Court of Appeals Identifies The Issues In Federal Criminal Appeal

July 31, 2008 by Carl Lietz

Recently, the Eleventh Circuit (which is headquartered here in Atlanta, Georgia) identified the issues that it will address in a federal criminal appeal involving the federal mail fraud statute. As both Paul Kish and I have discussed here and here, one of the main issues in the case is whether the pattern jury instruction that courts typically utilize in federal fraud cases accurately defines what the government must prove in order to convict an individual who is charged under the federal mail fraud statute.

In Paul's previous post, he noted that, initially, the court of appeals concluded that the pattern jury instruction is deficient in that it failed to require the government to prove that the defendant participated in a scheme that was "reasonably calculated to deceive persons of ordinary prudence and comprehension." Therefore, since the pattern instruction failed to include this important language, the Eleventh Circuit reversed the fraud convictions in the Svete case.

Svete's victory, however, was short lived. As I previously discussed, not long after this ruling, the Eleventh Circuit vacated its opinion and ordered that the case be heard by the entire court, rather than just the three judges that sat on the panel. I also noted that although the opinion vacating the initial ruling did not identify the issues that the Court will focus on in the en banc sitting, it is safe to assume that the jury instruction issue would in fact be the focus.

Recently, the Court confirmed that it will indeed focus on the jury instruction issue when the case is heard by the entire court. According to a letter recently sent to the parties in the case, the Court will focus on "whether the district court erred when it gave the pattern jury instruction about mail fraud . . . and declined to instruct the jury that the government must prove that the defendants devised or participated in a scheme reasonably calculated to deceive persons of ordinary prudence and comprehension." In addition, however, the Court will also address whether it should overrule the decision that established the rule which now requires the Government to prove that a defendant participated in a scheme reasonably calculated to deceive persons of ordinary prudence and comprehension. As noted previously, this is an important case, and one that should be followed closely by attorneys that defend individuals charged with white collar crimes.

Sentencing First Offenders in Federal Court: Is the Tide Finally Turning?

July 28, 2008 by Paul Kish

Many people, lawyers included, are surprised when I tell them there is no such thing as a "first offender" in federal court. Many years ago, there were "Youthful Offender" statutes in federal court, but in our efforts to "shock and awe" crime, we completely eliminated all vestiges of the idea that young people or first offenders should get a break. In recent years, some breakthroughs I have written about in earlier posts now allow judges more freedom when imposing sentences for people convicted of federal crimes. A recent case and a survey conducted by the United States Sentencing Commission seem to give additional arguments to those trying to get the justice system to realize that a person who has led a previously honorable life needs to be sentenced very differently than one who has been in trouble before.

As we know, the Sentencing Guidelines are a grid based on two factors: Offense Level and Criminal History Category. There are six separate Criminal History Categories, with "criminal history points" assigned for various interactions with the criminal justice system. Arrests do no count, nor do convictions more than 10 years ago. However, and here's the important part, the lowest category (Category I) applies to everybody who has either 0 or 1 "criminal history points." This means that a 64 year old businessman never previously arrested is in the same category as a 35 year old with 19 arrests, and all of his convictions were over 10 years ago. In the major 1995 case involving the Guidelines, the United States Supreme Court said that a judge would "abuse his or her discretion" by trying to go BELOW Category I because the Sentencing Commission already took into account the low likelihood of recidivism when it created Category I.

Now that the Guidelines are no longer mandatory, more and more cases show that judges are slowly recognizing that we need to do better for "true first offenders", in other words, people never previously arrested as opposed to people never convicted within the recent past. The recent case mentioned above is from the Sixth Circuit, United States v. Duane, No. 06-6536, (6th Cir. 7-17-08). Although they did not rule for the defendant, the court noted that, "Because Duane had zero points at age 57, he might plausibly argue that even category I — which applies when a defendant has zero or one criminal history point(s) — overstated his criminal history to some degree." In other words, maybe a "true first offender" deserves more of a break than simply placing him or her into the lowest Criminal History Category.

Federal Prosecutors Trying to Seize Assets: the Details are Important!

July 26, 2008 by Paul Kish

Federal prosecutors are more and more fond of trying to seize assets from people who are prosecuted for federal crimes. We see this quite a bit in money laundering and white collar crime cases. However, a recent federal case that started in South Florida shows that the details are always important, and a good lawyer who keeps the feds on their toes can sometimes prevent such asset forfeitures.

The recent decision by the Eleventh Circuit Court of Appeals here in Atlanta in the case of United States v. De la Mata is a perfect example of this principle. Many years ago, the feds prosecuted Mr. De La Mata and others, and got convictions and lengthy sentences. Significantly, some of the defendants included corporations owned and controlled by De La Mata and others. The prosecutors also wanted to forfeit assets owned by the people and by the corporations. However, and here's the important part, the prosecutors tried to use a short cut, and got the individual defendants to agree to turn over a large quantity of assets. The prosecutors forgot that the corporations were separate entities. As a result, the order entered by the judge turned over assets owned by the corporations, without ever hearing from the corporations themselves.

Several years passed, and the corporations asked for a return of their property. The government refused, and the judge also would not give back the assets. The court of Appeals recently agreed with the corporations. The opinion notes how the prosecutors could not use the shortcut of an agreement with the individual defendants to get property owned by the corporations.

In many of our cases, we negotiate with prosecutors about assets they want to seize from our clients. This recent decision shows how important it is to do our homework in this area.

Recent Developments in the Federal Criminal Case of Alabama's Former Governor and Richard Scrushy

July 24, 2008 by Carl Lietz

Over at the White Collar Crime Prof Blog, Ellen Pogdor discusses an interesting development in the federal criminal case of Alabama's former governor, Don Siegelman, and Richard Scrushy. Governor Siegelman and Richard Scrushy were both convicted in a federal criminal trial that took place in Montgomery, Alabama. After the jury returned the verdicts, the defense attorneys received documents that purported to be printouts of emails. The documents were received from an unknown source and seemed to suggest that one or more of the jurors was improperly exposed to extraneous information during the trial, and during the jury deliberations.

After receiving the emails, the defense attorneys brought them to the attention of the court in the form of a motion for a new trial. Among other things, the federal criminal defense attorneys asked the Judge to conduct an investigation to determine the authenticity of the emails. According to Governor Siegelman's attorney, however, the prosecutors opposed this request for any real investigation into the authenticity of the emails. Consistent with the prosectors' position, the Judge denied the motions for a new trial, as well as the request for an investigation into the authenticity of the emails. After additional printouts were received, the defense attorneys filed additional motions with the Judge, asking the Judge to investigate the authenticity of the emails. On each occasion, this request was denied.

Significantly, earlier this month, the Department of Justice revealed that it was aware of an investigation that was conducted to determine the authenticity of the emails. Specifically, it was recently revealed that while one of the motions referenced above was pending, the U.S. Marshals Service informed the Judge that Postal Inspectors had conducted an investigation into the matter and reached the conclusion that the emails were not authentic. This conversation between a Department of Justice agent and the Judge took place outside the presence of defense counsel; moreover, it was not revealed to defense counsel until 15 months after it occurred.

According to Sieglman's attorneys, "there can be no doubt that the ex parte communication from representatives of the Department of Justice to the District Court, about matters that were directly at issue in a pending motion, was highly improper." Among other things, Governor Siegelman's attorneys have asked for a thorough investigation to determine who took part in, or approved, or knew about but failed to disclose, this misconduct." You can access the letter Governor Siegleman's wrote to the Department of Justice here.

Has a Federal Criminal Prosecutor Prosecuted Innocent People?

July 15, 2008 by Carl Lietz

In an article published on law.com, Scott Horton raises the question of whether the chief federal prosecutor in the Northern District of Alabama "knowingly prosecuted innocent people?" Among other cases, Scott discusses the well known federal fraud prosecution of Richard Scrushy, who was acquitted of all charges. In addition, Scott discusses the prosecution and acquittal of Axion, a prosecution that Scott describes as the "latest in a string of aggressive prosecutions brought by Birmingham U.S. Attorney Alice Martin." According to Scott, "those prosecutions are marked by convictions overturned and innocent men wronged. Two judges have openly questioned whether she knowingly prosecuted innocent people." In addition, Scott reports that "the American Lawyer has learned that the U.S. Department of Justice's Office of Professional Responsibility has opened an investigation into allegations of misconduct that were made by Axion against Martin."

There are a number of things about the Axion prosecution that are particularly interesting. First, unlike in most federal criminal cases, Axion waived its right to a jury trial and agreed to a bench trial, a trial that allows the judge alone to decide whether the accused is guilty. Second, after the Government presented its evidence, the case was ultimately dismissed by Judge Inge Johnson of the federal district court in Birmingham, who wrote, "Evidence was received ... that at least raises the possibility in the eyes of the district court that the government continued to investigate and prosecute the defendants even after uncovering evidence demonstrating that the defendants were not guilty." Third, as a result of a motion filed by Axion, Judge Johnson awarded $363,000 in costs, attorney fees and interest to Axion.

This story will be interesting to follow as it develops. According to Scott, "a Justice [Department] spokesman says that the Department's Office of Professional Responsibility, which investigates allegations of misconduct by Justice attorneys, is investigating Martin for "allegations of political prosecution involving both the Northern and Middle Districts of Alabama, arising out of the prosecution of former Gov. Siegelman and other matters." Scott's full story can be found here.

Atlanta Money Laundering Prosecution: Federal Prosecutors Ordered to Explain Charges

July 15, 2008 by Paul Kish

We are defending a client here in Atlanta against federal money laundering charges. The indictment seems to be confusing and unclear, so we filed several motions asking that the prosecutors explain more about what our client supposedly did wrong. Recently, a federal judge here in Atlanta granted our request. The judge entered an Order directing the prosecutors to give us what we call a "bill of particulars." Here is why that is so important.

Federal money laundering charges are amazingly complicated. The federal statutes on this cover far more than what most people think of as money laundering. One part of the federal money laundering laws makes it a crime to take money from just about any crime, and then use that money in a "financial transaction" over $10,000 with a "financial institution." Here is where it gets tricky.

The indictment in our case never made it clear which "financial institution" was involved. The business that employed our client (a used car dealership) is a "financial institution" under the law, even though most people would never consider it to be such. In other words, when a used car dealer sells a car for more than $10,000, that is a "financial transaction" with a "financial institution." Furthermore, the business, like most companies, took its daily receipts and deposited them into the bank, which of course is yet another "financial institution."

The problem is that the prosecutors would never tell us which "financial transaction" we need to defend against. Was it the point when the business accepted money from a customer, or was it the point when an employee took the money to the bank for deposit? This could turn out to be very important down the road.

Eleventh Circuit Vacates Opinion in Federal Criminal Fraud Case

July 2, 2008 by Carl Lietz

In a case that is being closely watched by federal criminal defense attorneys, the Eleventh Circuit vacated its prior opinion in a federal fraud case. In the initial opinion, the Court concluded that the pattern jury instruction for federal mail fraud cases is deficient in that it fails to require the Government to prove that the defendant intended to create a scheme reasonably calculated to deceive persons of ordinary prudence and comprehension. According to the Court, this burden is not reflected in the current Eleventh Circuit pattern jury instruction for mail fraud. For this reason, the Court vacated the defendants' convictions on the mail fraud charges.

Earlier today, however, the Court entered an Order vacating its prior opinion and directing that the case be reheard by the entire Court. Although today's Order did not identify the issues that Court will focus on in the en banc sitting, it is safe to assume that the jury instruction issue will in fact be the focus.

Our firm has been following this case very closely. In fact, shortly after the initial decision was handed down, my law partner Paul Kish outlined the significance of the decision in a previous post. As he pointed out, the decision had the potential to impact a whole host of other cases, including those that involved other varieties of alleged fraud. We will certainly continue to follow the case, as it develops.