Case o' The Week: Needing Neo in the Ninth - Costanzo, bitcoin, and interstate commerce

  Morpheus versus the Agents, again.

  (Spoiler alert: not a happy ending, this time).

United States v. Costanzo, 956 F.3d 1088 (9th Cir. Apr. 17, 2020), decision available here.

Players: Decision by Judge Hawkins, joined by Judges Owens and Bennett. Hard-fought appeal by D. Arizona AFPD Dan Kaplan.  

Facts: Costanzo’s (a.k.a. “Morpheus Titania”) enthusiastic bitcoin sales drew the Feds’ attention. Id. at 1089. Over five meetings, undercover agents used cash to purchase over $100k in bitcoin. Id. at 1090. Agents explained the cash came from drug sales. Id. 

  Costanzo was charged with, among other things, money laundering and went to trial. Id. at 1091. At trial, the government presented evidence about the “verification process,” as bitcoin was transferred from Costanzo to the agents. Id. One such verification took place in Germany. Id. 

  The Court denied Costazno’s motion for acquittal, and he was convicted. Id.

Issue(s): “Appellant contends that the transfer did not have the requisite effect on interstate commerce, an element of each of the charged offenses.” Id. at 1089. (footnote omitted). 

  “Costanzo [argues] that the government failed to prove that the transactions affected interstate commerce in any way.” Id. at 1091.

Held: “Because we conclude that the transfer in question, which involved the use of an Internet or cellular network connected Personal Computer Device (PCD) to transfer bitcoin (together with the digital code necessary to unlock the bitcoin) to the digital wallet of another Internet or cellular network connected PCD, had the necessary effect on interstate commerce, we affirm.” Id. (footnote omitted). “Here, the government presented evidence regarding Costanzo's business; his use of global platforms; and the transfer of bitcoin through a digital wallet, which by its nature invokes a wide and international network. Costanzo advertised his business through localbitcoins.com—a website based outside of the United States. He encouraged the undercover agents to download applications from the Apple Store or other similar platforms to facilitate their communications and transactions. He then utilized those applications to engage in encrypted communications with the agents to arrange the transfers. Then, in each transaction, Costanzo and the agent used those applications on their smartphones to transfer bitcoin from one digital wallet to another. Each transaction was complete only after it was verified on the blockchain. Viewing all of this evidence in the light most favorable to the government, we are satisfied that the evidence is sufficient for some trier of fact to find the ‘minimal’ interstate commerce nexus required under § 1956.” Id. at 1092-93.

Of Note: Constanzo’s co-D, Peter Steinmetz, was less blasé about the illegal origins of the cash. Like Constanzo, Steinmetz was charged with money laundering using bitcoin. Transcripts later revealed, however, that Steinmetz refused to sell bitcoin to an agent posing as a Russian heroin buyer. Steinmetz became “a poster child for heavy-handed bitcoin enforcement.” See article here. 

  New currencies: old law-enforcement problems.

How to Use: What is the standard of review, for the sufficiency of evidence for an interstate commerce element? Judge Hawkins uses de novo review, and asked whether “any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.” Id. at 1091-92 (emphasis in original). The government, however, argued that the proper standard of review was, “manifest injustice.” Id. at 1092 & n.3. The panel avoids the issue by explaining the result would be the same under either standard. Id.

  Beware, however, of the government’s more-onerous theory of review for future interstate commerce challenges.

                                   

For Further Reading: The federal Terminal Island and Lompoc facilities are now the subjects of new civil suits, brought by medically-vulnerable inmates facing the COVID-19 pandemic.

For a must-read brace of terrifying Complaints, by Bird Marella and the SoCal ACLU, see here.

Image of Morpheus and Agent Smith from https://scottmanning.com/content/smith-interrogates-morpheus-transcript/

Image of Lompoc from https://www.sfchronicle.com/news/article/574-inmates-test-positive-for-coronavirus-at-15255843.php

Image of Terminal Island from https://www.latimes.com/california/story/2020-04-29/coronavirus-terminal-island-prison-inmates-outbreak

Steven Kalar, Federal Public Defender, N.D. Cal. Website available at www.ndcalfpd.org

Case o' The Week: "Demons Made Me Do It" - Read, Mentally-Ill Clients and Insanity Defenses

Still crazy, after all these years.

United States v. Read, 2019 U.S. App. LEXIS 7652 (9th Cir. Mar. 18, 2019), decision available here.

Players: Decision by Judge Hawkins, joined by Judges M. Smith and Hurwitz. Reversal for Mr. Read earned by former CD Cal AFPD, now CJA Attorney, Davina Chen.

Facts: While an inmate at FCI-Phoenix, Read stabbed his cellie thirteen times. Id. at *2. When later detained, Read said he had no memory of the attack. Id. at *3.

  He was charged with federal assault.

  A shrink diagnosed Read with schizophrenia and severe cannabis use disorder. Id. Read was found incompetent and sent to the BOP for restoration. Id.

  The BOP shrink noted that Read experienced the sensation of having his stomach cut out with a knife, by virtue of a voodoo doll being used against him. Id. at *4. The BOP doctor also confirmed the schizophrenia and cannabis-use diagnoses. Id. Nonetheless, the BOP psychologist found Read competent to stand trial. Id.

  Defense counsel then hired a neuropsych, who opined that Read was unable to form the criminal intent for the assault. Id. Defense counsel noticed an insanity defense, prompting another gov’t psych eval. Id.

  Read returned from a remote evaluation. After a Faretta hearing he successfully moved to proceed pro se (with the defense attorney as standby counsel). Id. Read flatly rejected an insanity defense, and insisted instead with going forward with a defense theory of “demonic possession.” Id. at *6-*7.

  The court then reappointed standby counsel as Read’s counsel, who “ably, but unsuccessfully, . . . present[ed] an insanity defense at trial.” Id. at *8.

Issue(s): “We address a question of first impression: whether a criminal defendant has the Sixth Amendment right to demand that counsel not present an insanity defense.” Id. at *1.

   “Read claims the district court violated his Sixth Amendment right to present a defense of his own choosing by terminating self-representation and permitting counsel to make an insanity defense.” Id. at *12. 

  “[W]e today face a question of first impression in this circuit.” Id. at *13.

Held: “We hold that McCoy v. Louisiana, 138 S. Ct. 1500 (2018), requires under the facts of this case that the demand be honored. We . . . reverse and remand for a new trial.” Id. at *1.

  “[A] district court commits reversible error by permitting defense counsel to present a defense of insanity over a competent defendant's clear rejection of that defense.” Id. at *12.

Of Note: Read is peppered with the “bizarre.” The D.J. characterized Read’s “demonic possession” defense as “bizarre.” Id. at *8. Judge Hawkins characterizes McCoy’s defense theory in the controlling SCOTUS McCoy case as “every bit as bizarre as Read’s.” Id. at *14. The Supreme Court in McCoy, followed by the Ninth Circuit in Read, place the highest value on the “autonomy” rights of (patently mentally-ill) defendants who want to pursue these “bizarre” defenses and reject insanity defenses over the advice of counsel.

  A decade ago, Judge Reinhardt predicted precisely the – well, bizarre – real world outcomes created by this focus on the "autonomy" of mentally ill defendants in his compelling Farhad concurrence. See 190 F.3d 1097, 1107 (9th Cir. 1999) (Reinhard, J. concurring)  ("The right to self representation must be balanced, like the right to waive conflict free counsel in Wheat, or the right to a public trial in Estes, against the Due Process Clause's fundamental, guarantee that trials will be reliable, just, and fair. Surely if the right to a fair trial is compelling enough to justify the Court's previous limitations on Sixth Amendment rights, it is compelling enough to limit, in appropriate cases, the Sixth Amendment right at issue here. As with most other individual rights, there are competing and countervailing interests, both personal and social. Nothing inherent in the implied right of self representation justifies exalting that right over all others in the constitutional constellation, or requires the courts to permit Farhad and others with similar limitations or incapacities to turn criminal trials into travesties. Rather, courts can develop rules for determining when the exercise of the right to self representation would be consistent with the mandate of the Fifth Amendment, and when it would not. In the latter case, the right to self-representation would give way."); See generally blog entry here.

   However, while wrestling with Read down in the district court trenches, note an interesting hint from the Ninth. Judge Hawkins explains that, at this time, the Ninth refuses to limit the right to refuse an insanity defense in cases where the defendant is actually mentally ill. Id. at *20 & n.5. Judge Hawkins throws in an intriguing “but see” to a case imposing that limit – maybe an invitation for a future argument?   

How to Use: Can our truly nutty clients go pro se?

  Probably not.

  In a very helpful holding, Judge Hawkins gives much guidance on what a D.J. should consider when making this tough call. Id. at *17-*18.

  Read Read for a valuable discussion on Faretta / Edwards / Ferguson pro se issues – Read is a now lead pro se case.   

                                               

For Further Reading: In 1998, Theodore “the Unabomer” Kaczynski pleaded guilty and avoided the death penalty. See NYT article here. 

  In a later dissent from the denial of a habeas petition, Judge Reinhardt described the tensions between the mentally-ill Kaczynski and his very able defense counsel over the question of an insanity defense at trial. United States v. Kaczynski, 239 F.3d 1108, 1119 (9th Cir. 2001) (Reinhardt, J., dissenting).

  Looking back at Kaczynski through the prisms of McCoy and Read, would the Unabomber have gone to trial without an insanity defense (and thus been awaiting execution) today?

Image of voodoo doll from https://pokerground.com/en/do-you-believe-in-poker-superstitions/

Image of Ted Kaczynski from https://news.yahoo.com/letters-from-a-serial-killer--inside-the-unabomber-archive-234543736.html

Steven Kalar, Federal Public Defender N.D. Cal. Website at www.ndcalfpd.org  

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Case o' The Week: Shades of Gray - United States v. Gray and Rule 32 rights at Form 12 sentencings

   Probation may see black and white, but there are many shades of Gray.

  United States v. Gray, 2018 WL 4763175 (9th Cir. Oct. 3, 2018), decision available here.

Players: Per curiam decision with Judges Leavy, Hawkins and Tallman. 

   Nice win for AFPDs David A. Merchant II and Josyln Hunt, District of Montana.

Facts: Ashley Gray was charged with violations of supervised release. Id. at *1. Gray was arrested and the district judge then referred the case to the magistrate judge “for hearing, finding of facts, and recommendation.” Id. 

  At the revocation hearing before the magistrate judge, Gray admitted to all but one of the allegations. Id. The guideline range was 4-10 months: Defense counsel asked for three months of custody; the government, five. Id. 

  The magistrate judge recommended five months. Id. 

  The MJ advised Gray she had the right to appear before the district judge, but would have to file a written objection within two weeks to do so. Id. Gray didn’t file any written objections to the magistrate judge’s findings and recommendation. Id. at *2. 

  The Honorable District Judge Lowell then relied on a Probation Officer’s (confidential) sentencing recommendation of 20 months. Id. The district judge considered Gray's monitored jail phone calls that – according to Probation -- revealed a “lack of remorse.” Id. Without a hearing, the district court imposed Probation's recommended custodial sentence of twenty months. Id. 

   The district court’s twenty-month custodial sentence was “four times the length of the sentence recommended by the magistrate judge and the government.” Id. at *3 (emphasis in original).

Issue(s): “Gray contends that the district court violated Federal Rule of Criminal Procedure 32 by failing to disclose to her factual evidence on which it relied at sentencing.” Id. at *2.

Held: “The government concedes that the district court erred, and we agree.” Id. 

  “Rule 32 ‘require[s] the disclosure of all relevant factual information to the defendant,’ including ‘factual information underlying a probation officer’s confidential sentencing recommendation.’ . . . . In its order sentencing Gray, the district court relied on the probation’s officer confidential sentencing recommendation, which included factual information that had not been disclosed to Gray and to which she had no opportunity to respond before sentence was imposed. Accordingly, we must vacate and remand for resentencing.” Id.

Of Note: For many in the Ninth, this Montana procedure seems foreign: a District Judge delegated sentencing of a supervised release violation to a Magistrate Judge? Here, Gray consented and agreed to proceed before the MJ. Doesn’t matter, explains the Ninth. “In conducting proceedings based on an order of reference by a district court, a magistrate judge does “not possess the authority to impose sentence; only the district court possesse[s] that authority.” Rodriguez, 23 F.3d at 921. Thus, even if the defendant is given an opportunity to appear and speak before the magistrate judge, the district court must provide the defendant an additional opportunity before the actual sentence is imposed.” Id. at *3.  

How to Use: There’s an interesting waiver holding buried in Gray. Gray didn’t object to the Magistrate Judge’s findings and recommendation: why didn’t she lose her right to complain about the D.J.’s later sentence? 

  The Ninth held that Gray's general lack of objection to the MJ's recommendation wasn’t an “explicit waiver of her right to be present and allocute.” Id. at *3. Gray teaches that waiver of Rule 32 rights isn’t a casual thing: invoke it when the government hides behind a waiver argument in sentencing and allocution claims.

                                               

For Further Reading: In Gray, the defense, the M.J., and the AUSA were just months apart in their sentencing recommendations – and all were in or near the guideline range. Probation, by contrast, urged a custodial term four times the government’s recommendation and double the high-end of the guidelines. 

  Does the largely-unfettered discretion of Probation to initiate violation proceedings, or to recommend sentences, increase sentencing disparity? 

  For an interesting piece wrestling with that question, see Probation and Parole Officers and Discretionary Decision-Making: Responses to Technical and Criminal Violations, available here.

Image of Probation Officer badge from https://www.pinterest.com/pin/561964859745692847/

Steven Kalar, Federal Public Defender, N.D. Cal.

New website available at https://www.ndcalfpd.org/ (many thanks to creative web master AFPD Candis Mitchell!)

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Case o' The Week: Savor the Waiver - Laney and Defendant Confirmation of Jury Waivers

 Defense counsel wants a bench trial.

 The AUSA wants a bench trial.

 The district court is fine with a bench trial.

 Is the defendant down with an empty jury box?

 The Ninth would like to know.

United States v. Laney, 2018 WL 706497 (9th Cir. Feb. 5, 2018), decision available here.

Players: Decision by Judge Hawkins, joined by Judges W. Fletcher and Tallman. 

  Admirable win for ND Cal CJA panel stalwarts Scott Sugarman, Sugarman & Cannon, S.F., and for Robert Beles, Beles & Beles, Oakland.

Facts: Laney and his co-defendant, Federico, were managers in construction companies. Id. at *1. In a complicated scheme, they were accused of colluding to inflate costs, then pocketing payments for fictitious work. Id. at *2. They were charged with mail fraud. Id.

  Trial counsel (different attorneys than appellate counsel) submitted stipulations for a bench trial, with counsel’s e-signature. The stips had no signatures from the defendants, and no indication that defendants’ were involved in discussions leading to the stip. Id. The district court accepted the stip, there was an eleven-day bench trial, and the pair were found guilty of multiple counts. Id.

  Laney and Federico were sentenced to sixty and seventy months, respectively. Id. They appealed, challenging (among other things), the validity of the jury waivers.

Issue(s): “In these consolidated appeals, we must determine whether a presumption of validity attaches to a stipulation by defense counsel that their clients waive their right to a jury trial on their criminal charges.” Id. at *11 (footnote omitted). “Laney and Federico contend that their convictions must be vacated because the record does not reflect adequately that they made voluntary, knowing, and intelligent waivers of their rights to a jury trial.” Id. at *3.

Held: “We conclude that counsel’s stipulations in this case did not raise a presumption of validity, and the record is insufficient to show that the jury trial waivers were voluntary, knowing, and intelligent. Therefore, although we conclude that the convictions are supported by sufficient evidence, we reverse and remand based on the ineffective jury trial waivers.” Id. at *1 (emphasis added).

Of Note: In a decision of first impression, the Ninth joins sister circuits in holding that a waiver of a jury trial must (logically) be signed by the defendant him or herself. Id. at *3.

  That’s a laudable rule, but as a practical matter, this new requirement for defendant signatures is probably irrelevant. DJs alarmed by this trial do-over in Laney will likely heed the Ninth’s advice – the Circuit has “implored the district courts to conduct colloquies with the defendant before accepting a waiver of his or her right to a jury trial.” Id. at *3 (quotations and citation omitted).

  If you and the government plan on a bench trial, anticipate a DJ demanding a defendant’s in-court colloquy and express waiver (a better policy approach, in any event). This is a heck of a waiver to ask of a defendant: best that our clients going into that decision very well informed, and very clear on the record.

How to Use: Sasquatch in the Humboldt redwoods. 

 Bipartisanship in D.C.

A Bipartisan Bigfoot in D.C.

  Conditional pleas in the Northern District of California. 

  Each of these fantastic beasts are rumored to exist -- though documented instances have proven exceedingly rare.

  Add to this list, “Structural Error reversal on appeal.”

  Structural Error, a great bulwark of constitutional rights, has been steadily eroded on all fronts in the last decade or two. That makes the structural error reversal in Laney particularly sweet. Id. at *5.

  Note that Judge Hawkins specifically rejects the government’s scramble at post-trial reconstruction, offered to try to salvage the convictions from the structural error reversal. Id. This is a useful rebuff for appellate folks to remember in future cases: Rule 23 issues (jury waivers) are evaluated in the context of the time of the waiver, not in retrospect after the trial is complete.

                                               

For Further Reading: Remarkably, AUSAs often balk at bench trials (the federal government really doesn’t trust a federal judge to deliver a verdict?) Should the federal government get to veto our clients’ request for a bench trial, particularly in sensitive cases, such as child porn?

  For an interesting article arguing against a black ball for the government, see, Waiver of Jury Trials in Federal Criminal Cases: A Reassessment of the “Prosecutorial Veto” available here.  

Image of empty jury box from https://eji.org/news/alabama-judges-ignoring-jury-verdicts-leads-nations-highest-death-sentencing-rate

Image of Bigfoot in Dupont Circle from https://pbs.twimg.com/media/Bh08EgOIgAEtz4Q.jpg

Steven Kalar, Federal Public Defender, Northern District of California. Website at www.ndcalfpd.org

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Case o' The Week: Pic, Sixteen => Mand-Min, Fifteen: Laursen and the Child Porn Production statute.

 A picture is worth . . . 5,475 days.

United States v. Laursen, 2017 WL 460660 (9th Cir. Jan. 30, 2017), decision available here.

The Hon. Judge Johnnie B. Rawlinson

 Players: Decision by Judge Rawlinson, joined by Judge Callahan. Concurrence by Judge Hawkins.

Facts: Laursen, 45, had a consensual sexual relationship with a sixteen-year-old girl. Id. at *1. Laursen told police the girl was being prostituted (but did not reveal his relationship). Id. Police examination of the girl’s laptop revealed sexually explicit images of the girl and Laursen. Id. 
  Later, Laursen’s sister gave the police a camera that she found, that contained sexually explicate images of the girl. Id. 
  Laursen was charged with and convicted of production and possession of child porn. Id. at *2. The court rejected a jurisdictional challenge, where Laursen argued that the girl was “not a child” because under Washington law she was a young woman of legal consensual age. Id. at *4. 
  Laursen was sentenced to the mand-min fifteen years. Id.

Issue(s): “In this appeal we address whether taking consensual nude ‘selfies’ involving a forty-five-year-old man and a sixteen-year-old girl is sufficient to support a conviction for production and possession of child pornography.” Id. at *1 (footnote omitted).

Held: “We . . . specifically reject the argument made by . . . Laursen that the legality of his sexual relationship with a sixteen-year-old under Washington state law precluded prosecution under federal law.” Id. “[I]n the state of Washington, Laursen’s sexual relationship with [the girl] was legal but the production of pornography stemming from that relationship was not.” Id. at *6.

Of Note: How many seventeen-year olds routinely take consensual and sexual cell phone shots similar to those in Laursen – pics that here resulted in a fifteen year mand-min sentence? That sobering question is asked by Judge Hawkins in his persuasive concurrence.

  Judge Hawkins would adopt a narrower construction of the key term, “uses” in the child production statute. Id. at *8. He would hold that the term “uses,” as the statute references between the photographer and the minor, requires that the defendant must have “exerted some sort of improper influence on the minor for the purpose of producing the visual depiction of sexual conduct.” Id.

  Applying that narrowing definition here, Judge Hawkins would find that Laursen met that requirement: the big age difference between the couple, Laursen’s gift of drugs to the girl, moving her from motel room to motel room, and the girl’s history of abusive relationships were sufficient evidence of improper influence. Id. at *9.

  Judge Hawkins has the better argument: the very expansive definition of the word “uses” in the majority’s opinion means the only limitation on the high mand-min “production” statute is unfettered AUSA discretion.

  Romeo is lucky there were no iPhones in Verona. Amorous teens, beware.

How to Use: This brief opinion quickly mows through a bevy of constitutional and evidentiary challenges. Id. at *4-*8. One of the most concerning is the rejection to the overbreadth challenge. Id. at *6.

  It was undisputed that Laursen could legally have a full consensual sexual relationship with the sixteen-year old girl. Id. at *6. (“[I]ll-advised, but perfectly legal,” as Judge Hawkins observes.). Id. at *8. However, the instant Laursen encouraged the girl to take a consensual nude picture, he fell afoul of the federal “production” statute and bought himself a fifteen-year mandatory minimum sentence. Id. Notably, there is no evidence that Laursen distributed, transferred, or showed these private pictures to anyone outside of the relationship. Id at *8 (Hawkins, J., concurring).

  The result of Laursen is that consensual intercourse with a sixteen-year old is legal in Washington -- yet encouraging that same sixteen-year old to take a private nude picture converts the relationship into a fifteen-year mand-min federal crime.

  A troubling case that merits a close read for anyone defending child porn production charges.

                                               

For Further Reading: In 2016, the Obama administration started to shut down private federal prisons as prison populations shrank, and after a number of investigations revealed horrific conditions in the for-profit institutions. See article here.

  A.G. Sessions is reversing course. For an interesting -- and disturbing -- piece on the ramifications of the new A.G.’s policy shift, see Private Prisons: Here’s Why Sessions’ Memo Matters, available here.

Image of the Honorable Judge Johnnie B. Rawlinson from http://lasvegasnba.org/wp-content/uploads/2014/08/Judge-Rawlinson-square-image-300x300.jpg

Image of Romeo and Juliet from http://scalar.usc.edu/works/romeo-and-juliet-act-2-scene-2-through-the-years/media/RomeoandJuliet4.jpg

Steven Kalar, Federal Public Defender N.D. Cal. Website at www.ndcalfpd.org

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