Case o' the Week: Baaad case for fraudster who shears sheep rancher, Williams

The Ninth extends the “intangible rights to honest services” theory of fraud to private individuals (instead of just government employees) in United States v. Williams, __ F.3d. __, Slip. Op. 2969 (9th Cir. Mar. 21, 2006), decision available here. The theory is limited to fiduciaries, however – especially fiduciaries who buy condos in Belize with their client’s money (left).

Players: A sophisticated challenge by AFPD Ruben Iniguez before a tough, tough panel.

Facts: Financial planner Williams bilked an old sheep rancher out of several hundred thousand dollars, sending much of the money to Belize. Slip. op. at 2974. He was not a government employee. Instead of sticking to a straightforward theory of wire and mail fraud of actual assets, the government tacked on an alternative theory under 18 USC § 1346. This statute includes a definition that criminalizes “a scheme or artifice to deprive another of the intangible right of honest services.” 18 USC § 1346. The jury returned a general guilty verdict that didn’t specify its theory of fraud.

Issue(s): “Defendant argues that the ‘intangible rights’ theory of fraud does not apply to private individuals.” Id. at 2977. [Ed. note: there were many other interesting issues in this decision not addressed in this memo.]

Held: “We follow our sister circuits and hold that the ‘intangible rights’ theory of fraud, as codified by § 1346, can apply to private individuals as well as to public figures.” Id. at 2981.

Of Note: White collar folks should view this case warily. Author Graber traces the development of the “intangible rights” theory, the theory’s temporary demise in McNally v. United States, 483 U.S. 350 (1987), and its apparent resurrection by Congress in Section 1346. In sum, the Supreme Court rejected the “intangible rights” theory in its 1987 McNally decision. Graber notes that Congress meant to “restore the pre-McNally landscape” with Section 1346. Id. at 2979, citing United States v. Frega, 179 F.3d 793, 803 (9th Cir. 1999).

In any event, the “intangible rights” theory probably made little actual difference to defendant Williams: it sounds like the defendant could have been squarely convicted on a pure “assets fraud” theory. Williams is dangerous, though, because it gives the government another arrow in its fraud quiver. The “intangible rights to honest services” is – by definition – a less “tangible” theory of loss than “actual assets” fraud. Because the theory is not clearly defined and limited, it is a fraud allegation ripe for expansive and abusive pleading by the feds.

How to Use: Graber (reluctantly, one senses) limits the “intangible rights” theory to defendants who have a fiduciary relationship with the victims. Id. at 2982. This limitation arises because the theory has traditionally and overwhelmingly been applied to bribery of public officials. Id. Therefore, part of the new rule is that an element of the intangible rights theory of fraud is a fiduciary relationship between the fraudster and victim: without this relationship, there is no basis for conviction under § 1346. Beware, however, that the panel leaves open for another day whether the “‘intangible right of honest services’ in § 1346 applies to persons who are not fiduciaries.” Id. at 2983.

For Further Reading: Williams’ trial defense counsel labored under what can be charitably described as bad facts. The victim sheep rancher who was defrauded was old and mentally feeble. See USAO Press Release. When arrested, Williams was caught with evidence suggesting that he was planning a permanent vacation in Belize. Id. Despite these facts, the Oregon Federal Public Defender still scraped out a new and novel challenge to its client’s conviction. AFPD Ruben Iniguez and his office deserve credit for finding a solid fight in an apparently bleak case.

Steven Kalar, Senior Litigator N.D. Cal FPD. Website available at www.ndcalfpd.org

Good Citations No. 1

I am trying out a new feature for the Ninth Circuit Blog: short blurbs on case excerpts that may or should become part of our litigation vocabulary. Just some passing thoughts on selections from the massive volume of cases churning through the courts. Not a lot of detail but maybe worth a citation in a pending brief or a note for future reference. If you spot a worthy case, please email it my way.

• The Supreme Court’s Randolf decision (linked here) provides a trove of material for briefs on consent searches. Justice Souter writes for a 5 to 3 majority, holding that a defendant’s refusal to consent to a search overrides a third party’s consent. But the starting point of the analysis is likely to help in almost all consent cases by pointing to the seriousness and narrowness of the exception to the warrant requirement: "To the Fourth Amendment rule ordinarily prohibiting the warrantless entry of a person’s house as unreasonable per se, one ‘jealously and carefully drawn’ exception recognizes the validity of searches with the voluntary consent of an individual possessing authority" (citations omitted).
• In the midst of a long and complicated opinion on jurisdiction under the Maritime Drug Law Enforcement Act, Judge Pregerson writes for the Ninth Circuit in Perlaza on the Fifth and Sixth Amendments. The court holds that the jurisdictional predicates of the MDLEA must be submitted to the jury and proved beyond a reasonable doubt. At pages 2591-92, the court notes that, in "limited circumstances," "facts not formally identified as elements of the offense charges" are subject to constitutional trial rights. The court goes on to provide language helpful to our reasonable-doubt-at-sentencing arguments: based on Winship, "the Due Process Clause protects the accused against conviction except upon proof beyond a reasonable doubt of every fact necessary to constitute the crime with which he is charged," followed by the common law formulation of elements as "facts legally essential to the punishment to be inflicted."
• In a case upholding as reasonable a 77-month sentence for being present in the United States after deportation, there is some solace in the methodology. In Rodriguez-Rodriguez, the Ninth Circuit does three things worthy of notice: 1) contrary to the trend criticized here, no use or mention is made of any presumption that a guideline sentence is reasonable; 2) the totality of the § 3553(a) factors are evaluated as indicated in Cantrell; and 3) the rule of parsimony – requiring the court to impose a sentence sufficient but not greater than necessary – is expressly part of the reasonableness review.
• And if the government is arguing against appellate jurisdiction to review within guidelines sentences, the First Circuit en banc in Jimenez-Beltre found the government's position to be "hopeless" in light of language in Booker making clear that reasonableness review is available regardless of whether the sentence is within or outside the Guidelines range;
• In a district court decision litigated by AFPD Lisa Hay, Judge King granted a motion to suppress statements and evidence in United States v. Spurk, 2005 WL 3478195 (D.Or. Dec. 20, 2005). The confrontation of the defendant in a front yard constituted custody, requiring suppression of the fruits of interrogation conducted without Miranda warnings, and the contents of a backpack on a nearby bench were not close enough to be searched incident to arrest.

Steve Sady, Chief Deputy Federal Public Defender, Portland, Oregon

Case o' The Week: Ninth Rejects Marital Privilege for Lawyer-Wife, Griffin

In an interlocutory appeal from the highly-publicized Aryan Brotherhood case, the Ninth finds jurisdiction to consider a claim of marital privilege – then finds the privilege doesn’t prevent disclosure. United States v. Robert Lee Griffin, __ F.3d. __, Slip. Op. 2729 (Mar. 16, 2006), available here. (Tyler Bingham, left, is a defendant in the first round of trials that is currently underway).

Players: Judge (W.) Fletcher writes for the panel.

Facts: Griffin is charged with RICO conspiracy and murder, in relation to the Aryan Brotherhood. Slip. Op. at 2732. Officers searched the residence of Griffin’s wife, who is also his attorney. Id. at 2732-33. They recovered letters Griffin wrote to her from prison; letters marked “Confidential” and addressed to his wife as “Attorney at Law.” A special master appointed to review the letters redacted attorney-client and work-product materials. Id. at 2733. Before the redacted letters were released to the government, Griffin objected based on the marital communications privilege. Id. The motion was denied, and an interlocutory appeal filed.

Issue(s): 1. Interlocutory Appeal: Does the Ninth have jurisdiction over this interlocutory appeal? 2. Marital Privilege: Does the marital privilege protect “against disclosure of recordings or documents containing confidential marital communications to an adverse party during an investigation, whether or not those recordings or documents are eventually introduced into evidence?” Id. at 2739.

Held: 1. Interlocutory Appeal: “[W]e hold that the order is immediately appealable under either the collateral order doctrine or the Perlman rule.” Id. at 2734. 2. Marital Privilege: “We will assume, without deciding . . . that a recording or document containing a confidential marital communication is protected from disclosure to an adverse party during an investigation. Nevertheless, we hold in the circumstances of this case that Griffin cannot claim the privilege.” Id. at 2379. Because Griffin sent the letters from prison, and authorities can read prison letters, no marital privilege survives. Id. at 2740.

Of Note: Unless your spouse is your client, the marital privilege discussion is of little interest. The Ninth dodges the issue of whether the privilege extends to documents given to third parties. Id. at 2379. Griffin is a case worth reading, however, for its clear description of two types of interlocutory appeal: the collateral order doctrine and the Perlman rule. Id. at 2734. In Cohen, the Supreme Court set forth three factors that go into the collateral order analysis – the Griffin decision works through these factors in detail. Id. at 2734. Interlocutory appeal is also possible under the Perlman rule. Id. at 2736. That rule states that a “discovery order directed at a disinterested third-party custodian of privileged documents is immediately appealable because the third party, presumably lacking a sufficient stake in the proceeding, would most likely produce the documents rather than submit to a contempt citation.” Id. at 2737.

How to Use: Griffin will be a lead Ninth Circuit case for interlocutory appeals. Another lead case – cited in Griffin – is United States v. Austin, 416 F.3d 1016, 1020 (9th Cir. 2005). Austin is a disappointing case that refuses interlocutory appeal for joint defense agreements. See id. at 1021. Joint defense agreements – and – specifically, Henke JDAs – present huge, unresolved issues in this Circuit. These issues elude appellate review because they arise in high-exposure cases that frequently resolve in (appellate-waiver) deals. See, e.g., United States v. Stepney, 246 F.Supp.2d 1069 (N.D. Cal. 2003). The defense bar needs to figure-out how to get the tough issues of Henke JDAs up before the Ninth.

For Further Reading: Griffin is a death-eligible defendant in a forty-defendant indictment. See USAO press release, here. He is alleged to have been one of the founding members of the California Commission of the Aryan Brotherhood. Id. The first round of this high-stakes, high-profile case is currently underway in Los Angeles. See article here.

Steven Kalar, Senior Litigator N.D. Cal. FPD. Website available at www.ndcalfpd.org

Case o’ The Week: Fourth Gourde by Ninth, Computer Searches in Child Porn Cases

An en banc court of the Ninth issues a disappointing Fourth Amendment decision regarding computers and child porn in United States v. Micah J. Gourde, __ F.3d __, Slip Op. at 2357 (9th Cir. March 9, 2006), available here. The decision inspires vigorous and thoughtful dissents from Judges Reinhardt and Kleinfeld (left).

Players: Hard-fought case by Tacoma AFPD Colin Fieman. Majority opinion by Judge McKeown.

Facts: Gourde was a paid member of “Lolitagurls.com,” a “mixed” website that had illegal child porn, and legal child erotica and adult porn. Slip op. at 2364. The FBI busted the site and interviewed the owner, who admitted that it was a child porn website. Id. at 2363. The feds seized the site host computer, but apparently never checked to see what Gourde actually downloaded. Instead, the FBI successfully secured a warrant to search Gourde’s computer. Id. at 2364. The search affidavit described how child porn recipients keep images, that computers store images for a long time, and explained that Gourde had taken affirmative steps to join the site. Id. at 2364-65. The affidavit did not describe any efforts used to determine whether Gourde actually downloaded child porn. The search lead to a bust, a conviction, and a conditional plea preserving the search challenge. A three-judge panel reversed the search; that decision went en banc.

Issue(s): “Gourde claims that the affidavit in support of the search lacked sufficient indicia of probable cause because it contained no evidence that Gourde actually downloaded or possessed child pornography.” Id. at 2361.

Held: “We disagree. Based on the totality of the circumstances, the magistrate judge who issued the warrant made a ‘practical, common-sense decision’ that there was a ‘fair probability’ that child pornography would be found on Gourde’s computer. . . . The Fourth Amendment requires no more.” Id. at 2361 (citation and footnote omitted).

Of Note: This opinion sparked heated dissents from two unlikely allies: Judges Reinhardt and Kleinfeld. The en banc opinion conducts a deferential Gates analysis of the decision to issue the warrant, and finds that the “reasonable inference that Gourde had received or downloaded images easily meets the ‘fair probability test.’” Id. at 2370. Reinhardt is appalled. Under his Franks analysis, the majority does not demonstrate “sensitivity to constitutional principles” when it ignored the fact that the feds possessed “a computer that would reveal whether the defendant had downloaded child pornography” and declined “to examine it.” Id. at 2377. This is particularly troubling when the website contained “mixed” images - legal and illegal porn. Id. at 2379. Kleinfeld also dissents, explaining “the majority errs in concluding that there was probable cause for a search because its inferences depend on unarticulated assumptions that do not make sense.” Id. at 2381. Kleinfeld seems right, the majority seems wrong. The majority’s key, faulty assumption is, “Gourde’s status as a member manifested his intention and desire to obtain illegal images.” Id. at 2368. That is not true: membership status also entitled Gourde to secure legal porn, and legal child erotica. The majority’s assertion that membership = possession of illegal child porn is not explained. More importantly, before the warrant application the feds had the means to show probable cause by simply examining the seized host computer and seeing whether Gourde actually downloaded the images. The FBI search affidavit in this case demonstrates either incompetence or hubris: neither shortcoming should have been sanctioned by the en banc majority.

How to Use: The silver lining in this dark cloud is the survival of United States v. Weber, 923 F.2d 1338 (9th Cir. 1991). Id. at 2374. In Weber, a defendant was targeted via mail by the feds, and offered child porn. Id. The Ninth reversed that search because the warrant would have justified “virtually any search of a home of a person who once placed an order for child pornography . . . .” Id. The majority flatly distinguishes Weber, which is good: that important decision survives unscathed.

For Further Reading: In his dissent, Judge Kleinfeld offers a series of – colorful – examples of private secrets that are no business of the government. Id. at 2381-82. Nominated by Bush I in ‘91, Kleinfeld is a big supporter of the Ninth Circuit split. See interview here.

Steven Kalar, Senior Litigator N.D. Cal. FPD. Website available at www.ndcalfpd.org

Case o' The Week: Gov't Takes it on the Chen in Interlocutory Appeal

Always in the little guy’s corner, Judge Tashima recognizes Miranda protections for undocumented aliens in a great case from Guam. United States v. Lin Chen, __ F.3d __, Slip. Op. 2151 (9th Cir. Mar. 2, 2005), available here.

Players: Win by Fed P.D. John Gorman, great decision by Tashima.

Facts: Chen was one of a number of aliens allegedly smuggled into Guam. Id. at 2154. He was taken into administrative custody and questioned by INS officers pending an IJ appearance. Id. at 2154-55. Chen wasn’t Mirandized, and had an attorney at the time who was not contacted. Id. at 2155. Later, the agent referred the case to an AUSA, who charged Chen with perjury to “pressure” him to cooperate against the smuggler. Id. at 2156. Chen moved to suppress his statements, won in district court, and the government took an interlocutory appeal. Id.

Issue(s): Does an “INS agents’ investigation of illegal immigrants constitute ‘interrogations’” to trigger Miranda requirements? Id. at 2157.

Held: “[T]he facts here demonstrate that Chen was subject to an especially heightened risk of § 1325 prosecution. The particular circumstances of this case – namely, the prosecutor’s willingness to pursue charges against Chen to procure Chen’s testimony against Li, and the fact that Chen was questioned in a district that has a practice of prosecuting § 1325 violations – rendered [the INS agent’s] questioning of Chen an ‘interrogation’ for Miranda purposes.” Id. at 2161.

Of Note: This is a characteristically thoughtful decision by Judge Tashima. In Chen, Tashima carefully traces the Circuit’s treatment of custodial interrogations of undocumented aliens. Id. at 2157 - 60. He persuasively distinguishes United States v. Salgado, 292 F.3d 1169 (9th Cir. 2002), which had declined to suppress statements during an interview pending an administrative hearing. Id. at 2158-59. While the Ninth in Chen declines to reach the question of every custodial interrogation of an undocumented alien triggers Miranda (because of § 1325 illegal entry exposure), the Court concludes that the potential criminal exposure on these facts merited the protections.
Note also that this victory is twice as sweet when it was on the government’s interlocutory appeal.

How to Use: In the Northern District of California, INS agents routinely troll the jails looking for illegal reentry (§ 1326) candidates. When they locate potential defendants, they have an initial, un-Mirandized interview establishing identity, citizenship, and immigration status. Only then do they Mirandize the alien and repeat the interrogation – all within a locked cell in a county jail or state prison. Under Chen (and the authority it collects), these little pre-Miranda interviews are unlawful – like Chen, these interviews are done in the context of likely criminal prosecutions for illegal entry (or even worse, reentry). What one does with this challenge is another question: usually the evidence is so overwhelming in a § 1326 case that the confession is just icing on the government’s cake. But for cases with no offers, every little motion helps leverage a deal . . . and helps discourage ICE officers from this lazy, shameful, and unlawful practice.

For Further Reading: The Ninth needs more Semper Fi. Like Judge Harry Pregerson, Judge Tashima was a Marine and former district court judge. See bio here. Judge Tashima was nominated to the Ninth by Carter in 1980, and took senior status in 2004. Id.
When ten years old, he was an internee in a WWII relocation camp for Japanese-Americans. See essay here. That experience shaped his view of his role of the bench: “In my twenty-four years as a federal judge, both in the trial court and on the appellate bench, it has been my privilege to participate in what I believe to be the primary mission of the federal courts – to uphold the rule of law and to hold the government to its constitutional obligations.” Id.
In the Buckland litigation, he proved himself a man of his word: he held the government to its constitutional obligations and found the central federal drug statute to be unconstitutional under Apprendi.

Steven Kalar, Senior Litigator N.D. Cal. FPD. Website available at www.ndcal.fpd.org