target anymore, and theyre switched to the witness category. 5. DOJ not required to give this form, but they do because Congress may figure something worse out. Although its not reversible error if they dont. Subject: government just not sure about this person yet not a target, but dont know which category to put them in. 1. Very rare that an attorney will have a subject testify unless its so clear cut that the person is just a witness. 2. In those cases attorney will ask for immunity. Witness: attorney will ask for immunity. 1. Never know what could be said or where something might go. 2. Usually government will grant it. 3. Perjury isnt covered by the immunity statute. Subpoenas 1. Types i. Duces tecum (asking for documents) ii. Ad testificandum (subpoena to get person there to testify) 2. 17(c) 3. Webster Hubbell - #2 person in Attorney Generals office under Clinton i. Subpoena they issued to him in the book ii. Very extensive iii. This led to Supreme Court case that reversed his conviction. 4. R. Enterprises The Court of Appeals held that a three pronged standard for grand jury subpoenas should be applied in the context of a subpoe na to produce certain business records of adult entertainment companies in connection with an investigation into the interstate tra nsport of obscene material.

Synopsis of Rule of Law. The standard that should be applied to motions to quash subpoenas in the grand jury context is found in Federal Rule of Civil Procedure (F.R.C.P.) Rule 17(c), and is whether they are unreasonable or oppressive. Reasonableness is assumed, but may be rebutted by the party seeking to quash with a showing that there is no reasonable possibility that the category of materials the government seeks will produce information relevant to the general subject of the grand jurys investigation. To this end, the government may be required to reveal the general subject matter of its investigation
Facts: Subpoenas were issued to three adult materials distributors in connection with a grand jury investigation into allegations of the interstate transport of obscene materials. The companies moved to quash the subpoenas on the grounds that they were irrelevan t and that it was likely that they would infringe on the First Amendment constitutional rights of the companies. The District Court denied those motions. The Court of Appeals remanded the motions to quash certain of the business records, holding that the Nixon test of r elevancy, admissibility and specificity established by the Supreme Court of the United States (Supreme Court) in the trial context wa s equally applicable to the grand jury context. Discussion. A grand jury proceeding is very different from a trial, in that the grand jury may investigate on mere suspicion of wrongdo ing, and must necessarily have broad powers to gather and process information. Because its purpose is to establish probable cause, it may not be required to show probable cause to gather information in the first instance, as that requirement would unduly paralyze the gr and jury. 5. In re Carrato Brothers Case H. Problem #1 1. Advantages to using a grand jury: i. Dont need probable cause to get documents ii. Secrecy easier to get employees to testify iii. Can just be investigating matter dont have to be sure of results iv. Compulsory nature making people talk, getting documents in there v. No time constraints except outside SOL vi. Efficient and economical use of resources 2. Disadvantages of using grand jury: i. May reveal some of case to people who testify ii. Tip off subject of inquiry who might destroy evidence (could still get them on obstruction) iii. May be seen as political attack against company I. Problem #2 1. Defense arguments: i. Carroto standards: length of time unreasonable (note suggests anything over 10 years unreasonable) ii. Proprietary information in corporate records (R. Enterprise case suggests this may be grounds for an exception) iii. (c) is public record readily available to government; defendant shouldnt be burdened
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iii. (c) is public record readily available to government; defendant shouldnt be burdened iv. (d) and (e) no reasonable particularity overbroad and burdensome v. Irrelevance 2. Prosecution arguments: i. Corporate books unsure when/where noncompliance began and who needs to be charged need to figure that out ii. Names of employees terminated need to find out if theres whistleblower readily available iii. Tax returns what kind of capital expenditures. iv. Easy access v. Health records probably have access, would want to know if there are any medical problems with employees due to products there vi. Email communications easily accessible.
Overbreadth Objection Boyd v. United States The prosecution relied upon a statute which required defendants to produce "any business book, invoice, or paper belonging to, or under the control of, the defendant "demanded by the prosecution as necessary to prove particular allegations made in the government's case. The trial court ordered the partners to comply with the statute. The partners produced the demanded invoice, but argued that its compulsion was unconstitutional under the Fourth and Fifth Amendments.

The Court held that "any forcible and compulsory extortion of a man's own testimony or of his private papers to be used as evidence to convict him of crime or to forfeit his goods" violated both the Fourth and Fifth Amendments to the Constitution. The Court concluded that compelling Boyd to produce his invoices or private papers was "compelling him to be a witness against himself, within the meaning of the Fifth Amendment to the Constitution." The Boyd Court thus provided broad protection for the contents of one's personal papers. The Court noted that historically such compulsion contradicted the "principles of a free government." Therefore, the Court declared the forfeiture statute unconstitutional and ruled that the invoices could not be admitted into evidence. Boyd was relied upon by the courts for the proposition that private documents fell within a "zone of privacy" and could not be subpoenaed without violating the Fifth Amendment.
Hale v. Henkel The Court held that a corporation could not invoke the Fifth Amendment right against self-incrimination. The Court distinguished persons from corporations, noting that the former were guaranteed constitutional rights but the latter were not. Reasoning that a corporation was a "creature of the state," which was granted special privileges but limited statutory rights, the Court held that a corporation could not refuse to produce its books and records when charged with abusing its privileges.

Reasonableness In re Grand Jury Subpoena Duces Tecum (373-376) A grand jury subpoena demanded data created by senior officials at Corporation X, as well as the central processing units, hard drives, and floppy disks associated with corporate computers used by those officials. The court quashed the subpoena as unreasonably broad, stating that the correct way to balance relevance and particularity was to consider relevance at the level of categories of materials. In particular, it stated that documents, rather than storage media, was the appropriate category of materials to which to address a subpoena. Targeting hard drives, the court reasoned, would be like targeting file cabinets rather than files, and would necessarily produce irrelevant documents. In the case at hand, where the subpoena requested all documents on a drive, the court suggested that a search procedure for distinguishing relevant and irrelevant documents could cure the subpoena. Volume as unreasonable - to define the reasonableness of a subpoena based on the volume of items identified for production would be to require the government to ascertain, before issuing a subpoena, the extent of any wrongdoing. But ascertaining the extent of wrongdoing is itself a primary purpose for the issuance of the subpoena. The expense of complying - the government generally refused to reimburse parties for their costs in complying with subpoenas, except where the subpoena is governed by the financial privacy act. U.S. v Dionisio - it is clear that a subpoena to appear before a grand jury is not a seizure in the Fourth Amendment sense.
The exclusionary rule in the Grand Jury: In United States v. Calandra, the Supreme Court ruled that grand juries may use allegedly illegally obtained evidence in questioning witnesses because "the damage to that institution from the unprecedented extension of the exclusionary rule outweighs the benefit of any possible incremental deterrent effect." A grand jury hearing is an investigation to determine if a crime has been committed and whether criminal proceedings should take place. If a grand jury feels that criminal proceedings should occur, it will present to the court an indictment, a written accusation made upon oath.

Extending the exclusionary rule to grand jury proceedings would seriously impede grand juries. Suppression hearings would halt the progress of a grand jury investigation. Extending the exclusionary rule to grand jury evidence would deter police investigation that was directed toward finding evidence only for grand jury use. Since evidence obtained unlawfully would not be admissible in a criminal trial, a prosecutor would probably not ask for an indictment in a case where a conviction could not be gained.
I. In re: Grand Jury 286 f. 3d 153 - Grand jury subpoenas take priority over civil protective orders, but permits that presumption to be rebutted based on circumstances. "[a] grand jurys subpoena trumps a Rule 26(c) protective order unless the person seeking to avoid the subpoena can demonstrate the existence of exceptional circumstances that clearly favor subordinating the subpoena to the protective order."

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Ch. 11 Challenges to the Grand Jury Process

Friday, December 02, 2011 3:28 PM

I. Challenges to the Grand Jury Process A. Supervisory Power Over the Conduct of the Grand Jury 1. United States v. Williams i. Issue is whether prosecution has to offer exculpatory evidence to the grand jury. ii. Under Brady v. Maryland, prosecutors must disclose to defense counsel exculpatory evidence of the accused. iii. Rule Courts have no authority to prescribe that the prosecution offer exculpatory evidence in grand jury proceedings pursuant to t heir
inherent supervisory authority over their own proceedings.

iv. In grand jury proceedings, the prosecution has no obligation to present exculpatory evidence. v. Although it is not required, all it will do is increase your failure rate as a prosecutor if you do not present to grand jury under Brady, would have to
give exculpatory evidence at trial. Note 1: Based on Williams, the 5th circuit overturned the district court's dismissal of an indictment when the government allegedly u sed perjured testimony to obtain it: "We are persuaded that perjury before the grand jury that was not knowingly sponsored by the governme nt may not form the basis for a district court's dismissal of an indictment under its supervisory powers." Note 2: The intentional prosecutorial introduction of perjured testimony on a critical issue has been characterized by severa l courts as a constitutional violation. Supervisory power may be exercised if the prosecutor's conduct threatens the impartiality or independence of the grand jury's processes. Note 4. US v. Navarro-Vargas: court rejected the claim that the grand jury instructions provided at the start of the term of service must include a specific statement that it need not return an indictment even if they found probably cause that the defendant committed the o ffense. Note 5: United States v. Mechanik held that a defendant's conviction at trial establishes probable cause to indict and therefore any error in the grand jury's charging decision is rendered harmless. The Court explained: The petit jury's verdict of guilty beyond a reasonable d oubt demonstrates a fortiori that there was probable cause to charge the defendants with the offenses for which they were convicted. Convictions will therefore stand despite violations of the grand jury rules. In U.S v. Nova Scotia: the Court held that a customary harmless-error inquiry is applicable where ... a court is asked to dismiss an indictment prior to the conclusion of trial94 and that a showing of prejudice is required before the indictment will be dismissed for prosecutorial misconduct. The Court adopted Justice O'Connor's standard for nonconstitutional error in grand jury proceed ings, previously articulated in her Mechanik concurrence: [u]nder this standard, dismissal of the indictment is appropriate only if it is es tablished that the violation substantially influenced the grand jury's decision to indict, or if there is grave doubt that the decision to indict was f ree from the substantial influence of such violations. Challenges to the Use of the Grand Jury 1. United States v. Arthur Anderson, LLP i. Court found no abuse of grand jury process. ii. As a prosecutor, once you indict, you CANNOT use the grand jury any longer for the purpose of getting information for the cas e. iii. However, if you still have some defendants that you are investigating, you can use the grand jury process. iv. "Abuse of the grand jury process occurs only when the government's sole or dominant purpose in convening a grand jury is to g ather evidence for an already pending litigation." Note 1: other objections include the use of the grand jury (1) to gather evidence for use in a pending or future civil action (2) to gather evidence to further independent investigations by law enforcement agencies and (3) to harass witnesses by forcing an unneeded personal ap perance or placing a witness in a situation where he or she is likely to commit perjury. B. Grand Jury Secrecy Note 1: There is no first amendment right to access to a grand jury proceeding. 1. Rule 6(e)(2) sets forth the general secrecy requirements of federal grand jury proceedings. It provides that the grand jurors, grand jury personnel, government attorneys, and personnel assisting government attorneys may not disclose "a matter occurring before a grand jury." i. Rule 6(e)(7) provides that "a knowing violation of Rule 6 may be punished as a contempt of court." Some courts suggest that this provision refers only to criminal (and not civil) contempt. However, Finn v. Schiller ruled that Rule 6(e)(7) refers as well to civil contempt, but that it does not create a private cause of action to seek a civil contempt sanction. 2. Finn v. Schiller i. Addressed the scope of the contempt remedy under Rule 6(e). In Finn, the target of a grand jury investigation filed a private civil action seeking injunctive relief against a prosecutor for alleged violations of Rule 6(e). The Fourth Circuit ruled that a target has the ri ght to notify the court of alleged Rule 6(e) violations, and that a court has an affirmative duty to investigate charges once a prima facie showing of a violation is made. In addition, the court has a duty to provide the relief necessary to prevent future violations (injunctive relief and/or civil c ontempt) and/or to punish past violations (criminal contempt). Contrary to prior federal circuit court rulings, however, the Fourth Circuit concluded that a target did not have a private right of action to pursue such relief against an alleged violator under the Rule. 1) Neither the witness whose testimony is leaked, nor the person who is the subject of the information leaked, has a cause of action for which relief can be demanded. ii. Note 1: In re U.S.: Must be some reasonable basis for district court to launch an inquiry into claims that the prosecutor has engaged in grand jury misconduct. Depending on the context, mere suspicion may be enough to cause further inquiry into violation of a well -established rule, particularly where infringement of a defendant's constitutional rights are potentially involved. 3. In re: Sealed Case No. 99-3091 i. Issue is what constitutes matters occurring before the grand jury in terms of secrecy requirements. ii. The boundaries of the first requirement what constitutes a matter occurring before the grand juryhave not been fully fleshed out in court decisions. This much, however, is clear: The Rule does not impose secrecy upon all facts pertaining to a federal criminal inv estigation. iii. Where the general public is already aware of the information contained in the prosecutors statement, there is no additional harm in the prosecutor referring to such information. C. Attorneys Fees for the Governments Misconduct 1. United States v. Braunstein i. Defendant argued that government is required to pay his attorneys fees because the prosecution was vexatious, frivolous, or in bad faith under the Hyde Amendment. ii. Hyde Amendment and McDade Amendment subject government to ethics rules and sanctions for vexatious, frivolous, or in bad fait h.

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ii. Hyde Amendment and McDade Amendment subject government to ethics rules and sanctions for vexatious, frivolous, or in bad fait h. iii. Test for deciding when you are entitled to attorneys fees is whether the governments prosecution was vexatious, frivolous, or in bad faith. iv. What you learn as a prosecutor is that caution must be exercised in bringing actions to grand jury and look at any exculpator y evidence offered by the
defendant.

v. What you learn as a defendant is that there is an incentive to give information to the government because if case is still br ought and defendant is
acquitted, attorneys fees might be obtained. Note 1: U.S. v. Gilbert - 11th Circuit defined "bad faith" as "not simply bad judgment of negligence, but rather it implies the conscious doing of a wrong because of dishonest purpose or moral obliquity; ...it contemplates a state of mind affirmatively operating with furtiv e design or ill will." "Vexatious"- subjective and objective element: Subjectively, the Government must have acted maliciously or with an intent to harass Appel lants; Objectively, the suite must be deficient or without merit. Defendant must show government had some ill intent. Subjective intent to harass does not arise from merely factual mistakes or mistakes concerning the legal merit of the government's position. Note 2: Under Hyde, the burden is on the defendant in the underlying case to prove the government's position was vexatious, frivolous or in bad faith. Fifth Amendment Claim: 1.) statement that is made, the evidence that results has to be compelled - if person just walks into police station and admits to crime, it is not compelled. 2.) evidence has to be testimonial - has to reveal the workings of the human mind. 3.) the evidence must be self-incriminating - if the statement is "I didn't do it." then it isn't self-incriminating. 4.) 3 with respect to the speaker - not against their mother, best friend, spouse etc. Has to be against the person rendering the evidence.

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Ch. 10 Production of Documents

Monday, December 05, 2011 1:06 PM

A. The Act of Production Doctrine 1. Personal Papers i. Fisher v. United States a. In each of these cases taxpayers who were under investigation for possible civil or criminal liability under the federal income tax laws, after having obtained from their respective accountants certain documents relating to the accountants' preparation of their tax returns, transferred the documents to their respective attorneys to assist the taxpayers in connection with the investigations. b. Subsequently, the Internal Revenue Service served summonses on the attorneys directing them to produce the documents, but the attorneys refused to comply. c. The Government then brought enforcement actions, and in each case the District Court ordered the summons enforced. d. In one of the cases, the Court of Appeals affirmed, holding that the taxpayers had never acquired a possessory interest in the documents and that the documents were not immune from production in the attorney's hands. e. In another of the cases, the Court of Appeals reversed, holding that by virtue of the Fifth Amendment the documents would have been privileged from production pursuant to a summons directed to the taxpayer if he had retained possession, and that, in light of the attorney- client relationship, the taxpayer retained such privilege after transferring the documents to his attorney. f. The Supreme Court held 1). Compelled production of the documents in question from the attorneys does not implicate whatever Fifth Amendment privilege the taxpayer-clients might have enjoyed from being themselves compelled to produce the documents. i). Whether or not the Fifth Amendment would have barred a subpoena directing the taxpayers to produce the documents while they were in their hands, the taxpayers' privilege under that Amendment is not violated by enforcing the summonses because enforcement against a taxpayer's lawyer would not "compel" the taxpayer to do anything, and certainly would not compel him to be a "witness" against himself, and the fact that the attorneys are agents of the taxpayers does not change this result. ii). These cases do not present a situation where constructive possession of the documents in question is so clear or relinquishment of possession so temporary and insignificant as to leave the personal compulsion upon the taxpayer substantially intact, since the documents sought were obtainable without personal compulsion upon the taxpayers. iii). The taxpayers, by transferring the documents to their attorneys, did not lose any Fifth Amendment privilege they ever had not to be compelled to testify against themselves and not to be compelled themselves to produce private papers in their possession, and this personal privilege was in no way decreased by the transfer. iv). Even though the taxpayers, after transferring the documents to their attorneys, may have had a reasonable expectation of privacy with respect to the documents, the Fifth Amendment does not protect private information obtained without compelling selfincriminating testimony. 2). Although the attorney-client privilege applies to documents in the hands of an attorney which would have been privileged in the hands of the client by reason of the Fifth Amendment, the taxpayer-clients in these cases would not be protected by that Amendment from producing the documents in question, because production of such documents involves no incriminating testimony and therefore the documents in the hands of the taxpayers' attorneys were not immune from production. i). The Fifth Amendment does not independently proscribe the compelled production of every sort of incriminating evidence but applies only when the accused is compelled to make a Testimonial communication that is incriminating. ii). Here, however incriminating the contents of the accountants' work papers might be, the act of producing them the only thing that the taxpayers are compelled to do would not itself involve testimonial self-incrimination, and implicitly admitting the existence and possession of the papers does not rise to the level of testimony within the protection of the Fifth Amendment. iii). It is now settled that an individual may not withold documents from production pursuant to a grand jury subpoena on the ground that the content of the documents may tend to incriminate the individual. HOWEVER, the exception is when an individual is compelled by the government to incriminate HIMSELF by creating the documents in the first place.

ii. Sole Proprietorship Records 1. United States v. Doe (Doe I) i. Supreme Court, referring to Fisher, indicated that although the contents of a document may not be privileged, the act of producing the document may be. ii. The act of producing the documents may have testimonial value since it could indicate that the documents existed, were in the possession of the witness, etc. a. Doe II - Court made Defendant sign 12 forms consenting to disclosure of any bank records. Court allowed it. a) It did constitute a communication but the government was directing defendant to do an act in a manner analogous to a directive requiring production of a handwriting sample or voice exemplar. The act COULD result in production of evidence that would be used against defendant, but the directive did not "point the government toward hidden accounts or otherwise provide information tha twill assist the prosecution in uncovering evidence." iii. Foregone Conclusion Doctrine a. United States v. Hubbell i. As part of a plea agreement, respondent promised to provide the Independent Counsel investigating matters relating to the Whitewater Development Corporation with information relevant to his investigation. ii. Subsequently, the Independent Counsel served respondent with a subpoena calling for the production of 11 categories of documents before a grand jury in Little Rock, Arkansas. iii. Respondent appeared before that jury, invoked his Fifth Amendment privilege against self-incrimination, and refused to state whether he had the documents. iv. The prosecutor then produced an order obtained pursuant to 18 U.S.C. 6003(a) directing respondent to respond to the subpoena and granting him immunity to the extent allowed by law. v. Respondent produced 13,120 pages of documents and testified that those were all of the responsive documents in his control. vi. The Independent Counsel used the documents' contents in an investigation that led to this indictment of respondent on tax and fraud charges. vii. The District Court dismissed the indictment on the ground that the Independent Counsel's use of the subpoenaed documents violated 18 U.S.C. 6002--which provides for use and derivative-use immunity--because all of the evidence he would offer against respondent at trial derived either directly or indirectly from the testimonial aspects of respondent's immunized act of producing the documents. viii. In vacating and remanding, the Court of Appeals directed the District Court to determine the extent and detail of the Government's knowledge of respondent's financial affairs on the day the subpoena issued. a) If the Government could not demonstrate with reasonable particularity a prior awareness that the documents sought existed and were in respondent's possession, the indictment was tainted. ix. Government appealed to the Supreme Court. x. Supreme Court held that the indictment against respondent must be dismissed.
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x. Supreme Court held that the indictment against respondent must be dismissed. xi. Rationale a) The Fifth Amendment protects a person from being "compelled in any criminal case to be a witness against himself." The word "witness" limits the relevant category of compelled incriminating communications to those that are "testimonial." In addition, a person such as respondent may be required to produce specific documents containing incriminating assertions of fact or belief because the creation of those documents was not "compelled" within the meaning of the privilege. However, the act of producing subpoenaed documents may have a compelled testimonial aspect. That act, as well as a custodian's compelled testimony about whether he has produced everything demanded, may certainly communicate information about the documents' existence, custody, and authenticity. It is also well settled that compelled testimony communicating information that may lead to incriminating evidence is privileged even if the information itself is not inculpatory. b) It is apparent from the subpoena's text that the prosecutor needed respondent's assistance both to identify potential sources of information and to produce those sources. It is undeniable that providing a catalog of existing documents fitting within any of the 11 broadly worded subpoena categories could provide a prosecutor with a lead to incriminating evidence or a link in the chain of evidence needed to prosecute. Indeed, that is what happened here: The documents sought by one grand jury to see if respondent had violated a plea agreement led to the return of an indictment by another grand jury for offenses apparently unrelated to that agreement. The testimonial aspect of respondent's act of production was the first step in a chain of evidence leading to this prosecution. Thus, the Court cannot accept the Government's submission that respondent's immunity did not preclude its derivative use of the produced documents because its possession of the documents was the fruit only of the simple physical act of production. In addition, the Government misreads Fisher v. United States, 425 U.S., at 411, 96 S.Ct. 1569, and ignores United States v. Doe, 465 U.S. 605, 104 S.Ct. 1237, 79 L.Ed.2d 552, in arguing that the communicative aspect of respondent's act of production is insufficiently testimonial to support a privilege claim because the existence and possession of ordinary business records is a "foregone conclusion." Unlike the circumstances in Fisher, the Government has shown no prior knowledge of either the existence or the whereabouts of the documents ultimately produced here. In Doe, the Court found that the act of producing several broad categories of general business records would involve testimonial self- incrimination. c) "the collection and production of materials demanded was tantamount to answering a series of interrogatories asking a witness to disclose the existence and location of particular documents fitting certain broad descriptions, in which it was necesasy for the witness to make extensive use of the contest of his own mind in identifying hundreds of documents" b. Effect of Hubbell i. After Hubbell, prosecutors are no longer free to use the contents of documents to prosecute a witness after they have immunized that witnesss act of producing those documents. ii. If prosecutors can show prior knowledge of the existence, location, and authenticity of the documents, then the act of production has no testimonial value, and a court must reject a witnesss assertion of an act of production privilege. iii. In that case, the prosecution can obtain the documents without an immunity grant and is free to use both the act of production and the contents of the documents to prosecute the witness. iv. Thus: Foregone Conclusion (Fisher) vs Fishing expedition (Hubbell). Locating the divide turns on the government's prior knowledge of the existence, location, and authenticity of the documents to be produced. iv. Proving Existence, possession, and authenticity a. In re Grand Jury Subpoena Dated April 18, 2003 i. Ninth Circuit held that the act of producing documents may itself be testimonial in nature when "[b]y producing documents in compliance with a subpoena, the witness admits that the documents exist, are in his possession or control, and are authentic." a. In this case, a corporation was under investigation for violations of various anti-price fixing laws. Pursuant to a subpoena, Corporation identified John Doe as the employee responsible for the allegedly illegal pricing schemes. After someone else corroborated Corporations story, federal agents interviewed Doe - who then gave inculpatory statements. When the interview was over, the agents served upon doe a subpoena duces tecum, which required him to produce all items in his possession "relating to the production or sale of Dynamic Random Access Memory ("DRAM") components, including but not limited to, handwritten notes, calendars, diaries, daybooks, appointment calendars, or notepads, or any similar documents." b. Doe conditioned the production of the documents on a grant of immunity. Doe's argued that producing the documents would be testimonial since only he could authenticate and verify the contents of the writings. Moreover, production would itself be testimonial since the government could not actually establish that the documents existed unless Doe produced them. c. After being denied his request for immunity, and after the trial court refused to quash the subpoena, Doe refused to produce the documents. The trial judge held him in contempt. The Ninth Circuit reversed. a) Although "[t]he goverment was not required to have actual knowledge of the existence and location of each and every responsive document," it still had to show with reasonable particularity that the documents existed. Allowing the government to compel the production of documents about whose existence it is not aware is to turn private citizens into unwilling "informants" against themselves. In retrospect, the government knew that Doe was involved in some price-fixing schemes. However, the government could not establish that the defendant possessed incriminating documents. b) Moreover, the subpoena required Doe to authenticate incriminating documents, thereby establishing the only evidentiary link between himself and the incriminating statements contained on the document. Requiring a defendant to authenticate incriminating documents also violates the Self-Incrimination Clause. Judge Canby continued: 1). The authenticity prong of the foregone conclusion doctrine requires the government to establish that it can independently verify that the compelled documents are in fact what they purport to be. Independent verification not only requires the government to show that the documents sought to be compelled would be admissible independent of the witness' production of them, but also inquires into whether the government is compelling the witness to use his discretion in selecting and assembling the responsive documents, and thereby tacitly providing identifying information that is necessary to the government's authentication of the subpoenaed documents. Compliance with this broad language would require the witness to discriminate among documents, thereby providing identifying information that is relevant to the authenticity of the documents. c) Thus, the subpoena should have been quashed because the documents it demanded were not known to exist, and because requiring Doe to produce them would have provided an evidentiary link between Doe and the statements contained in the documents. Note 2: US v Ponds - Identified that SCOTUS has not defined the precise amount of cognition on the part of an immunized party necessary to render a subpoena response "testimonial." But government needed Ponds assistance both to identify potential sources of information and to produce existing documents rendered the subpoena's response "testimonial" and NOT mere "surrender." Note 3: US v. Grable - dealt with issues relating to failure to assert the act of production privilege.

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v. Entity Documents i. Braswell v. United States 1) A federal grand jury issued a subpoena to petitioner as the president of two corporations, requiring him to produce the corporations' records. The subpoena provided that petitioner could deliver the records to the agent serving the subpoena, and did not require petitioner to testify. 2) The corporations involved were incorporated by petitioner, who is the sole shareholder of one of them. Petitioner, his wife, and his mother are the directors of both corporations, and his wife and mother are secretary-treasurer and vice president of the corporations, respectively, but neither has any authority over the corporations' business affairs. 3) The District Court denied petitioner's motion to quash the subpoena, holding that the "collective entity doctrine" prevented petitioner from asserting that his act of producing the corporations' records was protected by the Fifth Amendment privilege against selfincrimination. The Court of Appeals affirmed. 4) The Supreme Court held that the custodian of corporate records may not resist a subpoena for such records on the ground that the act of production will incriminate him in violation of the Fifth Amendment. 5) Rationale a) This Court's precedents as to the development of the collective entity doctrine do not support petitioner's argument that, even though the contents of subpoenaed business records are not privileged, and even though corporations are not protected by the Fifth Amendment, nevertheless his act of producing the documents has independent testimonial significance, which would incriminate him individually, and that the Fifth Amendment prohibits Government compulsion of that act. b) If petitioner had conducted his business as a sole proprietorship, United States v. Doe, 465 U.S. 605, 104 S.Ct. 1237, 79 L.Ed.2d 552, would require that he be provided the opportunity to show that his act of production would entail testimonial self-incrimination as to admissions that the records existed, were in his possession, and were authentic. c) However, representatives of a collective entity act as agents, and the official records of the organization that are held by them in a representative rather than a personal capacity cannot be the subject of their personal privilege against selfincrimination, even though production of the papers might tend to incriminate them personally. d) The plain mandate of the precedents is that the corporate entity doctrine applies regardless of the corporation's size, and regardless of whether the subpoena is addressed to the corporation or, as here, to the individual in his capacity as the records' custodian. e) Any claim of Fifth Amendment privilege asserted by the agent would be tantamount to a claim of privilege by the corporation, which possesses no such privilege. Recognizing a Fifth Amendment privilege on behalf of records custodians of collective entities would have a detrimental impact on the Government's efforts to prosecute "white-collar crime." f) Such impact cannot be satisfactorily minimized by either granting the custodian statutory immunity as to the act of production or addressing the subpoena to the corporation and allowing it to choose an agent to produce the records who can do so without incriminating himself. g) However, since the custodian acts as the corporation's representative, the act of production is deemed one of the corporation, not the individual, and the Government may make no evidentiary use of the "individual act" of production against the individual. Note 1: Custodian's Obligation - Curcio v. US: A custodian may invoke 5th amend. Privilege as to any testimony not immediately related to the act of producing documents in response to a subpoena. However, he may be required to identify through oral testimony that the documents produced are in fact called for by the subpoena. Under Curcio - he could not be required to supply additional testimony necessary to render the documents admissible evidence under the "business records" exception to the hearsay rule. Under Braswell, such permissible authenticating testimony MAY NOT be used to incriminate the custodian personally. In re Grand Jury Proceedings 471 F. Supp 2d 201 ??? Note 2: Personal Documents - In re Grand Jury Proceedings 55 F.3d 1012 - In determining whether documents are corporate documents beyond purview of Fifth Amendment privilege against self-incrimination, determination of essential character of document as personal or corporate does not hinge on some magical percentage of personal versus corporate entry, but ratio of personal or corporate entries is relevant to that determination. What is the essential nature of the document? 1.) who prepared it, the nature of its content, its purpose or use, who possessed it, who had access to it, whether the corporation required its preparation, and whether its existence was necessary to or in furtherance of corporate business. As a general rule, the greater proportion of personal entries, the more likely it is that the trier of fact could reasonable conclude that it was prepared, used, and maintained as a personal document. vi. Closely-held business a. Amato v. US i. The First Circuit, relying largely on the Supreme Court's decision in Braswell explained why the Fifth Amendment's protection against selfincrimination does not protect corporate records. Excluded from the self-incrimination privilege the papers of even one-man professional corporations and small "Subchapter S" corporations. In Amato, the court of appeals considered a claim by the custodian of records of a oneperson corporation, who argued that his mere act of producing the subpoenaed records incriminated him as an individual. While recognizing that the act of production can be protected by the Fifth Amendment, the court refused to make an exception to the general rule that corporations and their custodian of records may not claim the privilege. b. In re Three Grand Jury Subpoenas Duces Tecum (Doe cases) - Held that compelling an ex-employee to disclose documents belonging to his former employer is both testimonial and incriminating. Therefore, the ex-employee was entitled to the act of production privilege afforded by the Fifth Amendment. Moreover, the court disputed the contention that characterizing former employees of a corporation as no longer representatives of that corporation would create incentives for employees to leave with documents to avoid producing them. The court found that there have been few reported incidents of employees taking advantage of this rule. Additionally, the court reasoned that sanctions for theft and obstruction of justice, and the government's ability to recover the documents through other means, such as a search warrant, would eliminate the perverse incentives for employees.

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Ch. 12 Searches
Tuesday, December 06, 2011 1:35 PM

I. Fourth Amendment Requirements: a. Almost all searches involved in white collar crime will require a warrant. The searches here are of business premises or res idences, and they are not likely to present any of the narrow exceptions to the warrant requirement that occasionally apply to the search of buildings. Accordingly, tho se searches will have to meet the requirements of the second clause of the 4th amend. b. Typically, the searches in white collar investigations will be aimed at obtaining documents. The major warrant clause stumbl ing blocks in obtaining a warrant for a document search are i. Establishing probably cause ii. Describing the documents to be seized with sufficient particularity. II. Probably Cause a. Illinois v. Gates i. Probable cause is a fluid concept - turning on the assessment of probabilities in particular factual contexts - not readily or often usefully, reduced to a neat set of legal rules. ii. The magistrate issuing the warrant must conclude on the basis of a "practical, common -sense" analysis of the information presented that "there is a fair probability" that evidence of a crime will be found in the place to be searched." 1) The special difficulty presented in establishing probably cause for a search for documents lies not in establishing probably cause as to the commission of a crime, but in establishing probably cause that particular documents constitute evidence of that crime. III. Particularity of Description a. Marron v. United States - "the requirement that warrants shall particularly describe the tings to be seized makes general searches under them impossibl e and prevents the seizure of one thing under a warrant describing another." b. But particularity also requires that the office exercising the search can identify "with reasonable certainty" the items so s pecified. Document searches pose a special difficulty in this regard because simply descriptions do not sufficiently distinguish one document from another. c. Courts note that a more particular descriptions is required when other objects of the same general classification are likely to be found at the place to be searched. d. To avoid the problem of "general warrants" there are certain factors a court will consider in assessing the particularity of the description in the warrant. i. A greater degree of ambiguity will be tolerated when the police officers have done the best they could possibly do given the circumstances, by acquiring all the descriptive facts which a reasonable investigation of this type of crime could be expected to uncover, and by ensuring that a ll of those facts were included in the warrant. ii. A more general type of description will be sufficient when the nature of the objects to be seized is such that they could not be expected to have more specific characteristics. For example, 50 sheets of plywood, three brass beds, two televisions, etc., would be sufficient. iii. Contraband requires a less precise description because of its particular character. iv. Failure to provide all of the available descriptive facts is not a basis for questioning the adequacy of the description when the facts omitted could not have been expected to be of any assistance to the executing officer. v. An error in the statement of certain descriptive facts is not a basis for questioning the adequacy of the description if the executing officer was nonetheless able to determine, from those facts provided, that the object seized was that intended by the description. vi. Greater care in the description is ordinarily needed when the property to be seized is of the general type to be found at the place to be searched. For example, "cassettes onto which copyrighted films have been electronically transferred," would be an insufficient description of the pr operty to be seized if the premises to be searched had many other cassettes. vii. One must use greater care in the description of the property to be seized when that type of property is generally in lawful u se in substantial quantities. Thus, a description of "certain automobile tires and tubes" would be insufficient. viii. The utmost care is called for in the description when the consequences of a seizure of innocent articles by mistake is most s ubstantial, as when the objects seized are books and films. IV. The Leon Exception a. Ordinarily, evidence obtained through an unconstitutional search and seizure may not be used by the prosecution in its case -in-chief. b. US v. Leon created an exception to that "exclusionary rule" remedy as to certain unconstitutional searches made pursuant to a warrant. c. Leon held that "The 4th amend. exclusionary rule should be modified so as not to bar the use in the prosecution's case -in-chief of evidence obtained by officers acting in reasonable reliance on a search warrant issued by a detached and neutral magistrate but ultimately found to be unsupported by probable cause. d. Leon reasoned that the "exclusionary rule is designed to deter police misconduct rather than to punish the error of judges," and therefore it had no functional validity where the police office acted in reasonable reliance upon the prior judgment of the magistrate. e. Leon does not exempt from the exclusionary rule all searches based on an invalid warrant. The court identified 4 situations where warrant flaws would still result in the application of the exclusionary rule: i. Where the officer presented knowing or reckless falsehoods in the affidavit used to obtain the warrant ii. Where the issuing magistrate wholly abandoned his judicial role as illustrated by a case in which the magistrate allowed hims elf to become a member of the search party iii. Where the warrant was so facially deficient -i.e. in failing to particularize the place to be searched or the things to be seized - that the executing officers cannot reasonably presume it to be valid iv. Where the warrant was issued on an affidavit so lacking in indicia of probable cause as to render official belief in its exis tence entirely unreasonable. f. US v. Travers i. The Eleventh Circuit held that an overly broad search warrant articulating the items to be seized as all documents involving real estate, litigation, property, mailings, photographs and any other material reflecting identity, and anything reflecting potential fraud, was reasonably re lied upon by the executing officers as valid and therefore the good faith exception to the exclusionary rule applied. 1) Upon obtaining a search warrant, agents seized boxes of documents consisting of everything from deeds to birth certificates i llustrating defendants use of aliases. Defendant challenged the use of this evidence at trial, and the district court concluded that while the warrant was unconstitutional because it was overly broad, the good faith exception nevertheless applied. 2) The court focused its inquiry on the reasonableness of relying upon the warrant on its face. The court held that the warrant was not so overly broad on its face that it was unreasonable for the officers to rely on it. The court first noted that based upon precedent, the good fait h exception can be applied to overly broad warrants as long as the warrant is not so overly broad on its face that the executing officers could not have r easonably presumed it to be valid. The court then looked at the complexity of the case, which involved a complex scheme to commit financial fraud, and reasoned that a wide variety of documentary evidence would be relevant in this type of case. The court recognized that the nature of these cases requires a more flexible reading of the [F]ourth [[A]mendment particularity requirement. Given this reasoning, the court noted, as did the district court, tha t whether the warrant was overly broad was a close call. Therefore, the court held it was not unreasonable for the executing officers to rely upon the warrant as valid on its face. ii. This decision nicely illustrates the significant limitation on the exclusionary rule represented by Leon. If a reasonable officer could have relied on the warrant
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V.

VI.

VII.

VIII.

ii. This decision nicely illustrates the significant limitation on the exclusionary rule represented by Leon. If a reasonable officer could have relied on the warrant believing it to be based on probable cause, suppression is not appropriate because suppression would not have a deterrent eff ect on the police. The theory is that you cannot deter an officer acting in good faith. The bottom line as a result of Leon is that evidence will rarely be su ppressed when a judge issues a warrant. Search of a Business a. US v. SDI Future Health, Inc. i. By way of background, it explained that a defendant will not be permitted to challenge a search unless he has standing, meani ng he must have had a reasonable expectation of privacy in the place or thing that was searched. In most cases, people will have standing to challenge searche s of places and things they owned, awfully possessed, or lawfully controlled. Thats why the district court ruled that Kaplan and Brunk had standing; i.e., bec ause they had significant ownership interests in SDI, [and] exercised a high level of authority over the operations of the company including the authority to set and control policy regarding access to SDIs business records and computer systems. ii. But, as the Ninth Circuit pointed out, when the place searched was a corporate office or other commercial property, an employees control of work -related documents and other things would not automatically result in standing . Said the court, [I]t does not suffice for Fourth Amendment standing merely to own a business, to work in a building, or to manage an office. Thus, while people can almost always reasonably expect privacy in e very nook and cranny in their homes, the situation is much different in business offices because of the great variety of work environments. iii. The court acknowledged, however, that there are two situations in which employees will almost always have standing. 1) They can usually expect privacy in their personal property and in offices that have been given over to [their] exclusive use . 2) The privacy expectations of the people who own and control small, family-run businesses will often extend throughout the premises. iv. In other situations, such as the case at hand, the court ruled it is necessary to analyze the specific circumstances of the search, especially the nature of the places that were searched and the property that was seized. Of particular importance are the following: 1) Personal property? Was the evidence seized the personal property of the defendant or otherwise kept in a private place separ ate from other work-related material. 2) Custody or control? Did the defendant have custody or immediate control of the evidence when officers seized it? 3) Security precautions? In addition to the security precautions taken by the company, did the defendant take precautions on hi s own behalf to secure the place searched or things seized from any interference without his authorization? [But even if the defendant took such precau tions, he might not have standing if he was on notice from his employer that searches of the type to which he was subjected might occur from time to time for work-related purposes." v. The court noted that the terms overbroad and particularity are sometimes confused, so it clarified the matter. It explain ed that a warrant is deemed overbroad if the affidavit does not establish probable cause to search for one or more of the listed items. In contrast, th e term particularity refers to the requirement that the warrant must clearly state what is sought. In discussing the misuse of these terms, the court acknowledged that [t]he error is quite understandable, given that some of our own opinions have been unclear on the difference between particularity and over breadt h. However, we now insist that particularity and overbreadth remain two distinct parts of the evaluation of a warrant for Fourth Amendment purposes. vi. The court then ruled that while the warrant was sufficiently particular, it was overbroad because it authorized a search for several things that were not supported by probable cause. After noting that there was no reason to believe that the entire SDI operation was a sham or otherwise permeated with fraud, the court pointed out that the warrant instructed officers to seize all documents relating to bank accounts, brokerage accounts trusts, and money market accounts. But, as it pointed out, this description was impermissibly broad because it authorized a search for all such documents, regardless of whether they pertained to the matters under investigation. Said the court, [B]y failing to describe the crimes and individuals under investigation, the warrant provided the search tea m with discretion to seize records wholly unrelated to the finances of SDI or Kaplan. Business pervaded by Fraud a. In re Grand Jury Investigation Concerning Solid State Devices, Inc. i. A generalized seizure of business documents may be justified if the government establishes probable cause to believe that the entire business is merely a scheme to defraud or that all of the business's records are likely to evidence criminal activity. ii. A warrant authorizing seizure of broad array of documents and data storage equipment was held to be insufficiently particular because there was no probable cause to believe the majority of suspect's operations were fraudulent. Computer Searches a. Reasonable expectation extends to computers. b. Individuals lose 4th amend. Protections when they relinquish control to a third party. Whether the 4th amendment requires go vernment to obtain a warrant before examining the information in possession of a third party depends first upon whether the third -party possession has eliminated the individual's reasonable expectation of privacy. c. Government may not examine (ordinarily) the contents of a package in the course of transmission without a warrant. Law Office Searches a. To avoid impinging on valid attorney-client relationships, prosecutors are expected to take the least intrusive approach consistent with vigorous and effective la w enforcement when evidence is sought from an attorney actively engaged in the practice of law. b. Warrant must be approved by Attorney General or Assistant Attorney General c. Ordinarily, authorization will be granted only when there is a strong need for the information or material and less intrusive means have been considered and rejected. d. Prosecutor must also consult with the Criminal Division. i. Directed to submit forms explaining why the search is desired ii. Why alternative means have been rejected iii. What procedures are to be followed to protect privilege and to ensure the prosecution is not tainted. e. Warrant should be drafted as specifically as possible. f. Often "privilege teams or "taint teams" are implemented. i. In re Grand Jury Subpoenas - criticized the use of a taint team.

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Ch. 13 - Self-incrimination
Wednesday, December 07, 2011 10:19 AM

i. The privilege against self-incrimination only applies if the testimony of the person claiming the privilege would be "incriminating." a. Hoffman v. US i. Privilege against self incrimination applies not only to responses that in themselves would sustain a conviction, but also to responses that would furnish a link in the chain of evidence necessary to prosecute the person claiming the privilege. The privilege should be sustained unless it clearly appears that the claim is mistaken, i.e., unless it is perfectly clear from careful consideration of all circumstances that the witness is mistaken and the answer cannot possibly have incriminating effect. b. In re Morganroth v. Fitzsimmons i. According to the Morganroth court, the Hoffman decision mandates that where the witness fears prosecution for substantive crimes, he should not be compelled to give testimony explaining his basis for asserting the privilege: 1. In such a situation a witness bears no further burden of establishing a reasonable cause to fear prosecution beyond asserting the privilege and identifying the nature of the criminal charge or supplying sufficient facts so that a particular criminal charge can reasonably be identified by the court. The witness has met his burden and the court does not need to inquire further as to the validity of the assertion of the privilege, if it is evident from the implications of a question, in the setting in which it is asked, that a responsive answer might be dangerous to the witness because an injurious disclosure could result. ii. The Morganroth decision summarized the standard to be applied in determining the propriety of an assertion of the Fifth Amendment privilege against selfincrimination: 1. A witness risks a real danger of prosecution if an answer to a question, on its face, calls for the admission of a crime or r equires that the witness supply evidence evidence of a necessary element of a crime or furnishes a link in the chain of evidence needed to prosecute. In Hoffman, the Supreme Court held that a real danger of prosecution also exists where questions, which appear on their face to call only for innocent answers, are dangerou s in light of other facts already developed. The asserted privilege must be upheld unless it is perfectly clear, from a careful consideration of all the circumstances in the case, that the witness is mistaken, and that the answer[s] cannot possibly have such tendency to incriminate. Note 3: Advanced Assertion of the Privilege: Upon receipt of a subpoena, a witness may inform the prosecutor that he will exercise the privilege as to all questions posed by the grand jury. The witness ordinarily should be excused from testifying unless the grand jury and the US Attorney agree to insist on the appearance. Note 4: Self Incrimination Warnings: It generally is agreed that the Fifth Amendment does not demand that a non-target witness be advised of his privilege against self-incrimination. Courts are divided, however, as to whether such advice must be given to a target, with the more recent rulings leaning in the direction of holding that self-incrimination warnings are constitutionally required. 1. In United States v. Mandujano, the Supreme Court left that issue open for future consideration. Mandujano held that even if warnings were required, the failure to give the warnings could not constitute a defense to a perjury charge based on the witness' false grand jury testim ony. Six justices, however, went on to speak to the need for warnings, with four suggesting that they were not required. Chief Justice Burger rejected extens ion of Miranda to the grand jury setting noting that it applied ONLY to the special setting of custodial interrogation. ii. Waiver a. When a witness testifies, he relinquishes the privilege in that proceeding not only as to his testimony, but often also as to further information on the subject of his testimony. b. Rogers v. US i. The witness testified before a grand jury that, as treasure of the Communist Party of Denver, she had been in possession of party records, but had subsequently delivered those records to another person. She refused to identify the recipient of the records, asserting that would incriminating. Held in contempt. ii. Court noted that Rogers had already incriminated herself by admitting her party membership and past possession of the records; disclosure of her "acquaintanceship with her successor presented no more than a mere imaginary possibility of increasing the danger of prosecution." iii. A witness would not be allowed to disclose a basic incriminating fact and then claim the privilege as to the "details." c. The Privilege in Civil and Administrative Proceedings i. A person can invoke the 5th amendment privilege against self-incrimination in any proceeding so long as the statement might incriminate the person in a subsequent criminal prosecution. 1. In Spevack v Klein - attorney cannot be disbarred because of his assertion of the privilege against self -incrimination. The threat of losing his job is a powerful instrument of compulsion. 2. When a person exercises the privilege in a civil or administrative proceeding, it may entail certain costs that would not ari se in a criminal prosecution. While a court or administrative tribunal cannot punish a person for asserting the 5th amend privilege, it can take steps to remedy th e harm to an opposing party deprived of a useful source of information. a. A party claiming the privilege may be precluded from offering evidence to support her side of the case, which may result in a grant of summary judgment. b. The finder of fact may be able to draw an adverse inference against a party asserting the privilege as to the withheld information, such as find that an answer not given would have been unfavorable to the party refusing to respond. i. When a nonparty witness invokes the privilege, an adverse inference should not be drawn against either party unless the witness is so clearly connected to the party that they person is within its control, such as the officers of a corporation who have particular knowledge of its activities ii. State v. Horton 1. Contrary to Horton's contention, the fact that a lawyer's decision to invoke the privilege and remain silent can be used as e vidence in the disciplinary proceeding does not render the lawyer's decision to speak involuntary. Disciplinary proceedings are civil in nature, and a la wyer has no constitutional right to prevent the fact finder in that proceeding from considering the implications of his silence, along with other evidence agains t him, in making a determination. If he chooses to invoke his Fifth Amendment privilege and remain silent, a lawyer might be disciplined for the underlying miscon duct charged by the Board, but that does not mean he is compelled to speak rather than assert his privilege. iii. Immunity a. Scope of Immunity i. 18 U.S.C. 6002 1. Allows the prosecution to grant a witness immunity from prosecution and compels the witness to testify. 2. he immunity under the statute is called use/fruits immunity, and provides that at the request of the government, the court will issue an order that the witness may not refuse to comply with the order on the basis of his privilege against self -incrimination but no testimony or other information compelled under the order may be used against the witness in any criminal case, except a prosecution for perjury, giving a false statement, o r otherwise failing to comply with the order. 3. Prosecutors often demand, as a prerequisite for considering a grant of immunity, that the possible cooperating witness provid e a proffer of his testimony. This is, essentially, a detail of the witness's participation and the information that he can provide. a. Counsel will often first obtain an agreement in writing that the proffer will not constitute a waiver. b. US v. Mezzanatto: Should a defendant be able to waive his right to exclude self-incriminating statements made during plea negotiations as evidence in his trial. SCOTUS upheld a waiver provision in a proffer agreement that permitted the government to introduce the defendant's proffer statements in
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trial. SCOTUS upheld a waiver provision in a proffer agreement that permitted the government to introduce the defendant's proffer statements in response to his own contrary testimony at trial so long as it was knowing and voluntary. Mezzanatto dealt only with a narrow factual situation: namely, where the defendant testified at trial inconsistently with his proffer statements and where those statements were then used by the prosecutors for impeachment purposes. 4. Prosecutors may prefer a limited immunity to learn what the person can offer to assist the government's investigation. Queen for a Day. a. In United States v. Lauersen, Judge William H. Pauley III defined a Queen for a Day agreement as: i. [A] limited use immunity agreement where the suspect agrees to provide information in exchange for a promise from the Government that any statements made during the proffer will not be used against the profferor. Where plea negotiations break down or an immunity deal is rejected, the . . . Queen for a Day . . . permits a prosecutor to use the proffered statements in a number of circumstances, including to pursue leads, to crossexamine the defendant if she testifies, and for purposes of rebuttal. ii. The government agrees not to offer any of the proffered statements in its case-in-chief or in connection with any sentencing proceeding but may use the proffered statements to pursue leads and to impeach subsequent testimony. ii. U.S. v Krilich 1. Upheld the admissibility of proffer statements even where the defendant did not testify. There the court concluded that Kril ich's attorney presented testimony through cross-examination of government witnesses that contradicted his client's proffer, thereby allowing the government to introduce prev iously inadmissible proffer statements at trial. 2. Under this type of provision, a defendant who proceeds to trial is effectively muzzled from asserting any substantive defense inconsistent with his prior admission of guilt, on peril of opening the door to the introduction of the proffer statements. Note 1: Inconsistent Positions - US v. Barrow - the court, citing prior cases, stated succinctly: Statements made by defendants in proffer sessions are covered by Rule 410. Thus, if your client is interviewed by a government attorney and does not execute an agreement (or otherwise ex pressly waive the protections of Rule 410), the government should not be able to introduce your clients statements under any circumstances . Note 2: Other uses - US v. Schwartz - derivative-use immunity- Agent testified before the grand jury as to the substance of the proffer interviews with defendant. The immunity agreement did not prohibit use of defendant's statement before the grand jury which indicted him, as evidenced by the agreement's explicit waiver of a right to a Kastigar hearing along with a prohibition against use at trial. In Schwartz, for example, on e of the defendants was ultimately indicted even though his attorney negotiated limited use immunity in exchange for the defendant's cooperation. The Eleventh Circuit affirmed the defendant's conviction after concluding that the government's use of the defendant's immunized statements to procure his indictment did n ot violate the defendant's proffer agreement, which included a Kastigar waiver. Note 4: Sixth Amendment: US v. Velez - At trial, the defense had elected not to elicit certain testimony from defense witnesses following the DC's ruling that the testimony would open the door to the defendant's proffer statements. On appeal, Velez argued that the provision in his p roffer agreement that purported to waive his exclusionary privileges with regard to evidence or argument beyond his own testimony violated his constitutional rights to mount a defense" Court rejected holding that "fairness dictates that the proffer agreement be enforced. The court reasoned that the waiver pr ovision creates an incentive for the defendant to be truthful. The fact that his proffer statement can be used against him at trial to counter inconsistent evide nce or arguments makes deceit costly.

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Ch. 14 - Agency Investigations and Parallel Proceedings

Wednesday, December 07, 2011 2:20 PM

I. Parallel Proceedings: when the IRS issues a summons that summons can be objected to by means of a motion to quash or motion to modify.

a. Test for administering subpoenas (Powell Test): i. Has to be a legit purpose of the use of an IRS summons; ii. Material sought has to be relevant to whats under investigation iii. Information cannot already be in IRS possession 1) Part information is okay. iv. Administrative steps to obtain must have been followed 1) When IRS issues summons, by statute, it cannot undertake that process for purpose of facilitating a criminal process.
a) Powell has basically no application except to IRS. Govt is free to lie to people. It cannot lie where it is attaining compliance in its role as the government. i.e. you re not going on trial we are going to use you as a witness etc. Cordell says the information that is gained by the govt in a civil case even by way of interrogatories, req. for admission, depositions etc all can be used in criminal case. There is ONE restriction which is if the sole purpose of the undertaking the civil matter is to gain an advantage in the criminal matter is violation of due process. I. Civil Enforcement Agency Investigations a. Distinguishing Between IRS and Other Agency Investigations i. SEC v. Jerry T. O'Brien, Inc 1) Involved the propriety of the SEC's issuance of third-party subpoenas without first notifying the investigatee of the identities of the subpoena recipients. O'Brien contended that because he, lacking notice of the subpoenas, could not, and the thirdparty- subpoena recipient, lacking incentive to to object to the subpoena's propriety, would not force the SEC to initiate an enforcement proceeding, the SEC circumvented the protections against administrative abuse of the subpoena power that the Supreme Court had established in United States v. Powel. In a departure from traditional deference to administrative agency discretion in the use of their subpoena authority, the United States Court of Appeals for the Ninth Circuit held that the subject of an SEC investigation is entitled to notice of every third-party subpoena issued in the course of the investigation. The court based this holding on the need to prevent SEC encroachments on the Powell protections. ii. In re Administrative Subpoena John Doe, D.P.M II. Parallel Proceedings: a. US v. Kordel - Generally, the Supreme Court has approved the Governments use in a criminal case of evidence gathered in a related civil proceeding, often by a civil agency of the Government. The leading authority in this area is United States v. Kordel. The Kordel Court, addressing the criminal use of evidence garnered by the FDA, required only that the Government show an absence of bad faith on the part of the civil agency. A civil action brought solely to advance a criminal investigation is one brought in bad faith. III. Delaying the Parallel Civil Action a. A party in a civil suit who faces the possibility of a parallel criminal proceeding may seek to stay the civil proceeding pending the outcome of the criminal proceeding. Factors to consider the court must consider when granting a stay: i. (most important) The degree to which the civil issues overlap the criminal issues. ii. The current stage of the parallel criminal proceeding will often substantially affect the net balance of equities. Is the resolution nearby or remote in tiem? iii. Judicial efficiency. Resolution of the criminal case may increase prospects for settlement of the civil case. iv. The effect of the stay of the civil case upon the public interest. b. Afro-Lecon, Inc v. US i. The Court found government abuse warranting a stay of the civil case where government investigators surreptitiously attended discovery meetings in parallel proceedings. If a defendant cannot show specific evidence of agency bad faith, he may be entitled to stay the civil proceeding if he demonstrates that the civil case prejudices his criminal matter and the prejudice outweighs the public's interest in the civil matter. Note 3: It is universally agreed that the mere pendency of a criminal investigation standing alone does not require a stay.

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Ch. 15 - Attorney-Client Privilege

Wednesday, December 07, 2011 3:26 PM

1. Joint Defense Agreements a. A joint defense agreement is an agreement whereby multiple parties with a common interest in actual or threatened litigation can communicate with one another and coordinate strategy. It allows co-defendants and their lawyers to share work product and information, prepare a joint strategy, and share costs, without waiving the attorney-client privilege and work product protection. The sharing may involve cooperation on all aspects of a case, from strategy to discovery and trial, or it may simply permit access to each others witnesses. The extent of cooperation is usually dictated by the degree of commonality of interests, and the trust between parties and lawyers. 2. In re: Santa Fe International Corporation a. The Fifth Circuit limited application of this privilege by adopting a narrow construction of these terms in cases in which (1) the joint defense meetings were themselves alleged as improper and (2) the actual litigation was instituted many years after the meetings. b. The court reaffirmed that communications may be protected under the common legal interest privilege, not only in cases in which the communications involve codefendants in actual litigation and their counsel, but also in cases in which the communications involve potential codefendants and their counsel. Because of the lack of a clear definition for the term potential and in light of the deference to be accorded to the truth-seeking process, however, the court held that it was required to review the issue and then construed the term narrowly. The court concluded, in a two-to-one decision, that the threat of litigation must constitute a palpable threat at the time of the communication and not a mere awareness that ones questionable conduct might some day result in litigation.

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Ch. 16 Role of Counsel

Wednesday, December 07, 2011 3:34 PM

1. Right to Counsel a. US v. Stein i. Dismissal of federal indictments against company employees after the government discouraged continued company payment of the employees legal fees and costs was affirmed. The governments hampering of the employees ability to deal with a complex case and mountains of electronic discovery deprived the employees of their right to counsel under the Sixth Amendment. ii. The government appealed dismissal of indictments of thirteen former partners and employees of an accounting firm. The trial court determined that government pressure on the accounting firm led the firm to limit its payment of legal fees and expenses of its employees. The trial court observed that the employees were left without information technology assistance to deal with the mountains of electronic discovery in the case. iii. The court affirmed dismissal of the indictments. The governments linkage of the companys cooperation and non-indictment to setting limits on payment of employee defense costs deprived the employees of their right to counsel under the Sixth Amendment. The government-induced termination of defense fees and costs for employees once they were indicted caused even those employees with substantial personal resources to limit the activities of their defense counsel due to the complexity of the governments charges and the scattering of relevant facts throughout over 22 million documents.

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