In the absence of standardized impoundment procedure, officer may reasonably impound vehicle

United States v. Smith, No. 06-3112 (3d Cir. April 9, 2008)

Lancaster police arrested the driver and passenger of a car stopped in an area "in which parked vehicles were subject to being damaged, vandalized, or stolen." Police could not identify the owner of the vehicle, although they were able to determine that it did not belong to either occupant. Based on these facts, one of the officers decided to impound the vehicle, and during a subsequent inventory search discovered a handgun in the glove compartment. After losing a motion to suppress firearm, the defendant entered a conditional plea to a violation of 18 U.S.C. §§ 922(g) and 924(c).

On appeal, the defendant argued that the decision to impound the car had to "be exercised pursuant to standardized criteria or the seizure is unconstitutional." The defendant further argued that the Lancaster Police Department did not have a standard procedure regarding the impounding of vehicles. Notably, the defendant did not challenge the actual search itself, and the Third circuit thus limited its review to the "validity of the impoundment rather than the validity of the actual search of the vehicle."

Noting that this was a case of first impression in the the circuit, and recognizing that the other circuits are split on the issue, the Third Circuit joined the First Circuit in holding that the focus of the analysis is the overall reasonableness of the impoundment for a community caretaking purpose. In adopting this approach, the Court rejected the D.C. Circuit's logic "requiring that there be standardized police procedures governing impoundments." Thus, the Court concluded that "a reasonable impoundment does not become unreasonable merely because the police do not impound all vehicles found in similar circumstances any more than an unreasonable impoundment becomes reasonable merely because all vehicles in similar circumstances are impounded." Applying this approach to the facts of the case, the Third Circuit concluded that the discretionary decision to impound the vehicle was reasonable, especially given the officers' concern regarding the vehicle's safety.

Third Circuit lacks jurisdiction to hear defendant's appeal that speedy trial motion should've been dismissed with prejudice.

United States v. Martin Kuper, No. 07-1916 (3d Cir. April 7, 2008)

Before the district court, the defendant filed a motion to dismiss his indictment, alleging a violation of the Speedy Trial Act. The district court granted the motion, but dismissed the indictment without prejudice. The defendant appealed, arguing the indictment should have been dismissed with prejudice. The Third Circuit dismissed the appeal, stating that it lacked jurisdiction.

The Court explained that the district court's ruling was not a "final order" for purposes of 28 U.S.C. § 1291. Citing the Supreme Court's decision in United States v. MacDonald, 435 U.S. 850 (1978), which held that a motion to dismiss for a Sixth Amendment speedy trial violation was not a final order, the Third Circuit held that a violation of the Speedy Trial Act likewise, did not "represent a final rejection of a defendant's claim." Instead, the Court recognized that the defendant would be able to "appeal the dismissal of his first indictment if he is re-indicted and convicted." The Court also noted that every court of appeals addressing the issue has held that an order dismissing an indictment without prejudice is not a final order under § 1291.

Additionally, the Court rejected the defendant's claim that re-indictment would cause a "personal hardship," concluding that "the discomfiture and cost of a prosecution for a crime even by an innocent person is one of the painful obligations of citizenship." (Funny, I don't remember that being mentioned in my 5th grade civics class!)

“Identity theft” sentencing enhancement does not apply to altering addresses on clients’ financial statements

Update: On April 22, 2008, the Court filed the amended opinion. It appears to be substantially the same as the original.

Update: On April 17, 2008, the Court vacated its opinion and judgment sua sponte, explaining that an amended opinion will be filed forthwith.

In United States v. Hawes, No. 06-3334 (3d Cir. Mar. 27, 2008), the Court of Appeals held that the district court erroneously applied a two-level "identity theft" enhancement under § 2B1.1(b)(9)(C)(i) [now § 2B1.1(b)(10)(C)(i)] because the defendant’s conduct did not qualify for the enhancement. Hawes, an investment advisor, was convicted of defrauding his clients of monies that they had entrusted to him. As part of his fraudulent conduct, he changed the addresses to which his clients’ account statements were mailed so that the statements were sent directly to his office address. The Court held that changing an address does not constitute "produc[ing] or obtain[ing] any other means of identification," as required under § 2B1.1(b)(9)(C)(i). It explained that changing an address is similar to the application note’s examples of conduct that does not constitute identity theft, such as stealing an existing credit card or cashing a check from an existing bank account. It rejected the government’s contention that a "means of identification" includes a name plus any other piece of information; rather, the means of identification must be specific or unique. It also noted that "the change of address was to thwart the discovery of, not enable, the illicit activity." Finally, the Court held that Hawes did not "establish new credit or ‘breed’ new forms of identification, as contemplated by Congress and the Sentencing Commission in enacting this enhancement."

The Court further held that this error was not harmless and remanded for resentencing. It affirmed the lower court’s application of the vulnerable victim enhancement and the order of restitution.

Government’s failure to establish element of offense results in reversal.

In United States v, Ambrose Daniel, No. 07-2413 (3rd Cir. March 6, 2008), the defendant Ambrose Daniel was convicted of unlawful possession of ammunition, in violation of Virgin Islands’ law. Daniel had initially been charged in an eight count indictment, including several federal offenses, but was only convicted of the ammunition offense. Daniel appealed his conviction, arguing there was insufficient evidence to convict him of that offense. The Third Circuit, in an opinion by Judge Roth, reversed, holding that the government had failed to prove a requisite element of the offense.

To prove that Daniel was guilty of unlawful possession of ammunition, the government had the burden of showing that: (1) he possessed ammunition on the day of his arrest; and (2) he was not licensed or otherwise authorized to possess the ammunition. In his jury instructions, the judge explained: "The phrase, ‘unless otherwise authorized by law’ means that the defendant had no license nor other legal authority to possession [of] ammunition." During the trial, the government called a witness to confirm that Daniel was not licensed to posses a firearm. However, the government presented no evidence as to whether he was licensed or otherwise authorized to possess ammunition. The government also failed to present any evidence on what was required to become authorized to possess ammunition.

The Third Circuit emphasized that it owed considerable deference to a jury’s guilty verdict. Nevertheless, the Court found that the government presented no evidence on the issue of authorization to possess ammunition. Virgin Islands’ law does not have a licensing requirement for ammunition and the law is unclear as to how one becomes authorized to possess ammunition. The government argued that the court should infer that Daniel’s possession of the ammunition was unlawful because he did not possess a firearms license. However, the Third Circuit refused to make such an inference, holding that it was the duty of the legislature to determine the standards for what constituted unlawful possession of ammunition. Also, the Court further ruled that the government could not meet its burden of proof by substituting proof that defendant was not authorized to carry a firearm, for proof that he was not authorized to possess ammunition.

Finally, the government argued that defendant had failed to raise an affirmative defense that he was authorized to possess a firearm even though he was not licensed. The Third Circuit rejected this position, finding that authorization to possess ammunition is not an affirmative defense. Accordingly, the Court reserved Daniel’s conviction.

Juvenile adjudication of "discontinuance" not a "sentence" under 4A1.2. Improper Guidelines calculation not harmless error.

United States v. Langford, No. 06-2774 (3d Cir. February 22, 2008) - Langford entered a guilty plea to bank robbery, armed bank robbery, and carrying and brandishing a firearm during a crime of violence. At sentencing, defense counsel argued that a prior juvenile adjudication that was "discontinued" should not be counted in Langford’s criminal history category. Specifically, that a "discontinuance" was not a sentence under § 4A1.2(a) and therefore a point should not be added - making Langford a category III, rather than a IV. The sentencing court disagreed and ruled that the "discontinuance" counted under § 4A1.2(a) and concluded that Langford was a criminal history category IV.

On appeal Langford argued that the district court improperly calculated his criminal history score and, as a result, started with an incorrect Guidelines range in the sentencing process. In turn, the government argued it was harmless error. In a majority opinion drafted by Judge Rendell (joined by Nygaard), the Third Circuit held that the "discontinuance" was not a sentence under § 4A1.2(a) and that the resulting improper Guidelines range was not harmless error.

With respect to the "discontinuance" the Court focused on the language of § 4A1.2(a) which limits the assignment of criminal history points to those offenses committed prior to age eighteen which "resulted in imposition of an adult or juvenile sentence..." The Court then reviewed the Pennsylvania statutes and determined that a juvenile court can adjudicate a child delinquent and then order the juvenile petition discontinued. The Government argued that the "discontinuance" is akin to a "suspended sentence" which counts under §4A1.2(a). The Court disagreed and, relying on Black’s Law Dictionary, noted that a suspended sentence occurs when the court sentences one "formally" but the sentence is not "actually served". The Court also dismissed each of the Government’s several alternative arguments: 1) that Langford’s "discontinued" sentence was intended to be concurrent to a previously imposed sentence on another case; 2) that the juvenile court had no reason to sentence Langford because it had already committed him on another case; and 3) that the juvenile court’s order for a DNA sample was sufficient to amount to a sentence.

After rejecting these arguments, the Third Circuit found that in light of the district court’s error, the Guidelines range was affected. Therefore, the Court found the proper guideline range should have been calculated with a category III, not a IV - which reduced the range from 46-57 months down to 37-46 months.

The Court then reviewed the effect of this error. Citing United States v. Gunter, 462 F.3d 237 (3d Cir. 2006), the Court first ruled that although advisory, the Guidelines play an "integral role" at sentencing and therefore the district court is required to calculate them properly. Therefore, a miscalculation of the Guidelines would result in the failure to discharge its duties under step one of Gunter. In addition, the proper Guidelines range is the "natural starting point from which the sentencing court exercises its discretion under § 3553(a) at Gunter’s third step." The Court also found support in the Supreme Court’s recent decision in Gall v. United States, 128 S.Ct. 586, 597 (2007), which found an improper Guidelines calculation a "serious procedural error" and Kimbrough v. United States, 128 S.Ct. 558, 564 (2007), which found that a "district judge must include the Guidelines range in the array of factors warranting consideration."
Not only did the Court find that the district court’s failure to properly calculate the Guidelines affected the three part sentencing process, but also that it "the failure to start with the correct Guidelines range is legal error that thwarts reasonableness review–that is, it cuts off [the Court of Appeals] review process before [the Court] even reach[es] the issue of reasonableness."

The Court then considered whether the improper calculation of the Guidelines was harmless error. Immediately, the Court stated that "the use of an erroneous Guidelines range will typically require reversal..." The Court noted, however, that in limited circumstances the error could be harmless. The Court, citing Williams v. United States, 503 U.S. 193, 203 (1992) stated, "we will remand for re-sentencing ‘unless [we] conclude on the record as a whole ... that the error did not affect the district court’s selection of that sentence imposed." It then rejected the Government’s position that harmless error applies when incorrect range and correct range overlap - the only remedy here for the sentence imposed as a result of incorrectly calculated Guidelines range is remand for re-sentencing.

While Judge Weiss agreed with the majority that a "discontinuance" is not a sentence under § 4A1.2, he dissented stating that the miscalculation in the Guidelines range did not make the sentence unreasonable. He proposed some new test - requiring significant procedural error. Specifically,"[t]he reasonableness of a sentence will not be vitiated by an "insignificant" error in the Guidelines calculation. The Guidelines computation should be performed carefully, but it is designed to produce a range – not a designated point. Consequently, the Guidelines calculation need not be as precise as an engineering drawing. There is enough play in the system to allow for harmless error."

Third Circuit reverses for insufficiency in gun possession case - no evidence of constructive possession or aiding and abetting

United States v. Cunningham, No. 06-3899 (3d Cir. February 21, 2008) - After a jury trial, Cunningham was convicted of three counts - 1) distribution of crack cocaine, 2) possession with intent to distribute more than 5 grams of crack cocaine and aiding abetting, and 3) a possession of a firearm in furtherance of a drug trafficking crime and aiding and abetting. On appeal, Cunningham challenged the sufficiency of the evidence with respect to the two possession convictions.

The gun and drugs that formed the basis for Cunningham’s conviction were found in a back-pack, which Cunningham never held or carried. Rather, the person who held or carried the back pack was Cunningham’s co-defendant. Therefore, the Third Circuit Court of Appeals focused its analysis on whether or not the evidence was sufficient to show that Cunningham constructively possessed the items or aided and abetted his co-defendant’s possession of them.

In an opinion drafted by Judge Fisher, the Court of Appeals affirmed as to the drug possession and reversed as to firearm possession. In making this decision, the Court applied two separate analyses based on two of the Court’s prior holdings (one for the gun and one for the drugs).

With respect to the gun possession, the Court determined that the analysis provided in United States v. Garth, 118 F.3d 99, 113 (3d Cir. 1999) controlled. With that said, the Court concluded that the evidence was insufficient to convict for constructive possession because there was no evidence that Cunningham "knew" about the gun. The evidence was also insufficient for aiding and abetting because Cunningham’s actions "did not show that he attempted to facilitate the carrying of the gun ... or that the gun was in any way instrumental to his decision to participate in the drug offense."

With respect to the drug possession, the Court determined that the analysis provided in United States v. Iafelice, 978 F.2d , 96 (3d Cir. 1992) controlled. Unlike gun possession, the Court found that Cunningham’s sales of identical drugs that morning to those found in the backpack in the afternoon, his speaking with his co-defendant repeatedly, going into his house, and their apparent efforts to safeguard the contraband were sufficient. Quoting Iafelice the Court stated, "there is a logical and convincing connection between the facts established and the conclusion inferred.

Armed bank robbery sentence remanded for application of incorrect enhancement in original sentence and failure to justify alternative sentence.

United States v. Smalley, No. 06-4552 (3d Cir. Feb.29, 2008). At sentencing in this armed bank robbery case, the government and defense argued that the defendant should receive a three-level enhancement for "brandishing or possessing" a weapon under U.S.S.G. § 2B3.1(b)(2)(E). The judge, however, accepted the probation officer’s recommendation that he should receive a four-level enhancement for "otherwise using" a weapon under U.S.S.G. § 2B3.1(b)(2)(D). The judge imposed a 71-month sentence -- at the high end of the range.

After sentencing, the government wrote to the Court requesting that it issue an amended judgment explaining that it would have imposed the same sentence even if it had applied the three-level enhancement. The Court filed the amended judgment, but outside the time limit set under Federal Rule of Criminal Procedure 35(a).

On appeal, the Third Circuit agreed with the government and the defense that the lower enhancement should apply because although the defendant threatened to stab the teller if she didn’t cooperate, he never took his knife out of his pocket. The government argued harmless error because the district court amended the judgment to explain that the defendant would have received the same sentence no matter what enhancement applied.

The Third Circuit rejected the amended judgment for its failure to comply with Federal and Local procedural rules (Rule 35/out of time, Rule 36/not clerical, L.A.R. 3.1/not amplifying), and because it provided no basis for the 8-month upward departure or variance that would have been necessary to maintain the 71-month sentence (a Gall/Gunter error).

District court is powerless to grant the third point absent a § 3E1.1(b) motion by the Government, even where bad faith alleged.

In United States v. Drennon, No. 06-3399 (3d Cir. February 20, 2008), Drennon was charged with bank robbery and, prior to trial, challenged the constitutionality of an identification made by one of the bank tellers. After the suppression hearing, the motion was denied. As a result, Drennon entered guilty plea without an agreement one month prior to trial. At sentencing, Drennon received a two point reduction for acceptance of responsibility under § 3E1.1(a). Drennon moved, however, for the additional third point but the Government refused to file a motion § 3E1.1(b). "The Government argued that the large amount of work to prepare for trial had been done in connection with the suppression hearing." The district court then determined it could not grant the third point without such a motion from the Government. Therefore Drennon’s motion for the third point was denied. Drennon appealed.

On appeal, Drennon did not dispute whether or not the district court had the discretion to grant the third point. In fact, Drennon conceded that it’s predicated on the Government’s filing of a motion under 3E1.1(b) pursuant to a 2003 revision to the Sentencing Guidelines. Instead, Drennon argued that, in his case, the Government’s refusal to file such a motion was an act of bad faith.

In an opinion drafted by Judge Stapleton, the Third Circuit disagreed and held that the district court is powerless to grant the third point absent a § 3E1.1(b) motion by the Government. The Court noted that similar arguments had been made where the Government refused to file a motion for downward departure under § 5K1.1. In those cases, the Court held that there was no bad faith exception for the failure to file a motion for downward departure. Citing Wade v. United States, 504 U.S. 181, 185 (1992), the Court recognized that "the condition limiting the court’s authority [under § 5K1.1] gives the government a power, not a duty, to file a motion ..." The same rationale applies in the § 3E1.1(b) context.

While there is no bad faith exception, the Court noted that district courts have discretion to review the denial where the Government’s refusal to file a motion was based on an unconstitutional motive. The Court cited as examples the refusal to file because of the defendant’s "race, religion, or gender" or where it can be shown the refusal "was not rationally related to any legitimate government end." Unfortunately for Drennon, none of those factors were found. Affirmed.

Third Circuit addresses applicability of new crack guidelines to cases on direct appeal

In United States v. Wise, No. 06-4926, and United States v. Brown, No. 06-4928, (3d Cir. Feb. 12, 2008), a Third Circuit panel addressed for the first time the differential in the powder cocaine and crack cocaine Sentencing Guidelines since the Supreme Court’s decision in Kimbrough. Defendants Wise and Brown were convicted of possession with intent to distribute 50 grams or more of crack cocaine and possession of a firearm in furtherance of that offense. Defendant Brown was sentenced to a total of 324 months imprisonment (the middle of his advisory Guidelines range), and defendant Wise received a sentence of 319 months (the top of his advisory Guidelines range).

Both defendants challenged their sentences on procedural and substantive grounds. The Third Circuit reiterated the three step process to be applied by sentencing courts post-Booker, specifically: (1) properly calculating the Guidelines range; (2) formally ruling on the parties’ motions and if granting a departure stating how that departure affects the Guidelines calculations; and (3) exercising its discretion by considering all § 3553(a) factors and determining the appropriate sentence.

The Third Circuit noted that its review is two-fold, with the first duty being to ensure that the district court committed no significant procedural error in arriving at its decision, "such as failing to calculate (or improperly calculating) the Guidelines, treating the Guidelines as mandatory, failing to consider the § 3553(a) factors, selecting a sentence based on clearly erroneous facts, or failing to adequately explain the chosen sentence - including an explanation for any deviation from the Guidelines range" (quoting Gall). It then stated that it will review the district court’s decision under an abuse-of-discretion standard, but noted that the amount of deference it gives will depend on the type of procedural error asserted on appeal. By way of example, the Court said that it would hold that a district court abused its discretion if the sentencing decision was based on a clearly erroneous factual conclusion or an erroneous legal conclusion. The Court held that its review is highly deferential if the asserted procedural error is purely factual, but that it will not defer to a district court when the asserted procedural error is purely legal. Once the Third Circuit has determined that no procedural error has been committed, it will review the substantive reasonableness of the sentence under an abuse-of-discretion standard, regardless of whether the sentence falls within the Guidelines range.

The Court rejected Brown and Wise’s challenges to their sentences, including an allegation that their Guidelines range was incorrectly calculated because lower crack Guidelines took affect during the pendency of their appeal. The panel held that the rule requiring application of the version of the Guidelines in effect on the date of sentencing continues to apply, with two exceptions: (1) if applying the version of the Guidelines in effect on the date of sentencing presents an ex post facto problem, and (2) if a subsequent Guidelines amendment merely clarifies the law in existence at the time of sentencing, as opposed to working a substantive change in the law. Because the post-sentencing amendment reducing the base offense level applicable to a particular offense is a substantive change, it is not applied retroactively to cases on appeal.

The most significant portion of this opinion, however, may be in its discussion of the defendants’ ability to apply for relief pursuant to 18 U.S.C. § 3582(C)(2), noting that its decision was without prejudice to the defendants’ statutory right to pursue reduced sentences once the amendment to Guidelines § 1B1.10 becomes effective on March 3, 2008. In a footnote, the panel rejected the argument that because the Guidelines are no longer mandatory, defendants need not wait to apply for relief under the new crack cocaine Guidelines pursuant to 18 U.S.C. § 3582(c)(2):

Some may argue that, because the Guidelines are no longer mandatory, defendants need not wait to apply for relief under § 3582(c)(2). That fundamentally misunderstands the limits of Booker. Nothing in that decision purported to obviate the congressional directive on whether a sentence could be reduced based on subsequent changes in the Guidelines. As we have stated before, "[t]he language of the applicable sections could not be clearer: the statute directs the Court to the policy statement, and the policy statement provides that an amendment not listed in subsection (c) may not be applied retroactively pursuant to 18 U.S.C. § 3582(c)(2)." United States v. Thompson, 70 F.3d 279, 281 (3d Cir. 1995).

Gov did not breach plea agreement by withdrawing 5K motion

In US v. Schwartz, No. 05-4978 (Jan 10, 1008), the 3rd Circuit rejected Schwartz's claim that the government breached its plea agreement and acted in bad faith when it withdrew its previously filed motion for downward departure under USSG 5K1.1.

Schwartz pleaded guilty to conspiracy to distribute drugs and agreed to cooperate with the government pursuant to a plea agreement in which the government agreed to file a downward departure motion under 5K1.1 in exchange for the cooperation. Schwartz cooperated, and the government filed a downward departure motion one week prior to sentencing. The next day, however, DEA agents arrested Schwartz for violating his bail conditions by using drugs, and found about $4,500 worth of meth, plus a triple beam scale, in his residence. At the sentencing hearing the government moved to withdraw its 5K motion, and the court granted the motion.

The 3rd Circuit upheld the district court on the ground that the plea agreement was predicated on Schwartz's continued cooperation. The agreement specified that it was a condition of the agreement and an obligation of the cooperation that "defendant not commit any additional crimes." The agreement also allowed the government to withdraw any 5K motion if the defendant failed to cooperate. The commission of the additional crime of drug possession thus constituted a failure to continue cooperating, and triggered the government's right to withdraw the 5K motion.

The Circuit held that "the government may withdraw a downward departure motion when a defendant agrees not to violate the law and the written plea agreement reserves to the government the right to withdraw the motion upon that occurrence."

Government Did Not Breach Agreement to Make No Recommendation as to Sentence in "Package Deal" Plea Bargain

United States v. Neal Hall, No. 07-2373, (3d Cir. February 8, 2008), involves a "package deal plea bargain" in which the government accepted defendant husband’s guilty plea to willfully failing to file tax returns on the condition that co-defendant wife also plead guilty. Only Dr. Hall appealed.

Dr. Hall first argued that the District Court failed to exercise the "special care" required in determining whether a plea entered during a joint plea hearing as part of a tied plea agreement was voluntary.

The Court begins by observing that (1) "package deal" plea agreements must be disclosed to the court, and (2) colloquies must be conducted with special care to ensure the plea is voluntary. Here, although the district court did not follow a specific script, the Court found the plea was voluntary considering defendant’s education and intelligence and the fact that Dr. Hall had his own separate attorney, who he consulted during the colloquy. The Court rejected the argument that tied pleas are involuntary merely because a defendant benefits his co-defendant more than himself by pleading.

Dr. Hall’s plea agreement included a provision that the government would make no recommendation as to the sentence. Mrs. Hall’s plea agreement contained no such provision.


The joint sentencing hearing proceeded with argument from Mrs. Hall’s attorney followed by allocution and argument from Dr. Hall’s attorney followed by allocution.


The government began by responding to both defendants’ arguments. At various points, the government specified he was directing his comments toward Mrs. Grayson-Hall as he could not make a sentencing recommendation as to Dr. Hall. He asked for a sentence at the top of the guidelines for Mrs. Hall and made no recommendation as to Dr. Hall.

The government also maintained it was important to send a message in these white collar cases, arguing that because failing to file tax returns is a significant crime, a sentence of imprisonment is necessary for public perception.

Dr. Hall argued that the government breached the plea agreement by recommending a sentence of incarceration.

"[T]he doctrine that the government must adhere to its bargain in the plea agreement is so fundamental that even though the government’s breach is inadvertent and the breach probably did not influence the judge in the sentence imposed, due process and equity require that the sentence be vacated."

The Court initially distinguished between a promise to "[m]ake no recommendation as to the sentence," and a promise to take no position as to sentence, which speaks to no attempt at all to influence the defendant’s sentence.

In finding no breach of the plea agreement, the Court stressed two points. (1) The parties’ crimes and roles in the offense were identical such that government comment about one defendant necessary reflected on the other, and (2) Mrs. Greyson-Hall was sentenced first at Dr. Hall’s request thereby ensuring that the court would hear the government’s ardent advocacy concerning Mrs.Hall before it imposed sentence on Dr. Hall:

In retrospect Hall may have been unrealistic to expect, if he did so, that the Government’s statements regarding Grayson-Hall’s sentence would not have the capacity to impact on the court when it considered his sentence. In fact, Hall likely should have expected that, in light of the plea agreement reached by his wife and the identical role in the crimes played by Hall and Grayson-Hall, the Government would be making recommendations and comments as to Grayson-Hall that could affect him. There is no escape from the reality that this case differs from criminal cases . . . in which different defendants may have different roles in the offenses and may have different criminal records so that a recommendation as to one defendant will have limited or no effect on the case of another defendant. Hall and his wife committed identical offenses in identical ways and each could point to the same mitigating sentencing factors on his or her own behalf. Nonetheless, Hall proposed and consented to the manner in which his sentencing occurred, i.e., in a joint proceeding in which Grayson-Hall would be sentenced first, which gave rise to the possibility that comments meant to refer to his wife could be taken as referring to his situation as well. Hall’s express request for and consent to this arrangement, when taken in conjunction with the Government’s explicit recognition of the terms of Hall’s plea agreement and its statement that it was limiting its sentencing comments to Grayson-Hall, leads us to conclude that the Government’s comments . . . did not breach the plea agreement. . . .

The Court also rejected Dr. Hall’s argument that a guidelines sentence was unreasonable where the Guidelines "evaluate tax felonies with an element of fraud exactly the same as they do tax misdemeanors which involve no more than a willful neglect of a known statutory filing duty".

Plea Agreement Waiver of Right to File “Any Appeal” Bars Appeal of Restitution Order

At issue in United States v. Perez, No. 06-2036, is whether an appeal of a restitution order is barred by an appellate waiver.

The plea agreement contained a broad waiver of the right "to file any appeal, any collateral attack, or any other writ or motion" as well as a stipulation that loss amount was between $70,000 and $120,000. During sentencing, the defendant further stipulated to the loss amount of $73,476.

On appeal, the defendant argued that restitution is not technically a component of his sentence such that an appeal of restitution is not barred by the waiver. The waiver, he continued, only applies to challenges to the conviction and duration of confinement.

The Court rejected this argument, relying on prior cases law that restitution, ordered as part of a criminal sentence, is a criminal penalty. See United States v. Leahy, 438 F.3d 238 (3d Cir. 2006).

The Court observes that the plea colloquy was thorough and that it included a "lengthy discussion specifically regarding the waiver of appellate rights contained in the plea agreement."

There is a circuit split on this issue: Specifically the Fourth, Sixth, Tenth, and now the Third Circuits hold that a defendant who knowingly and voluntarily waives his right to appeal his sentence has waived the right to appeal a restitution order whereas the Second, Eighth and Ninth Circuits do not.

In closing, the Court cites Leahy for the proposition that restitution amounts need not be admitted by the defendant nor proven to a jury beyond a reasonable doubt.

Pennsylvania’s Sex Offender Notification Statute must apply equally to in-state and out-of-state sex offenders

In Doe v. Pennsylvania Bd. of Probation, No. 05-4200 (3d Cir. Jan. 23, 2008), a Court of Appeals panel, affirming the decision of District Court Judge Louis Pollak, held in a 2-1 decision that a provision in Pennsylvania’s sex offender notification statute that treated out-of-state sex offenders differently from in-state sex offenders violated the Equal Protection Clause of the Fourteenth Amendment to the U.S. Constitution.

The anonymous plaintiff, John Doe, brought an action under 42 USC § 1983, claiming that Pennsylvania’s Registration of Sexual Offender’s Act, 42 Pa. C.S. § 9791 et. seq. ("Megan’s Law"), violated the Equal Protection Clause. Doe is a Pennsylvania resident who was convicted of a sexual offense in New Jersey and sought to return to Pennsylvania to serve his parole. Pennsylvania’s Megan Law provides that an out-of-state offender seeking to transfer supervision to Pennsylvania must register with state and local police, and also be subject to community notification. In contrast, an in-state offender would not be subject to community notification unless designated, after a civil hearing, as a "sexually violent predator due to a mental abnormality or personality disorder that makes the person likely to engage in predatory sexually violent offenses." Id. at § 9792. Doe claimed that this disparate treatment of out-of-state offenders was unconstitutional.

Circuit Judge Nygaard’s majority opinion, joined by Circuit Judge McKee, ruled that the disparate treatment of in-state and out-of-state offenders violated the Equal Protection Clause, finding that the Commonwealth’s interest in protecting citizens from sex offenses committed by repeat offenders did not provide a rational basis for discriminating between in-state and out-of-state offenders. Because the Court concluded that the statute did not survive rational basis review, the Court did not determine whether the higher threshold of strict scrutiny review should apply to Doe’s claim.

In dissent, Circuit Judge Ambro concluded that the statute should be reviewed under the rational basis standard, and that the out-of-state offender classification satisfied that review standard. Judge Ambro stated that the Commonwealth’s legitimate interest in protecting its citizens from sexual offenses was rationally related to different treatment of out-of-state sex offenders, in light of, first, the Commonwealth’s asserted inability to replicate adequately for out-of-state offenders the proceedings that in-state offenders receive prior to community notification, and second, the likelihood that Pennsylvania communities would know more about in-state offenders than out-of-state offenders because of local media coverage.

Posted by Ronald A. Krauss at Thursday, February 7

Condition of Supervised Release Requiring Reporting of All Contact with Police Violates Due Process

In United States v. Maloney, No. 06-3745 (3d Cir. Jan. 17, 2008), the Court of Appeals held that a condition of supervised release which required the defendant to "notify the probation officer within seventy-two hours of being arrested or questioned by a law enforcement officer" was impermissibly vague as applied in the factual setting of the case. Maloney was convicted after a hearing violating three separate conditions of his supervised release, viz., 1) failing to notify his probation officer after he had been questioned by the police for failing to display a peddler’s license, 2) failing to report that he had purchased or had access to a vehicle and; 3) committing the crime of eluding a law enforcement officer.

With regard to the first violation, subsequent to commencing supervised release, Maloney began working as a shoe peddler and at some time later was issued a summons for failing to display his peddler’s license. The summons was ultimately dismissed as untimely. However, the probation officer charged Maloney with failing to report having been questioned by the police in connection with the issuance of the summons. The District Court held that Maloney violated the condition that he "notify the probation officer within seventy-two hours of being arrested or questioned by a law enforcement officer" when he failed to report that a law enforcement officer asked him for his peddler’s license and that the issuance of a summons should have impressed upon him the importance of reporting the incident. The Court of Appeals reversed the conviction.

The Court stated that "a condition of supervised release violates due process and is void for vagueness if it either forbids or requires the doing of an act in terms so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application." Here, the Court noted that the probation officer testified that the condition meant that Maloney had to report all "contact" with the police. The district court commented that it would be "ridiculous to suggest that the condition was so broad as to encompass the basic questions asked when one enters a federal building or undergoes a routine security check at an airport." Maloney testified that he was routinely asked to produce his peddler’s license and that on the day in question he showed the license but was cited because it was not visible on his cart. The Court of Appeals stated that: "The divergent attempts to interpret the term ‘questioned’ during Maloney’s revocation hearing illustrate the ambiguous scope of this condition of supervised release." The Court noted that there is general consensus that a simple request for identification would not have violated the condition despite the fact that such a request would fit within the definition of the condition. The Court of Appeals sighted the "glaring lack of consistency regarding the level of interaction required to transform basic contact with law enforcement into an incident that must be reported" as indicative of the vagueness of the condition. The Court concluded that condition was impermissibly vague in the context of Maloney’s case.

Noting the low standard of preponderance of the evidence and relaxed procedural safeguards at revocation hearings, the Court of Appeals affirmed the conviction on the remaining two violations. Nevertheless, the matter was remanded since the sentence may have been impacted by one of the conditions having been vacated.

Court of Appeals Discusses Issues of Striking Juror with "Aggressive Attitude", the Confrontation Clause and Amount of Loss

United States v. Jimenez, No. 05-4098 (3d Cir. Jan. 14, 2008), involved convictions arising out of a multi-defendant, 47-count indictment charging conspiracy to commit mortgage fraud and bank fraud. Five defendants appealed raising numerous challenges to their convictions, after a jury trial, and related sentences. The scheme involved a mortgage brokerage company and various related entities that secured residential and commercial loans for borrowers who could not otherwise obtain mortgages. When customers failed to qualify for loans, the conspirators fabricated federal tax returns and inflated W-2 forms or false pay stubs as well as various other documents associated with obtaining a mortgage. Some of the customers who received loans that they could not afford to repay, defaulted and lost their homes resulting in losses to the lender as well. The bank fraud involved a check kiting scheme wherein the mortgage brokerage companies cashed checks between 30 separate accounts maintained at the Hudson United Bank. During a one year period, there were 280 days where an overdraft existed in one of the accounts. Numerous separate issues were raised challenging the convictions.

First, the defendants challenged the district court’s refusal to strike a perspective juror for cause. During the fourth day of jury selection, a defendant’s lawyer complained about an "aggressive attitude" displayed toward her by a perspective juror while in line in the women’s restroom. Additionally, that juror was subsequently questioned on inconsistent answers that she reported on her questionnaire regarding the presumption of innocence. The district court refused to strike the juror for cause and the defendants used one of their peremptory strikes to dismiss the juror. The Court of Appeals held that even if the juror should have been excused for cause, there was no Rule or Due Process violation since the defendants elected to cure any defect by exercising a peremptory challenge, especially given that defendants were given an additional 4 strikes than provided for under the rules and that the conviction was by a jury on which no biased juror sat.

Next, the defendants convicted of bank fraud challenged the district court’s denial of their motion for a judgment of acquittal contending that a check kiting scheme requires kiting between at least two banks. The Court of Appeals framed the issue as "whether a check kiting scheme involving only one bank, where the defendant moves funds between various accounts at that institution, violates the bank fraud statute." The Court held that while the typical check kiting scheme involves more than one bank, § 1344 does not criminalize only the typical scheme. The Court held that the focus is on whether there was intent to defraud the bank. Since the defendants maintained 30 accounts at the same bank and maintained an elaborate system of writing large checks between those accounts to cover the overdraft, the Court found the requisite fraudulent intent and affirmed the convictions. The Court of Appeals also rejected a related challenge to the bank fraud convictions on the ground that the bank was aware of the overdrafts and consented to them. The Court held that "it is not a defense that an account holder colluded with a bank officer to commit bank fraud. It is the financial institution itself - not its officers or agents - that is the victim of the fraud." Moreover, the Court indicated that there was substantial evidence that the defendants meticulously moved funds between accounts to avoid detection of the overdrafts. Accordingly, the jury’s conclusion that the scheme was intended to defraud was supported despite the fact that a bank officer was involved in the scheme.

The third issue involved the jury instructions on the bank fraud charge where defendants asserted that the district court limited the jury’s ability to consider their defenses of good faith and lack of specific intent. Defendants argued that they were not given a meaningful opportunity to argue that acquiescence, receipt of fees, and repayment of the overdraft supported their complete good faith defense. The Court of Appeals rejected this argument finding that the instructions, read as a whole, accurately informed the jury that good faith was a complete defense negating the necessary specific intent to defraud the bank which the Government bore the burden of proving beyond a reasonable doubt. The district court was found to have properly instructed the jury that payment of the overdrafts could be considered in determining whether the defendants acted in good faith but that the bank’s charging of interest and fees on the overdrafts does not negate the defendants intent to defraud.

Numerous confrontation clause issues where then raised. First, the defendants asserted that the district court improperly limited their attempts to cross examine a bank employee regarding a consent agreement that the bank entered into with the FDIC in an unrelated matter. The defendants sought to show that the bank was motivated to cooperate with the Government given that it was subject to a state investigation in a different matter. The Court of Appeals rejected this argument because the state investigation was initiated years after the bank began cooperating in defendants’ matter and therefore the "marginal relevance and risk of delay and confusion" supported the decision to limit cross examination on this issue. The admission of certain documentary evidence was also challenged based on the Confrontation Clause. The residential and commercial mortgage fraud charges involved a total of 40 loans. The Government introduced documentary evidence relating to each loan including bank statements and either tax returns or tax abstracts from each borrower. However, only six borrowers testified at trial regarding their loan files. The only evidence introduced by the Government regarding 10 of the loans included bank records and tax returns and no witness testimony. Two separate challenges were raised to the admission of the evidence.

First, defendants maintained that their Confrontation Clause rights were violated by the admission of declarations by records custodians used to authenticate the bank statements of individual borrowers. The Government introduced the bank records from various banks which held accounts of mortgage customers who used the services of the defendants. These statements were used by the Government to demonstrate that the loan applications contained false information. The bank statements were introduced as business records pursuant to Fed.R.Evid. 803(6) and were authenticated with sworn declarations under Rule 902(11). The defendants did not challenge the information contained in the records as hearsay, but rather only "the testimonial statements in the certifications used to lay the foundation for their admission" as violative of the Confrontation Clause, since they did not have the opportunity to cross examine the certification declarant. The Court of Appeals did not determine whether the declarations admitted pursuant to Rule 902(11) were "testimony" subject to the Confrontation Clause but held that assuming, without deciding, that if they were testimonial, their admission for purposes of authenticating bank statements was harmless. The Court of Appeals stated that in determining whether the erroneous admission of testimonial evidence in violation of the Confrontation Clause is harmless, the following must be considered: "the importance of the testimony to the Government’s case, the cumulative nature of the evidence, the existence of corroborating evidence, the extent of cross examination allowed in the case, and the strength of the Government’s case as a whole." Noting that the defendants did not challenge the content of the bank records, but only the declarations stating that they were business records kept by the banks, the declarations did not add to the Government’s case against the defendants for submitting false loan applications. Therefore, the Court found the admission of the declarations to be harmless beyond a reasonable doubt.

The next Confrontation Clause challenge was to the admission of tax returns and abstracts for the individual borrowers. This claim was also rejected because the Court of Appeals found that the tax abstracts and tax returns were not hearsay at all, nor did they contain imbedded hearsay, because they were not offered for the truth of the matter asserted. The Court held that the returns were not admitted to show the truth of the matter asserted, viz., the actual income of the borrowers, but rather only the difference between the returns submitted to the IRS and those submitted as past of the loan applications. The Court concluded that "Nonhearsay use of evidence as a means of demonstrating a discrepancy does not implicate the Confrontation Clause."

One of the individual defendants raised several other issues which were denied with little significant analysis based on the facts of the case including the sufficiency of the evidence, misjoinder and the admission of rebuttal evidence. His claim of prosecutorial misconduct, however, merits reference. Although also summarily dismissed, the Court of Appeals did note its disapproval of the district court’s method of addressing the defendant’s motion for a mistrial. The defendant objected to the Government’s questioning of the defense investigator wherein the Government suggested that ethical rules were violated by approaching a prosecution witness known to be represented by counsel. The district court found the questioning to be a personal attack on defense counsel and directed the Government to make a statement to the jury apologizing for any suggestion that counsel or the investigator violated any ethical rules. That line of questioning was also struck. While the Court of Appeals did not approve of this method of addressing the problem, it held that it helped cure the improper line of questioning and concluded that the denial of a mistrial was not an abuse of discretion.

The Court of Appeals also rejected a challenge to the sentences imposed, all which appear to have been within guideline sentences, based on reasonableness. Challenges to the calculation of the amount of loss, using the 2000 version of the Guidelines Manual which was applicable, were also rejected. First, the inclusion of the amount of a defaulted commercial loan was challenged. The bank had charged off a balance of $165,000 on the defaulted loan and received $27,000 out of the bankruptcy proceedings of the borrower. The district court included an amount of loss of $138,000 despite the fact that the bank maintained a claim on collateral property which was subordinate to another bank and the bankruptcy trustee. The Court of Appeals held that given that the bank’s claim was subordinate, and the uncertainty of collecting anything from the bankruptcy estate, the district court did not clearly err by including the amount of loss of $138,000.

Additionally, it was argued that the inclusion of $132,000 in the amount of loss for bargained-for interest related to the defaulted residential loans was improper. The defendant relied on the change in the 2001 version of the Guidelines which excluded "interest of any kind" from the loss calculation. The 2000 version of the Guidelines was used because it resulted in a lower guideline range than the 2001version since the amendments to the 2001 version significantly increased the enhancements related to the amount of loss. However, the Court of Appeals noted that if the change relating to the inclusion of interest in the calculation of the amount of loss was clarifying rather than substantive, then the interest could have been excluded from the amount of loss calculation. The Court of Appeals declined to address the issue since any error resulting from the inclusion of the interest in the amount of loss would have been harmless. The total amount of loss was $2,729,192, including the $132,000 bargained-for interest and the enhancement range applicable was between $2.5 million and $5 million. Since deducting the amount of interest would not have impacted the Guideline calculation, the Court of Appeals held that remand was not warranted.

Defendant Breached Plea Agreement in Seeking Departure for Overrepresentation and Downward Variance Based on Personal Characteristics

In U.S. v. Williams, No. 05-4153, Dec. 31, 2007, the Circuit held that a defendant who sought departures for over-representation of criminal history and mitigating personal circumstances, and a downward variance based on personal circumstances, breached his plea agreement which stated “neither party will argue for the imposition of a sentence outside the Guidelines range that results from the agreed total Guidelines offense level.”

The court first established the same de novo standard of review in considering a defendant's breach of a plea agreement as with a government breach case. The government bears the burden to prove the breach by a preponderance of the evidence.

Next, in finding that Williams breached the plea agreement, the court rejected his arguments that 1) post-Booker, defendants should be able to argue for departures and non-Guideline sentences, especially because the sentencing courts are required to consider the factors set forth in § 3553 to determine whether a non-Guideline sentence is appropriate and 2) he was not precluded from arguing what the appropriate criminal history category should have been because the plea agreement did not stipulate a specific criminal history category. First, the stipulations in the agreement unambiguously prohibited Williams from making downward departure motions. Thus, the fact that Booker made the Guidelines advisory, and therefore enabled district courts to depart from the Guidelines, has no bearing on the fact that Williams agreed not to make such arguments. Second, Williams' did not dispute that his criminal history was correctly calculated under the Guidelines but argued that, notwithstanding that proper calculation, he was entitled to receive a departure under the Guidelines on the ground that a criminal history category III overstated his criminal history. Thus, when Williams argued about his criminal history, he was explicitly seeking a departure notwithstanding that the plea agreement unambiguously prohibited departure requests.

The court vacated the sentence imposed and remanded to the District Court for re-sentencing before a different judge, pursuant to the plea agreement.

Third Circuit widens circuit split on guilt-assuming hypotheticals; reaffirms breadth of Rule 404(b) in fraud cases

In affirming a mail fraud conviction, the Third Circuit has held in a 2-1 decision that guilt-assuming hypothetical questions may sometimes be asked of defense character witnesses, widening an existing circuit split on this issue. The Court also approved the admission of a substantial amount of other-bad-acts evidence to prove intent, thereby reaffirming the broad reach of Rule 404(b) in fraud cases.

The case, United States v. Kellogg, No. 05-1893, involved allegations that the owner of a water testing laboratory defrauded his customers by reporting to them that certain analyses were performed using one particular EPA methodology when, in fact, a different EPA methodology had been used. Intent to defraud was the principal issue at trial, with the defendant maintaining that any reporting errors as to the methodology used were accidental. Substantial evidence supported the defendant's claim, including a lack of motive arising from the near-identical scope and cost of the two methodologies, and evidence that this type of error could occur through computer glitches.

To prove fraudulent intent, the government presented 404(b) evidence that the defendant's certification to test drinking water had been revoked a year earlier by the Pennsylvania DEP. The decertification resulted from a series of citations for negligent laboratory practices, a small minority of which involved misrepresentations to DEP. The defendant argued that this evidence should have been excluded because the vast majority of it involved alleged negligent (as opposed to deceptive) conduct, and in any event failed the Rule 403 balancing test because it related to public drinking water, which was not at issue in the fraud prosecution.

In order to rebut the government's case of intent, the defendant offered several character witnesses who testified both as to their opinion of the defendant's truthfulness and as to his community reputation for the same. The prosecutor cross-examined at least one of these witnesses by asking him whether he would consider truthful a hypothetical person who had done what the government alleged the defendant had done. The witness promptly answered that such a person would not be truthful.

As to the Rule 404(b) evidence, the Third Circuit ruled it admissible on a theory that deceptive conduct in similar matters close in time to the alleged fraudulent conduct is admissible to prove intent. The Court did not address the defendant's argument that most of the admitted evidence involved alleged negligent, as opposed to intentional, conduct.

As to the guilt-assuming hypothetical, the Court ruled that such questions can never permissibly be asked of a reputation character witnesse (because any answer would be irrelevant), but that there is no "per se rule" prohibiting their use with opinion character witnesses. In the latter instance, the questions are probative of bias and, if properly framed as a hypothetical, do not impermissibly infringe on the presumption of innocence. In so holding, the Third Circuit sided with the D.C. Circuit, against the weight of authority from the Second, Fourth, Seventh, and Eleventh Circuits, all of which hold guilt-assuming hypotheticals improper as to both reputation and opinion character witnesses. Judge Roth disagreed with the majority in Kellogg, but concurred in the result because she deemed the error harmless.

3d Circuit reverses probationary sentences in fraud case

In United States v. Ali, (3d Cir. Nov. 27, 2007), the Third Circuit reversed probationary sentences in a fraud case, in which defendants Faridah Ali and Lakiha Spicer obtained federal money allocated to a community college to fund an adult education program. The Third Circuit held that the district court erred in its initial Guidelines calculation, that it relied on inappropriate factors for the downward departures, and that the resulting sentences were unreasonable, and thus vacated the sentences and remanded for resentencing.

The Third Circuit determined that the district court erred under step one of the sentencing process, the Guidelines calculation, because it rejected a preponderance standard for the loss calculation in favor of a reasonable doubt standard in Ali’s case and, further, failed to specify an estimate of the loss amount. The district court ultimately assessed a 15-21 month Guideline range (level 14, category I) for Ali, whereas Probation had calculated a 41-51 month range (level 22, category I). The Court also rejected the argument that the preponderance standard as applied to the sentencing calculations raised concerns under the Fifth or Sixth Amendments.

With respect to departure determinations under step two, the Third Circuit determined that the district court erred in granting downward departures on the following grounds: (1) good works and community support; (2) lack of initial intent to defraud; (3) Spicer’s minor role; and (4) the "exculpatory no" doctrine in Spicer’s case. The Court also found the district court’s analysis under step three of the sentencing process to be flawed because it was unable to meaningfully consider the recommended Guidelines range as required by § 3553(a)(4), given that its error at step one and its flawed departure analysis in step two tainted step three.

Admissibility of Co-conspirators Statements

In United States v. Weaver, No. 04-3888 (3d Cir. November 7, 2007), the Court of Appeals reversed the district court’s grant of the Defendant Weaver’s motion in limine precluding the Government from introducing a recorded telephone conversation between an alleged co-conspirator and her sister wherein the co-conspirator made statements implicating Weaver in a fraud scheme. The district court granted the motion, without having held a hearing, finding that the statements made by the co-conspirator were not in furtherance of the conspiracy and seemed to "constitute derogatory opinions having no conceivable value." The Court of Appeals rejected those conclusions and found the statements to be admissible under Federal Rule of Evidence 801(d)(2)(E).

Dolores Weaver was the director of an educational program at the Community College of Philadelphia (CCP). She was alleged to have been involved in a scheme with Faridah Ali, the assistant director of the Sister Clara Mohammed School wherein CCP made rental payments to the Sister Clara School for classes that were nonexistent. Weaver and Ali allegedly divided the money. On September 4, 2001, Ali had a conversation with her sister, Zaynah Rasool, discussing various matters involving the school including the arrangement with CCP. Ali complained about Weaver and made reference to problems with a teacher at the school and the potential of jeopardizing "what we got with the college."

The Government appealed the district court’s finding that the conversation between Ali and Rasool was inadmissable hearsay asserting that it was excepted from the definition of hearsay under Rule 801(2)(2)(E). The Court of Appeals began its analysis by first indicating that "In order for an out-of-court statement to meet the co-conspirator exception: the district court must find by a preponderance of the evidence that: (1) a conspiracy existed; (2) the declarant and the party against whom the statement is offered were members of the conspiracy; (3) the statement was made in the course of the conspiracy; and (4) the statement was made in furtherance of the conspiracy." Slip op. at p. 6. Weaver did not contest the district court’s implied findings with regard to the first three requirements and argued that the district court was also correct in finding that the statements were not made in furtherance of the conspiracy. After a detailed review of its prior cases on this issue, the Court of Appeals indicated that Ali’s statements to Rasool served to inform her of the status of the conspiracy and therefore were in furtherance of the conspiracy. The Court noted that Ali’s statements informed Rasool that Ali was dependant on Weaver to make sure that CCP did not discover that her school was a sham site and that Weaver was requesting a 50% kickback from the rent payments. The Court further recognized, however, that the statements explaining the current status of the conspiracy would only be in furtherance of the conspiracy if Rasool was also a member of the conspiracy as the Government alleged. Since the district court did not hold an evidentiary hearing to determine whether the Government can demonstrate Rasool’s involvement in the conspiracy, the Court of Appeals remanded and indicated that if at a hearing Rasool is found by a preponderance of the evidence to be a member of the conspiracy, the statements concerning the status of the conspiracy are admissible.

The Court of Appeals also determined that Ali’s statements to Rasool cautioning Rasool not to upset a certain teacher because that teacher might report that no classes are being taught at the school are admissible whether or not Rasool is determined to be a member of the conspiracy. The Court reasoned that the purpose of Ali’s statements to that regard were for the purpose of concealing the conspiracy so that it may continue thus furthering the conspiracy.
Lastly, the Court of Appeals found that the district court was wrong in finding that the September 4 conversation was irrelevant. The Court held that Ali’s statements to Rasool confirmed the essential elements of the conspiracy and therefore were relevant under Federal Rule of Evidence 401.

Jury Instructions in Religious Tax Protestors' Case Constructively Amended Indictment

United States v. McKee, No. 05-3297 (Oct. 29, 2007), involved the prosecution of three members of the Reformed Israel of Yaweh ("RIY") religious sect, which opposes the payment of taxes to support war. Two of the defendants were owners of a small carpentry and home renovation business, and the third was the wife of one of the defendants. The Third Circuit vacated the defendants’ convictions for failing to pay employment taxes because the jury instructions constructively amended the indictment. The indictment charged the defendants with preparing, signing, and causing the filing of false employment tax returns. The instructions listed several examples of conduct sufficient to establish the charged conspiracy, including falsifying records and failing to report wages to an accountant. Although the government introduced evidence that the defendants falsified books and records and withheld information from the company’s accountant, this conduct was never charged in the indictment. Thus, the Court held, the instructions had the effect of broadening the indictment to include uncharged conduct. The Court further noted how difficult it is for a defendant to prove actual prejudice in this situation and went on to find that the government failed to rebut the presumption of prejudice arising from the constructive amendment.

The Court rejected most of the defendants’ other arguments. It held that the government established sufficient evidence on the conspiracy and tax evasion charges and rejected the defendants’ challenges to the admission of certain evidence. Notably, the Court found sufficient proof of an agreement to conspire from evidence of RIY’s anti-tax teachings, the defendants’ commitment to those teachings, and their positions within RIY. However, the Court found insufficient evidence to sustain the wife’s conviction for failing to file individual tax returns. The government claimed that this defendant, who served as the company’s bookkeeper, had a tax obligation (despite the fact that she did not receive a salary from the company) because she used the proceeds of three company checks to purchase two cars and paint her house. The Third Circuit rejected this argument and held that the government did not prove that the proceeds were intended as compensation for her bookkeeping work---they were just as likely to have been contributions of marital support or a gift from her husband. Moreover, there was no evidence that the defendant knew that the checks were intended as income.