Friday, September 23, 2011

Honest Services Fraud and Bribery convictions upheld

In US v. Wayne R. Bryant and R. Michael Gallagher, Nos. 09-3243 & 09-3275 (click here) (Aug. 25, 2011), the Circuit affirmed the convictions of Bryant and Gallagher for honest services fraud and bribery in connection Gallagher, dean of a NJ medical school, giving Bryant, a state senator, a "low-show" job in exchange for Bryant funneling state money to the medical school. The Circuit rejected defense arguments that the government interfered with defense access to witnesses, that the evidence was insufficient, and that the jury instructions were defective.

Due Process/Interference with the Defense

The Court rejected a due process challenge to language that the government had placed on the face of every grand jury subpoena issued in the case, warning witnesses that “disclosure of the nature and existence of this subpoena could [and, in at least one case, “would”] obstruct and impede a criminal investigation . . . .” The defense contended that that language interfered with its access to witnesses by restricting the witnesses’ free choice whether to speak with the defense. Even though the warning language tracked the language of the obstruction of justice statute, and even though the U.S. Attorney implied a judicial imprimatur by placing the language on the face of the subpoenas, the Court characterized the language as a mere “request[] that witnesses practice discretion,” which “forthright citizens” would be inclined to heed. Thus it found no due process violation.

When defending its warning language in the district court, the U.S. Attorney’s Office for the District of New Jersey had cited an office policy of putting that language on every single grand jury subpoena. The Bryant Court criticized that blanket approach as “bad policy,” but preserved the prosecutors’ discretion to decide when to warn witnesses that they risk prosecution for obstruction if they speak with the defense.

Honest Services Fraud

The jury in Bryant was instructed solely on a bribery theory of honest services fraud, which survived the Supreme Court’s 2009 Skilling decision. Thus, the defense challenged the contours of the bribery theory, with respect to evidentiary insufficiency and instructional error.

In sum, the Court reaffirmed that honest services fraud bribery requires a quid pro quo exchange of a thing of value for an official act; that is, an intent to influence an official action (by the payor) and to be influenced (by the payee). It found the evidence plainly sufficient, and declined to adopt a more restrictive interpretation of bribery in light of Skilling. On the latter point, it rejected a defense challenge to the “stream of benefits” (or “retainer”) theory of bribery. The Court also endorsed, for the first time, an instruction that permits conviction in the presence of a “dual purpose” for the challenged payments. That is, a payor who makes a payment with the intent to influence official action is guilty even if he also intends to compensate the payee for legitimate work. The Court does not appear to have intended to use “dual purpose” to dilute the requirement of a quid pro quo, however. It referred to the secondary purpose as an “additional hope” of receiving legitimate work – in addition, that is, to the required corrupt intent to influence official action. Thus “dual purpose” will likely function in the future as another in a string of engraftments to the honest services fraud instruction that tell juries what is not a defense, rather than what the government must prove.
Section 666 Bribery

The Bryant Court declined to reach the most significant open issue in this circuit with respect to Section 666 bribery: does it require a quid pro quo exchange? Because the Court found that the jury instructions did require an exchange, it did not have to decide whether omitting an exchange was error.

The defense had contended that the jury instructions improperly substituted the mere temporal overlap of payment and official action for the required exchange, by using the phrase “while intending to influence [or to be influenced],” “while” being a temporal concept rather than a causal one. The Court held that the inclusion of the word “while” did not dilute the central concept of exchange that the intent language embodies.

Mail Fraud in Connection with Pension

The Court also addressed several arguments related to “traditional” mail fraud, in connection with counts alleging that Bryant had defrauded the New Jersey Board of Pensions and Benefits. Here the Court left open another significant issue: whether to join other circuits in rejecting the doctrine of mail fraud convergence. The doctrine requires proof that the defendant made a false statement to the actual victim. Finding that Bryant had in fact made a false statement directly the victim, the Court declined to decide whether convergence is required.

A practice note on this point: the government typically argues that the circuit already rejected mail fraud convergence in United States v. Olatunji, 872 F.2d 1161 (3d Cir. 1989), even though (as the defense contended in Bryant) any such ruling in Olatunji would have been dicta. Bryant makes clear that the circuit views the issue as open.

Thursday, September 22, 2011

47 year prison terms affirmed for brothers convicted of Hobbs Act robbery of local drug dealer

Brothers Barron and Barry Walker were convicted after trial of various offenses including drug trafficking, firearm and robbery charges. Each was sentenced to a prison term of 47 1/2 years. On appeal, the brothers challenged their convictions and sentences on multiple grounds, including improper joinder, sufficiency of the evidence, improper expert testimony, and an alleged Brady violation. The Third Circuit, in United States v. Walker, 10-3090 (3d Cir. Sept. 13, 2011), quickly disposed of the severance claims, holding that joinder of all counts against both brothers was proper, despite the inclusion of two escape-related charges solely against Barry Walker, where the escape charges arose directly from the earlier drug, conspiracy and gun charges against both brothers. Nor, according to the Third Circuit, did the district court abuse its discretion in declining to grant Barron Walker's motion to sever his trial from his brother's trial where the issues were uncomplicated, the trial lasted only four days, included only two defendants and encompassed only three distinct episodes of criminal conduct.

With regard to the sufficiency of the evidence on the 18 U.S.C. § 924(c) charge (use of a firearm in furtherance of drug distribution), the Court found that the testimony of the confidential informant and a cooperating co-defendant, while not overwhelming, was sufficient to sustain the convictions. The witnesses testified that they observed Barron and Barry Walker arrive together in the same vehicle, that Barron had cocaine in his possession, and that Barron and Barry jointly made a cocaine sale while Barry wore a gun on his hip.

Next, the Court addressed the brothers' challenge to the government's expert on cocaine trafficking. In order to support the interstate commerce element of the Hobbs Act robbery charge, the government's expert, a 30 year law enforcement officer and narcotics investigator, testified that cocaine is manufactured outside of Pennsylvania and transported into the State. The Walkers' argued that the expert's testimony was unreliable because they could have possessed synthetic cocaine and the expert was unable to distinguish between synthetic and plant-based cocaine. The Third Circuit rejected this argument and agreed with the district court's conclusion that the expert's method for reaching his conclusions was reliable. It found that the expert's opinions were based on his personal experiences interacting with drug traffickers and law enforcement personnel over 30 years. Accordingly, the Court concluded that the expert's testimony was properly admitted.

With regard to the sufficiency of the evidence on the Hobbs Act robbery charge, the Third Circuit held "that by presenting evidence that (1) the Walkers attempted to rob a cocaine dealer of a de minimis amount of drugs and cash, and (2) the drug dealer's cocaine originated outside of Pennsylvania, the government presented sufficient evidence" to satisfy the interstate commerce element of the Hobbs Act. The Court acknowledged that the use of the Hobbs Act to prosecute "what could be considered a fairly garden-variety robbery gives us some pause," especially in light of the extremely harsh sentences that resulted. Nevertheless, the Court "trust[s] and expect[s]" that federal prosecutors will exercise their broad prosecutorial discretion "to make the most effective use of federal resources, to avoid supplanting the state criminal systems that quite ably address classic state-law crimes, and to seek just and appropriate criminal sentences in the course of their representation of the United States."

Finally, the Third Circuit addressed the defendants' claim that the government withheld exculpatory evidence material to their defense in violation of Brady v. Maryland, 373 U.S. 83 (1963). The Court found that the government' s failure to disclose information regarding an incident where their confidential informant was found to be in possession of 0.18 grams of crack cocaine was not material to the instant prosecution where the CI was not the only witness against the defendants and had already been thoroughly impeached by the defense team.

For the foregoing reasons, the Third Circuit affirmed the convictions and sentences of both Barron and Barry Walker.

Monday, September 19, 2011

General Criminal Venue Provision Applies When Part of Offense Committed in US & Illicit Sexual Conduct Outside the US Statute Constitutional

In United States v. Pendleton, No. 10-1818, September 7, 2011, the Court of Appeals considered: (1) whether the general criminal venue provision of 18 U.S.C. § 3238 applies when a defendant commits part of his offense inside the United States; and (2) whether 18 U.S.C. § 2423(c) and (f)(1) of the PROTECT Act, which criminalize noncommercial illicit sexual conduct outside the United States, are a valid exercise of Congress’s power under the Foreign Commerce Clause of the United States Constitution (Article I, Section 8, Clause 3).

In 2005, Thomas Pendleton boarded a plane in New York City bound for Hamburg, Germany. Six months after his arrival there, he sexually assaulted a 15-year-old boy. German authorities arrested him, and a jury in Hamburg found him guilty of "engaging in sexual acts with a person incapable of resistance." After serving nineteen months in a German prison, Pendleton returned to the United States, where he was arrested and indicted in the District of Delaware on one count of engaging in noncommercial illicit sexual conduct in a foreign place, in violation of 18 U.S.C. § 2423(c) and (f)(1).

Although Pendleton’s offense began when he initiated foreign travel by boarding a plane bound for Germany in the Eastern District of New York, he "committed" the offense when he engaged in a illicit sex act in Germany. Because the criminal conduct was "essentially" foreign, the district court did not err in applying the general criminal venue provision, and venue was proper in Delaware.

As for the constitutionality of 18 U.S.C. § 2423(c), because the jurisdictional element in this section has an "express connection" to the channels of foreign commerce (the first prong of the Lopez three part framework to determine whether a statue has a constitutionally tenable nexus with foreign commerce), it is a valid exercise of Congress’s power under the Foreign Commerce Clause.

Friday, September 09, 2011

Use immunity for defense witness

In US v. Jamaal L. Mike, No. 10-1394 (Aug. 23, 2010) (click here), the 3d Circuit held that the district court properly denied a defense request for use immunity for a defense witness because the proffered testimony was not "clearly exculpatory" in view of the evidence undercutting both the proffered testimony and the defense theory of the case. (The Court also addressed two other issues unique to the Virgin Islands that are not reviewed here.)

Mike was charged with aiding and abetting the receipt of a gun acquired outside his state of residence. The government's evidence was that another person, Francis, purchased an AK-47 rifle in Florida and had it shipped to a false name in the Virgin Islands. Mike arranged with two others to retrieve it from the Post Office, having them supply the false name. They were arrested once they placed the package in the car. Francis was also arrested, and he pleaded guilty. But he told agents during plea negotiations that Mike and the others did not know what was in the package. Mike then asked the court to grant Francis use immunity, and the court denied the request. Mike was convicted after a trial.

On appeal the 3rd Circuit upheld the conviction, ruling that Francis's testimony would not have been "clearly exculpatory." Following US v. Smith, 615 F.2d 964 (3d Cir. 1980), the Court explained that the right to Due Process includes the right to have "clearly exculpatory" evidence presented to the jury, and this must include the right to compel the testimony of a defense witness who asserts the Fifth Amendment right to remain silent. "[T]he only way to compel this evidence is to grant [use] immunity." For this reason, courts have the inherent judicial power to grant defense witnesses use immunity. Smith imposed five conditions that must be met: "[1] immunity must be properly sought in the district court; [2] the defense witness must be available to testify; [3] the proffered testimony must be clearly exculpatory; [4] the testimony must be essential; and [5] there must be no strong governmental interests which countervail against a grant of immunity." Id. at 972.

The principal issue here concerned condition #3 - whether the evidence was "clearly exculpatory." In US v. Thomas, 357 F.3d 357 (3d Cir. 2004), the Court explained that use immunity may be denied when the exculpatory nature of the testimony is "at best speculative... because a credibility determination would [be] required in order to determine which parties are more credible." Id. at 365-66. The Court here ruled that Francis's testimony would not have been clearly exculpatory because there was "evidence in the record undercutting the testimony Francis might have given and Mike's theory of the case." A juvenile who was with Mike testified that Mike gave him the false name on a slip of paper to use to pick up the package, and also that Mike wanted him to take the rap for the charge since a conviction for him would only mean a stay in a Boy's Home. In addition there were numerous phone calls between Francis and Mike on the days the AK-47 was purchased, the day it was sent, and the day it was picked up. Concluding that the jury here was confronted with "more than just a credibility determination," the Court held that Francis's testimony was not clearly exculpatory.

Chief Judge McKee dissented, stating, "I do not believe our precedent can be interpreted to preclude use immunity for Francis merely because his credibility would have been in issue had he testified. Such a broad prohibition of use immunity would be tantamount to eliminating that tool altogether, even when a witness's testimony was required to satisfy the requirements of due process, because credibility is always an issue whenever any witness testifies.... Here, the district court's ruling deprived Mike of the only witness who could testify about Mike's knowledge of the contents of the package he received."

Practice note: This decision leaves the definition of "clearly exculpatory" very murky. Chief Judge McKee is surely right in stating that since the jury must always make a credibility determination regarding a witness, that fact cannot preclude use immunity. Likewise, the fact that the government has other evidence contradicting the defense theory of the case also cannot be a basis for precluding use immunity. If it were, then use immunity would seem to be available only when the government's case was insufficient.

Self-representation; CCE: and 851 notice

In US v. Prince Isaac, No. 08-4755 (Aug. 23, 2011) (click here) the 3rd Circuit held:

(1) Defendant who was representing himself was not denied his 6th Amendment right of self-representation by judge's failure to include him in two side-bar conferences (at which stand-by counsel did participate) since defendant never objected and seemed to acquiesce in stand-by counsel's participation;

(2) Instruction on CCE was error, as conceded by the government, because several of the counts it listed as counts that could qualify as the predicate drug distribution felony did not qualify; but error, to which there was no objection, did not rise to plain error because jury found defendant guilty on all the drug distribution counts, thus easily satisfying this element;

(3) The requirement of written notice of a prior conviction under 21 USC 851 (to enhance the mandatory sentence) is jurisdictional, and the lack of actual notice prior to trial in this case constituted plain error.  "[T]he requirements set out in 851 are mandatory and a district court may not impose an enhanced sentence unless the defendant has been notified of the 'strikes' in compliance with these provisions."

Fumo Sentencing Errors

In US v. Fumo and Arnao, Nos. 09-3388 & 09-3389 (Aug. 23, 2011) (click on link to see decision), the Third Circuit upheld Fumo's conviction, but reversed the sentences for both Fumo and Arnao, finding a number of sentencing errors.  The holdings of broadest significance were that the district court judge failed to follow the 3-step sentencing process, in particular the 2nd step, in which he was required to identify the new Guidelines range after granting a departure, and that he failed to specify whether he was granting a departure or a variance.

Fumo and Arnao were charged with multiple counts of fraud, tax evasion and obstruction of justice, arising from "one of the larges political scandals in recent state history."  Fumo was a powerful PA state senator, and Arnao was a Senate employee.  Fumo required Senate employees to attend to his personal needs and political interests, including housekeeping and political fundraising.  He also arranged state contracts for friends and supporters.  In order to conceal his personal use of public funds, he provided false job descriptions and failed to disclose the nature of their work.  He also funneled state money to a non-profit he founded, Citizens Alliance, for which Arnao became the director.  Fumo and Arnao used Citizen Alliance funds for their personal benefit and for political purposes, in violation of its non-profit status.  Fumo also used his position on the board of Independence Seaport Museum to take pleasure cruises on its yachts and to obtain other personal benefits.  When reporters with the Philadelphia Inquirer began investigating, Fumo had his emails deleted, and later "wiped" his computers to prevent forensic analysis. Following a lengthy trial, Judge Buckwalter sentence Fumo to 55 months and Arnao to one year in prison.  Both sentences were substantially below the Guidelines ranges.

Trial issues (Fumo's cross-appeal):
1) Evidence the government presented regarding the state Ethics Act was relevant and properly admitted in light of Fumo's defense that there were no rules or laws that barred use of Senate resources for personal benefit.  The Ethics Act was relevant to show that Fumo was acting to deceive the Senate and that he had fraudulent intent. The judge made clear to the jury that Fumo was not on trial for violating the Ethics Act.
2) Juror's comments on Facebook and Twitter during deliberations did not require reversal because they did not prejudice Fumo, and the postings were vague and "virtually meaningless."  Judge Buckwalter, moreover, provided excellent intructions to the jury, which the Circuit "enthusiastically endorse[d]", focusing on the importance of not consulting websites or blogs or posting case information on social media. 
3) Defense counsel's allegation that another juror learned during trial about Fumo's past overturned conviction was based on a double-hearsay affidavit and did not establish "substantial prejudice."  Opinion sets out 6-factor test for substantial prejudice.

Sentencing Issues (Government's appeal):
1)  Judge miscalculated the amount of loss.  (a) The government made out a prima facie case of $1 million loss due to Fumo arranging for overpayment of Senate employees, and Fumo did not show this estimate was inaccurate.  (b) Judge abused his discretion in not ruling on whether loss should include $150,000 contract awarded to Arnao's husband for no services.  (c)  Judge should have included in loss amount the lost rental value and unnecessary improvements made on a property Fumo induced Citizens Alliance to purchase and furnish for his use.
2) Judge should have applied 2-level enhancement for acting on behalf of a charitable organization USSG 2B1.1(b)(8)(A), based on Fumo's misrepresentation that he was acting on behalf of Citizens Alliance, since Fumo acquired funds from PECO for Citzens Alliance, intending to divert them to his personal use.
3) Judge  should have applied enhancement for use of sophisticated means, USSG 2B1.1(b)(9)(C), since Fumo's use of sham entities to conceal flow of funds to Fumo qualified as sophisticated means.
4)  Judge erred by not calculating the final Guidelines range, in Step 2 of the sentencing process, after granting what the judge initially said was a departure for Fumo's good works.  (The 3-Step sentencing process is: (1) calculate the Guidelines range: (2) address any departure arguments and specify effect on Guidelines range of any departures granted; and (3) impose sentence after consideration of 3553(a) factors and consideration of any arguments for variances.)
5)  Judge erred by failing to make clear whether he had granted a departure or a variance, since he called it both at various times.
6)  Judge correctly included pre-judgement interest in restitution, since this is permitted under the VWPA and is compensatory in nature.
7)  Judge gave a sufficiently thorough explanation for the variance below the Guidelines in Arnao's case to show that he had fully considered the government's arguments and the statutory factors.

Third Circuit Finds Defendant Was Not Seized Where He Briefly Paused and Raised Hands Before Fleeing

In United States v. Amos , ---F. 4th---, 2023 WL 8636910 (3d Cir. Dec. 14, 2023), the Third Circuit affirmed a district court's denial o...