It Tolls for Thee

United States v. Knight, No. 09-5195-cr (2d Cir. February 1, 2012) (Walker, Straub, Livingston, CJJ)

While a Western District grand jury was investigating defendant’s involvement in a “high yield” investment scheme, the district court granted the government’s application pursuant to 18 U.S.C. § 3292 to toll the statute of limitations while it sought the assistance of Hungarian authorities in obtaining records relating to transfers of some of the scheme’s proceeds into Hungarian bank accounts. The circuit affirmed that order as a proper application of the tolling statute.

Under § 3292, the court must grant the government’s application and suspend the statute of limitations if the application asserts that evidence of an offense being investigated by a grand jury is in a foreign country and it reasonably appears, by a preponderance of the evidence, that such evidence has been officially requested.

The government satisfied the statute here. It gave the district court a copy of the government’s official request to Hungary, a transcript of a victim’s grand jury describing how he had been defrauded, and the affidavit of an FBI agent describing transfers of proceeds from a U.S. bank account to a Hungarian bank account.

The court rejected the defendant’s argument that, since the relevant Hungarian bank had offices in the United States, the records could have been obtained by subpoena. Nothing in § 3292 suggests that the tolling is limited to situations where the foreign evidence is obtainable only through diplomatic channels. Nor is does it matter that the evidence sought might be immaterial; as long as evidence of an offense is located abroad, the limitations period will be tolled, even if the grand jury would otherwise have sufficient evidence to indict.

Lastly, the court rejected the claim that the district court should not have acted on the application ex parte. The statute does not give the party whose statute of limitations is being suspended the right to notice or a hearing. To the contrary, grand jury proceedings are typically non-adversarial and secret.

Cap’n Crunched

United States v. Pizzonia, No. 07-4314-cr (2d Cir. August 19, 2009) (Calabresi, Straub, Raggi, CJJ)

Dominick Pizzonia, a one-time captain for the Gambino crime family, was convicted of a racketeering conspiracy and sentenced to fifteen years in prison. On appeal, he raised an unsuccessful statute of limitations claim.

The government filed the indictment against Pizzonia on May 26, 2005; since a five-year statute of limitations applied, the government had to prove that Pizzonia’s participation in the conspiracy extended past May 26, 2000.

Pizzonia’s indictment charged a broad pattern of racketeering activity encompassing the entire spectrum of Gambino malfeasance. It alleged specifically that the pattern “consisted of” seven specified predicates. The jury found that he participated in only two of them: a 1992 double-murder conspiracy and a 1994-96 gambling offense. It also concluded that these two seemingly distinct events were sufficiently related to constitute a racketeering “pattern.” Finally, although the predicates ended well before May 26, 2000, the jury concluded that Pizzonia’s participation in the conspiracy continued beyond that date.

On appeal, Pizzonia argued that because the pleading alleged a racketeering pattern that “consisted of” seven acts, this temporally limited the conspiracy to the predicates. And, because the only proven predicate acts did not extend into the post-May 2000 limitations period, he argued, his conviction could not stand.

The circuit disagreed. The court held that the temporal scope of a RICO conspiracy is not limited to the charged or proven predicate acts. “[W]here, as here, the affairs of the enterprise in which a defendant agreed to participate through a pattern of racketeering are broadly defined to encompass all its criminal money-making objectives and all means used to protect those objectives, the conspiracy does not end, as a matter of law, with the last proved predicate.” Even if the government pleads a pattern that “consisted of” or “included” specified predicate acts, a defendant’s completion of those predicates “does not, as a matter of law, dictate the end of the pattern, much less the attainment or abandonment of the conspiracy’s overall objective.” Accordingly, an indictment drafted in this way does not “limit the temporal scope of the charged racketeering conspiracy to the time-frame of those predicates.”

Here, since Pizzonia “effectively concede[d]” that there was sufficient evidence that he participated in the conspiracy, although not in a charged RICO predicate, after May 26, 2000, the court affirmed his conviction.

Enterprise Rent-A-Cop

United States v. Eppolito, No. 06-3280-cr (2d Cir. September 17, 2008) (Kearse, Sack, Hall, CJJ)

Louis Eppolito and Stephen Caracappa were NYPD detectives who, for many years, also worked for the Lucchese organized crime family - and occasionally other Mafia families - on the side. They were were convicted of RICO conspiracy and other offenses after a jury trial. Judge Weinstein granted the defendants’ post-verdict Rule 29 motion on the RICO conspiracy, finding that the prosecution was time-barred by the applicable statute of limitations. He also granted a conditional new trial on the remaining counts, in the event the dismissal of the RICO conspiracy was not overturned on appeal.

On the government’s appeal, the circuit reversed and remanded the case for sentencing.

Background

The trial evidence revealed that, in the early 1980's, while working for the NYPD, the defendants gave law enforcement information and other assistance to the Lucchese family. Sometimes the detectives passed on information that permitted family members to evade arrest; other information led to the murder of Lucchese enemies or informants. Often, the defendants themselves participated in the murders. The defendants were paid for their work, and were even, for a time, on retainer.

Eventually the officers retired from the NYPD, but continued to provide assistance to the family until 1996, when they moved to Las Vegas. There, they got out of the murder business, but, until 2005, continued to have contact with organized crime in other ways, including: borrowing drug money to build a house, soliciting mob money to fund a movie project, and supplying methamphetamine.

The District Court’s Ruling

In dismissing the RICO conspiracy count, the district court held that once the defendants retired and moved to Las Vegas the conspiracy that began in New York in the 1980's came to a “definite close.” The court distinguished the defendants’ Las Vegas-based activities as sporadic and unconnected to the original racketeering enterprise. They were, “at best,” acts that furthered a “new enterprise, unconnected to the original one and conducted through an entirely different type of activity.” Thus, in the court’s view, the government failed to prove that any activity connected to the charged RICO conspiracy occurred with the five-year statute of limitations.

The Circuit’s Ruling

The circuit reversed primarily because it disagreed with the district court’s characterization of the nature of the racketeering enterprise. “Our principal difficulty with the district court’s statute-of-limitations-based acquittal ... is that the court’s view of the enterprise, its purposes, its location, and its duration were more restricted than what was alleged in the Indictment and than what the jury could infer from the evidence at trial.”

Specifically, the court noted that the Indictment defined the enterprise and its participants very broadly, and that the defendants’ association in providing services to members of organized crime did not cease to exist, as a matter of law, before March 9, 2000, the limitations cutoff date. Here, there was “ample evidence” that would permit a jury to find otherwise.

In addition, the court noted that the goal of the enterprise, as charged, was quite general - “to generate money for its members and associates” - and was not, as the district court had found, limited to the defendants’ using law enforcement information and acting “under color of law.” The jury was not required to find that the enterprise alleged in the indictment was dependent on the defendants’ access to confidential law enforcement information or that it ended when they retired from the NYPD.

Finally, the court took issue with the district court’s conclusion that the defendants’ relocation to Las Vegas marked the end of the enterprise through which they sought to earn money by providing services to organized crime figures. Rather, the jury was entitled to find that the defendants’ activities in Las Vegas were a continuation of this same type of activity.

Toll Free

United States v. Kozeny, No. 07-3107-cr (2d Cir. August 29, 2008) (Sack, Katzmann, Hall, CJJ)

In 2002 and 2003, the government believed that Frederic Bourke was involved in a scheme to bribe senior government officials in Azerbaijan in connection with the privatization of that nation’s state-run oil company. During the investigation, the government made treaty requests for assistance to Switzerland and the Netherlands. And, months later, on July 21, 2003, it applied for an order under 18 U.S.C. § 3292 tolling the statute of limitations based on those requests. By this time, however, more than five years had elapsed since some of Bourke's offenses had been completed.

Despite this, on July 22, 2003, a district judge suspended the statute of limitations for all of the offenses under investigation. Consistent with the statute, the order provided that the suspensions would begin on the date that the treaty requests had been made, and would end when the foreign governments took their final actions.

Bourke was indicted in May of 2005, and moved to dismiss part of the indictment on the ground that the statute of limitations had expired. He argued that § 3292 did not permit the government to toll the limitations period after the five years had already expired. The district court agreed, dismissing four counts that were already time-barred by the time the government sought suspension.

On the government’s appeal, the circuit affirmed. Its analysis began with the plain language of the statute, “liberally” interpreting it “in favor of repose.” Under section 3292(a) district court is supposed to “suspend” the “running” of the statute of limitations once it makes certain findings relating to the request for foreign evidence. But “suspend” means “to cause to stop, at least for a time, something that is in operation or effect,” and a statue of limitations is only in operation or effect if it is running. Moreover, a statute of limitations cannot be “running” if it has already “run.” “To restart the running of an expired statute of limitations would be to ‘revive’ it. We see no basis upon which to read the word "suspend" in section 3292 to include the distinct concept of revival.”

The court rejected the government’s argument that the only time requirement expressly mentioned in § 3292 is the requirement that the application be made before the indictment is returned. The court noted that this requirement and one that the application be made before the statute expires are not mutually exclusive.

Nor did the court agree that § 3292(b) affected this analysis. This subsection sets the commencement date for the suspension as the date on which the government requested the foreign evidence, and not the date that the court grants the 3292 application. But that the statute allows a retroactive start date for the tolling does not mean that the application for the tolling itself can be made after the statute of limitations has expired. This reading of subsection (b) would render the timing provisions of subsection (a) “superfluous.”

Finally, the court held that the “whole act” rule supported its holding. Under this canon, a court should read a single section in light of the objectives and policy of the whole law. Here, the “whole act” includes § 3292 and a parallel provision of the Speedy Trial Act, § 3161(h)(9), which provides for an exclusion of speedy trial time - once an indictment has been returned - of up to one year to allow for requests for foreign evidence. Thus, reading the two sections together, the meaning of § 3292 is clear. “If the government anticipates a delay on account of a request for foreign evidence before indictment, it can seek to suspend the statute of limitations pursuant to section 3292. If it anticipates such a delay after the indictment is returned, but before trial, it can separately apply for relief under section 3161(h)(9) of the Speedy Trial Act.”

Score: Form 1; Substance 0

United States v. Rutkoske, No. 06-4067-cr (2d Cir. October 25, 2007) (Newman, Winter, Katzmann, CJJ).

This stock fraud decision deals primarily with the timeliness of a superseding indictment.

An initial indictment not naming Rutkoske was filed on December 11, 2003; S1, the first superseder, was filed on April 6, 2004. It named Rutkoske, and described a single overt act within the five-year statute of limitations. Suspiciously, that act occurred “on or about April 9, 1999,” making the indictment timely by only about three days. After repeatedly being pressed by the defendant to pin down the details of the April 9 act, the government superseded again, in July of 2005. S2 charged Rutkoske with the same offenses as S1, but the government dropped the April 9 overt act and instead alleged two others, on April 15 and April 16, 1999. When Rutkoske moved to dismiss S2 as untimely under the five-year statute of limitations, the government conceded that the April 9 act had not occurred on that date, rendering S1 retroactively untimely. Nevertheless, the district court denied the motion, and the court of appeals affirmed.

The court began with the two-part test for relation back of a superseder: the original indictment must have been be validly pending and the superseder must not “materially broaden or substantially amend the charges.” The question raised here, one of first impression in this circuit, was “whether an indictment that is facially valid only because of one alleged overt act within the limitations period should be considered . . . validly pending . . . when the Government concedes that [that] overt act did not occur within the limitations period.” In answering this question in the affirmative, held that since S1 was “facially timely” when it was returned, it did not matter than it was, in actuality, untimely. The court noted that if the case had gone to trial on S1, the government could have satisfied the statute of limitations by proving a different, timely overt act. The court also noted that the government’s concession that S1 was untimely did not occur until after the return of S2. Thus, S1 was “facially timely and validly pending” at the time that S2 was returned.

The court also held that S2 did not broaden or amend the charges, since it merely extended the dates of the conspiracy by one week.

Comment: This is a disturbing decision. S1 was, as a factual matter, untimely both when it was filed and when S2 was filed. Why on earth should the case turn on the fact that S1 erroneously appeared to be timely? Is form really more important than substance? While the court carefully notes that there is no evidence that the government “deliberately withheld” its concession that the April 9 overt act had not occurred until after S2 was filed, the court’s confidence in the government would seem to be a bit naive. The facts here surely support a strong inference of deliberate withholding. The government must have known that there was a problem with the April 9 act when it decided to supersede; the defense had been pressing for an explanation of that act for more than a year. Given this, why else would the government have superseded unless it knew it had a timing problem? The government saved its case by not disclosing the defect until after S2 was filed. This decision would thus seem to give a free pass to all ethically challenged prosecutors - as long as they successfully hide their misconduct until it is cured, the defendant has no remedy.


On the brighter front, this case has a nice discussion of one of the most vexing Guidelines issues - the instruction that loss calculations under § 2B1.1 need not calculated with precision and that a “reasonable estimate” is sufficient.

Calculating loss can be particularly difficult in stock fraud cases because so many factors contribute to the decline of share prices. Surprisingly, this is not an area where the circuit has given much guidance. Here it does, turning, unusually, to civil law - the “principles governing recovery of damages in civil securities fraud cases” - for assistance. These principles a triggered remand for resentencing because the district court relied exclusively on the testimony of a NASD expert that, in essence, attributed the total decline in the stock price to the defendant’s conduct. The court's failure to “even consider[] other factors” relevant to the decline was error.