Reversal of Fortune

United States v. Plugh, No. 10-2815-cr (2d Cir. August 8, 2011) (Jacobs, Livingston, CJJ, Rakoff, DJ)

This about-face arises from a supervening Supreme Court decision.

In its original opinion in this case, a divided panel held that the defendant had successfully invoked his Miranda rights by declining to sign a waiver-of-rights form. See “Car, Men, Miranda,” posted July 31, 2009. The circuit affirmed, on a government appeal, suppression of the defendant’s statements, viewing the case as an application of Davis v. United States, 512 U.S. 452 (1994), which held that a suspect must “unambiguously” invoke his Miranda rights to cut off questioning.

But a 2010 case, Berghuis v. Thompkins, 130 S. Ct. 2250 (2010), held that the Davis “unambiguous” standard should control not just the “cut-off,” but also the initial invocation of the rights. There, Court found that the suspect’s refusal to sign was not an “unambiguous” invocation of his rights.

Viewing this as an “intervening change in the law” that “compels a different outcome” on the facts of the case, the court “reconsidered the district court’s order of suppression” and vacated it.

Rowe, Rowe, Rowe, You’re Toast

United States v Jackson, No. 07-0263-cr (2d Cir. August 4, 2011)
Leval, Lynch, CJJ, Korman, DJ)

Appellant Derrick Rowe, charged with a drug-related murder, had three trials. At the first, he was convicted of only drug trafficking and possession of ammunition, but the jury hung on three other counts - murder, § 924(c) and § 924(j). The court sentenced him to 32 years. At the second, the jury hung on all of the remaining counts. At the third, Rowe was convicted of the three open counts and received a 45-year concurrent sentence.

On appeal, his primary claim was that, at the third trial, the district court erred in allowing the government to play portions of his some of his prison phone calls without allowing him to play other portions under the Fed. R. Evid. 106 “rule of completeness.” The circuit found no abuse of discretion. In he first conversation, Rowe instructed a third party to tell a potential witness, named Battle, to keep quiet. But the portion he wanted to play, in which he said he was “not mad at” Battle would not have affected the jury’s “complete and proper understanding of the portion played by the government.”

In the other conversation, the government played a portion of a conversation with Battle's mother that reflected Rowe’s anxiety that the Battle had been arrested. Rowe wanted the court to play portions of the conversation that showed other reasons why Rowe might have been agitated but, again, the court found no abuse of discretion in precluding them.

Rowe also pursued a double jeopardy claim, arguing that the drug trafficking offense of which he was convicted at the first trial was a lesser included offense of the murder charge that the first jury hung on, and of which he was not convicted until the third trial. The court punted on whether this claim was legally correct, instead holding that it did not matter. Given the hung juries, for double jeopardy purposes, the second and third trials “are properly seen as continuations of the initial trial, and did not expose Rowe to double jeopardy.” Nor was there an Ashe v. Swenson-type collateral estoppel problem, since Rowe was not acquitted of the drug trafficking charge.

What’s In A “Same”?

United States v. Feldman, No. 10-2275-CR (2d Cir. August 1, 2011) (McLaughlin, Pooler, Sack, CJJ)

Defendant Feldman sought appellate review of four sentencing enhancements. The government argued that the court should not review them because the district court had indicated that it would impose “the same sentence” even without some of the errors. The circuit rejected this argument, reviewed the claims, found no error, and affirmed.

Background

The facts of the case are particularly unpleasant. Feldman was a psychiatrist who, in the 1990's, operated mental health facilities in Florida. These facilities proved to be Medicare/Medicaid fraud mills and, just as Feldman was negotiating a plea agreement, he fled to the Philippines.

There, he set up an even more egregious scheme. Through a website called www.liver4you.org, he fraudulently offered kidney and liver transplants in the Philippines. Desperate patients and their families wired him tens of thousands of dollars and traveled to the Philippines, but did not receive what they were promised. Eventually, Feldman was deported from the Philippines and prosecuted in the Northern District of New York, the locus of the bank accounts to which the victims wired their money. In NDNY, he was sentenced on both the transplant case and the Florida conduct. With enhancements, the district court found that the rage was 151 to 188 months, and sentenced Feldman at the top.

During the hearing, the court noted that “even if some of my rulings ... are inaccurate, there is no question that I still would give the same sentence I am about to give.” Citing this, the government argued in the circuit that the court “should decline to consider Feldman’s claims of procedural error at sentencing.”

The Circuit’s Decision

While noting that a guideline error can be harmless if “it could not have supported any lesser sentence,” the court held that the district court’s “same sentence” statement did not moot Feldman’s claims of error. The key, according to the circuit is ambiguity. Unless there is “unambiguous indication to the contrary,” the court will not assume that a sentence will be the same absent a guideline error. The court did not think that the district court’s “same sentence” statement was unambiguous because it referred only to “some” of the challenged enhancements “without stating which enhancement - or which combination of enhancements - would not affect Feldman’s sentence.”

While this disposed of the matter, the court went on to discuss the policy considerations. Given the importance of the guideline range to the selection of the sentence, the court “cannot lightly assume that eliminating enhancements from the guidelines calculation would not affect the sentence.” The court will be “especially wary of making such an assumption” where the appellate claims would have a dramatic effect on the sentence. Here, for example, if Feldman had prevailed on all of his arguments the range would have been 63 to 78 months, less than half of the range calculated by the district court.

Finally, the court noted that district courts “generally should not try to answer the hypothetical question of whether or not it definitely would impose the same sentence on remand if this Court found particular enhancements erroneous.” Criminal sentences cannot and should not be “exempted from procedural review with the use of a simple incantation.”

That said, however, the court found no merit to any of Feldman’s appellate claims. Those claims - objections to characterizing his website as mass marketing, the loss amount, the risk of death enhancement and obstruction of justice - tread no new ground, and the court’s resolution of them is not summarized here.

Insurance [Snow] Job

United States v. Ferguson, No. 08-6211-cr (2d Cir. August 1, 2011) (Jacobs, Kearse, Straub, CJJ)

For 3Q of 2000, the insurer AIG’s stock price dropped significantly, even though its earnings were satisfactory. The company concluded that the cause was a $59 million decline in its loss reserves - a measure of the company’s risk exposure.

In the true spirit of 21st Century American business ingenuity - the same, it seems, that caused the company to all but collapse entirely, and require a $90 billion government bailout, in 2008 - AIG, or at least some of its principals, decided that the best course would be - rather than actually increasing its loss reserves and satisfying its stockholders - to engage in an accounting fraud. The company accordingly entered into a sham reinsurance contract with General Re. The deal was structured to look - to AIG’s investors and auditors - like it was causing an increase in its loss reserves, but did not actually transfer any risk to General Re, which is, ordinarily, the sine qua non of a reinsurance contract. So shady was the deal that, while AIG booked the transaction - this opinion calls it the Loss Portfolio Transfer, or LPT - as a reinsurance contract (it had to, since that was its ostensible purpose) General Re booked it as a deposit.

Five defendants - four from General Re and one from AIG - were convicted after a jury trial of conspiracy, mail and securities fraud, and making false statements to the SEC. Although the circuit rejected a number of claims - including conscious avoidance, insufficiency, severance claims, evidentiary errors and prosecutorial misconduct - it found that two significant trial errors - one evidentiary and one in the jury charge - warranted a new trial.

The Evidentiary Error

Materiality was an element of “most of the charged offenses.” The government had to prove a “substantial likelihood” that the LPT misstatements “would be important to a reasonable investor.” And the government could have done so in legitimate ways, such as expert testimony on the LPT’s effect on AIG's stock price. Instead, the district court permitted the government to show this in an unfairly prejudicial way.

AIG’s stock price declined by twelve percent in 2005, once the nature of the LPT’s impropriety was publicly revealed in a series of new articles. While the district court excluded as overly prejudicial a chart graphing this decline as a line, it permitted the government to use a “functionally identical” chart in its opening, and also allowed the government to introduce bar charts showing single-day stock prices for the days following each article’s publication. These charts were “prejudicial” because there were several other problems affecting AIG’s stock price at the time; unrelated allegations of bid-rigging, self-dealing, earnings manipulation “and more,” which had been redacted from the articles.

Thus, the defendants faced a dilemma: they either had to allow the jury to attribute the full stock drop to the LPT, or accept the introduction of evidence of how thoroughly corrupt the company had become. To avoid this, the defendants offered to stipulate to materiality, but the government refused.

The circuit strongly suggested that the government should have been forced - Old Chief-style - to accept the stipulation. With no stipulation, the government not only got the benefit of an inflated sense of the effect of the LPT transaction on AIG’s stock, it “exploite[d] it [in summation] to emphasize the losses caused by the transaction.”

Since the charts suggested - without foundation - that the LPT was the sole cause of the twelve per cent “plummet” in the value of AIG’s stock, they should not have been admitted.

The Jury Instruction

The court also found reversible error in the district court’s “willfully caused” jury instruction. Willful causation is a theory of culpability akin to aiding and abetting, set out in 18 U.S.C. § 2(b). Under this section a defendant commits an offense if he “willfully causes an act to be done which if directly performed by him or another would be an offense.” Here, largely misled by the requests to charge, the district court structured the § 2(b) part of its jury instruction as a series of questions that omitted entirely the concept of causation. Instead, the jury was instructed to consider only whether each defendant acted knowingly, willfully and with the intent to defraud, and whether he intended that the crime would actually be committed by others.

The circuit found plain error, since the government “argued for guilt on a causation theory.” In addition, willful causation was a “likely theory of liability,” since the AIG accountants who actually filed the false LPT forms were not named as co-conspirators. A new trial was therefore warranted because it was “improbable, let alone absolutely certain, that the jury based its verdict on a properly instructed ground.”

Point of Controversy

United States v. Lee, No. 10-493-cr (2d Cir. July 26, 2011) (Parker, Chin, CJJ, Korman, DJ)

For the many years, the third acceptance of responsibility point - although to be completely faithful to guideline lingo, it is a “level,” not a “point,” since “points” are for criminal history - was something of a given. As long as the defendant either confessed early on or pled guilty timely, the reduction was granted. Effective November 1, 2003, however, the Commission amended the language of this adjustment, guideline section 3E1.1(b), to require a government motion for the third point. The amended section indicates that such a motion should state “that the defendant has assisted authorities in the investigation or prosecution of his own misconduct by timely notifying authorities of his intention to enter a plea of guilty, thereby permitting the government to avoid preparing for trial and permitting the government and the court to allocate their resources efficiently.” This amendment was the result of a congressional directive in the PROTECT Act, and the Commission justified it on the theory that only the government knew whether its resources had truly been conserved.

There has been surprisingly little third-point litigation in the ensuing years. But this case resolves an important question about the adjustment over which there is a circuit split.

Defendant Lee pled guilty to a four-count drug indictment without much fanfare. He later objected to several facts contained in the PSR,and the district court scheduled a Fatico hearing. On the eve of the hearing, the defendant withdrew all but one of the objections, and a pared down hearing went forward on that single objection, which the court resolved in the government’s favor. At sentencing, the government refused to move for the third acceptance point, over Lee’s objection, and the district court refuse to compel it. The court imposed a very long, but bottom-of-the-range sentence based on the range resulting from a two-level adjustment.

On appeal, the circuit reversed. While a government motion is a “necessary prerequisite” to the third point, circuit precedent has indicated a district court can still grant the point if the government’s refusal is based on an unconstitutional motive or a plea agreement leaves it to the government’s discretion and the government acts in bad faith.

Here, since there was no plea agreement, only the first option was available, but the circuit found that it was met, although the court seemingly identified an alternative reason for granting the point: the government’s reason for not making the motion was based on an “unlawful” - although perhaps not unconstitutional - reason: the refusal was not permitted by the guideline itself, which addresses only avoiding preparing for “trial.” While Lee put the government to its burden at a Fatico hearing, he undisputedly pled guilty early on and “spared the government from ‘preparing for trial.’” Thus, under the “plain language” of the guideline, “the government’s refusal” was “not justified.” The court also noted that the commentary to § 3E1.1 - which is binding - likewise limits the determination to whether the government has saved resources by avoiding preparing for trial.

Finally, and most interestingly - see comments below - the court also held that a defendant has a “due process right to reasonably contest errors in the PSR that affect his sentence” - and that “a defendant should not be punished for doing so.” If there is a “good faith dispute” as to a material fact in the PSR, “the defendant’s request that the dispute be resolved is not a permissible reason for the government to refuse to make the § 3E1.1(b) motion, even if resolution of the dispute requires an evidentiary hearing. “The court, not the government, imposes sentence, and the court is entitled to a full and accurate record - as are the parties.”

Comment

There are several interesting issues raised by this opinion. First, it forces consideration of the oddity of the whole acceptance of responsibility scheme at all. A sentence is supposed to be consistent with the goals of sentencing set forth in § 3553(a)(2), and none of those goals seem to have anything at all to do with whether the government - or the court, for that matter - was inconvenienced by the need to prepare for, or even conduct, a trial.

A second important point is this: since the inception of the guidelines, the circuit has held to the fiction that institutionalizing lower sentences for defendants who plead guilty does not “punish” going to trial, which would be unconstitutional, it “rewards” pleading guilty, which is not. What’s the difference? None, of course, or at least none that can be articulated. And this decision clearly implodes that whole line of reasoning, since it expressly holds that denying a defendant the third point for contesting a material sentencing fact - or at least doing so in “good faith” - “punishes” him for doing so. This decision should accordingly open the door to a similar argument that a defendant who goes to trial with a “good faith” claim that he should be acquitted is entitled to all three acceptance of responsibility points.

Finally, a close look at the rationale of the amended third point language reveals yet another oddity. The stated purpose of the amendment is to help conserve the resources of both the government and the court. While it is true that the government knows best whether it has expended resources, it is not in a better position than the court itself to know whether the court was inconvenienced by an untimely plea. Accordingly, the guideline should permit the court to impose the third point on its own if it concludes that no significant judicial resources were consumed by an untimely plea of guilty.

Trace Amounts

United States v. Gonzalez, 10-2202-cr (2d Cir. July 22, 2011) (Kearse, Miner, Chin, CJJ)

Former state senator Efrain Gonzalez, Jr., pled guilty to various fraud-related charges in connection with two sham charities that he set up while in office. This opinion contains an interesting discussion of the concept of “tracing” criminal proceeds. In it, the court concludes that tracing is not required to determine the number of victims under § 2B1.1, but is required, to some degree at least, to calculate the actual loss for restitution purposes.

The case arose from the actions of two supposed charities, West Bronx Neighborhood Association (WBNA) and United Latin American Foundation (ULAF). Each received both public money and private donations, and each - although supposed to be engaged in charitable activities - instead spent most of its money enriching Gonzalez by paying his personal bills - and those of some of his cronies - and funding a lavish lifestyle.

Gonzalez ultimately pled guilty to mail fraud, federal-program fraud, wire fraud and conspiracy. He later tried, unsuccessfully, to take the plea back - the circuit’s rejection of that issue, while very long, is straightforward and is not summarized here - and ultimately received a below-guideline 84-month sentence and restitution.

In challenging the length of his prison sentence, Gonzalez argued that the district court erred in concluding that the offense involved 50 or more victims under § 2B1.1(b)(2)(B). He claimed that, although more than 50 individuals donated money to WBNA, the government had not traced back the misappropriated funds to those particular donors. The circuit rejected this argument. It is not true that “before a person who has made a charitable contribution can be considered a victim within the meaning of § 2B1.1(b)(2)(B), his donation must be traced to a particular misallocation by the defendant.” Rather, a victim is a person who sustained any part of the actual loss, with no need that he be “linked with a specific part of the loss.” Such a holding is particularly apt given the specific instruction in the commentary to § 2B1.1 that defendants who exploit victims’ charitable impulses “create particular social harm.”

Interestingly, the court reached a somewhat different conclusion with respect to the restitution amount. In fixing restitution, the district court relied on WBNA’s donor lists. While it is true that any such donor could be a victim for restitution purposes, the circuit disagreed that each donor should be compensated for the full amount donated, since some of them “received value in return for their donations.” Some donated to and attended a WBNA gala that offered a “Buffet Supper” and an “Open Bar,” and others donated money for advertisements that appeared in the event’s program. The district court’s view that these donors expected that 100 per cent of their contributions would be used for charitable purposes was sufficient to make the determination that they were victims for restitution purposes, but was not sufficient to order full restitution of the amounts they gave. The circuit remanded the restitution order for “further proceedings to determine to what extent donors suffered [actual] losses.”

PC World

United States v. Vilar, No. 10-521-cr (2d Cir. July 19, 2011) (Jacobs, CJ, Rakoff, DJ)

Defendant Vilar and his co-defendant Tanaka were convicted of fraud-related charges after a jury trial. Both filed timely notices of appeal and the appeals were consolidated. Vilar, represented by new counsel, decided to develop a claim that his trial counsel was ineffective, and make a motion under 18 U.S.C. § 2255. This per curiam resolves his motion to dismiss the appeal without prejudice, with leave to reinstate it after completing the 2255. The circuit denied the motion, but granted Vilar a six-month extension of time to perfect his appeal.

The court noted that Vilar’s request was somewhat unusual. Usually, a defendant first pursues a direct appeal then, if he wishes, a 2255 motion. Vilar’s application would allow a collateral attack first and a direct appeal second, a route that “raises concerns both jurisdictional and practical.”

Under Appellate Rule 4, the court only has jurisdiction over an appeal if a notice of appeal is timely filed - that is, within 14 days, extendable by up to 30 days on a motion to the circuit. Vilar’s request - that the appeal be dismissed, but with jurisdiction to be revived more than 30 days later - is inconsistent with this rule.

There is, however, an “effective equivalent.” The circuit could stay adjudication of the appeal pending the outcome of the 2255. This would avoid the jurisdictional constraints of Rule 4, and the circuit has done it before. The court accordingly construed Vilar’s motion to dismiss and reinstate as a motion for a stay, but then denied the motion. The court found no compelling justification for the stay in Vilar’s claim of judicial economy, particularly since Vilar “has not shown that his § 2255 motion is more likely to succeed than his direct appeal.” While it is true that handling the 2255 first would allow consolidation of that appeal and the direct appeal, “few if any judicial resources would be conserved.” The consolidated appeals would “entail different standards, different records, and separate analyses,” and “simultaneous adjudication of interrelated issues using different standards and different records would increase the complexity of the consolidated appeal."

Nor did fairness concerns require granting the stay. The court rejected Vilar’s claim that the trial attorney’s ineffectiveness in developing the factual record below would prejudice the direct appeal, since any “additional fact-finding done pursuant to a habeas proceedings” would not be part of the record” on which the direct appeal would be decided.

Moreover, it would be unfair to Tanaka and the government to grant the stay. Either Tanaka’s appeal would be delayed or, if it were severed from Vilar’s, the government would have to litigate separately two identical appeals.

The court accordingly denied the motion, but granted Vilar a six-month extension of time, finding that nether the government nor Tanaka would be unduly prejudiced by the delay.

Summary Summary

At last - more summary orders of interest.

In United States v. White, No. 10-2631-cr (2d Cir. July 18, 2011) (summary order), the circuit vacated the district court’s decision denying resentencing under 18 U.S.C. § 3582(c)(2).

The case has a long procedural history. White originally rejected a plea offer that included one § 924(c) count while dropping another, but his attorney never told him that the second one carried a mandatory twenty-five year consecutive sentence. White ended up convicted after trial and facing a 570 to 622 month guideline range. On his habeas corpus petition, the district court concluded that his attorney had been ineffective, and fashioned an equitable remedy under which the court sentenced him under the final offer White had rejected - one count of crack trafficking and one § 924(c) count. This produced a 168-month sentence: 108 (a guideline sentence) on the crack count, plus 60 on the 924(c). The circuit upheld all of this back in 2007.

In 2010, the district court rejected White’s § 3582(c)(2) motion, holding that the crack portion of the sentence was not “based on” a guideline range affected by the 2007 ameliorating amendment. On this, White's second appeal, the circuit reversed. White’s “sentence was indeed ‘based on’ the guidelines.” The district court’s equitable remedy to White’s attorney’s ineffectiveness produced a sentence “based on” the range reflected by the counts of conviction that survived the remedy - the range contemplated by the final plea offer. This, although not the range for the counts on which White was convicted after trial, was “designed to replicate the sentence” he “would have received had he accepted the plea offer.” Thus, White was clearly eligible for a § 3583(c)(2) reduction. On remand, of course, the district court still has the discretion to grant or deny the motion.

In United States v. Johnson, No. 09-3917-cr (2d Cir. July 6, 2011) (summary order), the court rejected a claim that the guilty plea did not satisfy Rule 11. While the plea failed to advise the defendant of his rights to compel witnesses, plead not guilty, counsel at every stage of the case, or the court's obligations to order restitution and consider the guidelines, possible departures under the guidelines and the § 3553(a) factors, the circuit found no evidence that the defendant did not understand the charge or that he would not have pled guilty but for the court’s omissions.

To The Manner Porn

United States v. Jennings, No. 10-1642-cr (2d Cir. July 22, 2011) (Kearse, Miner, Chin, CJJ)

For defendant Russell Jennings, looking at child pornography was a hard habit to break. He served a twenty-one-month possession sentence in a 2006 case then, in 2009, while on supervised release, did it again. For the 2009 case, he received a long prison sentence, plus a concurrent supervised release violation sentence on the 2006 case, and a lifetime term of supervised release.

His appellate claims related largely to the way the evidence against him in the 2009 case was developed. He argued that his probation officer was improperly involved in the procurement of the search warrant and criminal complaint, and that incriminating statements he made to the officer were obtained in violation of the Fifth Amendment. The circuit affirmed.

For the first argument, Jennings asserted that his probation officer lacked the statutory and constitutional authority to (1) meet with the prosecutor to plain the 2009 criminal investigation (2) swear out, apply for and execute a search warrant and (3) become involved in the criminal investigation by interrogating Jennings at the government’s direction and by swearing out the criminal complaint.

The circuit disagreed. The duties of a probation officer are set out in 18 U.S.C. § 3603, and include protecting the public from persons whose release proves threatening to the community. Thus, officers should report a releasee’s wrongdoing, and the officer here did not act beyond the scope of this authority when he put the information he developed into affidavit form that better allowed other agencies to perform their duties. Nor did the officer usurp the Executive Branch’s prosecutorial function, in violation the doctrine of separation of powers. The United States Attorney’s Office drafted the search warrant and criminal complaint based on information that the officer provided, which was not a separation-of-powers violation.

Relatedly, Jennings also argued that the probation officer’s one-week delay in reporting its violation findings to the court violated a statutory requirement that he do so “immediately.” The circuit found no plain error, since the statutory requirement of immediacy, set out in 18 U.S.C. § 3603(8)(B), covers only those persons conditionally released after having been found not guilty by reason of insanity or otherwise suffering from a mental disease or defect, but not persons on supervised release in general.

The circuit likewise rejected Jennings’ Fifth Amendment claim, which derived from a condition of supervised release requiring him to answer his probation officer’s questions truthfully. Since he gave incriminating answers to the officer during an interview about his violation conduct, Jennings argued that those answers were compelled and should be protected by the Fifth Amendment.

But, since Jennings did not invoke the privilege against self-incrimination during the interview, the statements could be used. The Fifth Amendment privilege is not “self-executing,” and thus statements made by a person to his probation officer are not covered, unless the officer threatened that invocation of the privilege would subject the person to a penalty. But merely requiring a releasee to answer his probation officer’s questions truthfully does not render the answer to those questions “compelled,” even if the officer deliberately sought incriminating evidence.

Summers-Time Blues

United States v. Bailey, No. 07-3819-cr (2d Cir. July 6, 2011) (Cabranes, Pooler, Raggi, CJJ)

In Michigan v Summers, 452 U.S. 602 (1981), the Supreme Court held that the Fourth Amendment permitted police officers to detain the occupant of a premises during the execution of a search warrant, without need for individualized suspicion of the person detained. Here, the circuit, joining an issue in which the courts are divided, held that Summers also permits detaining the occupants after they have left the premises.

Background

In July of 2005, Suffolk County detectives obtained a search warrant for a basement apartment in Wyandanch, based on an informant’s tip that there was a gun there. When they arrived at the location to execute the warrant, they saw Bailey and an associate exiting the apartment. They drove off and the officers followed; about a mile from the apartment, the officers stopped Bailey’s car.

The officers patted Bailey down and, although he produced a driver’s license with a different address, he said that he was coming from “his” house at the target address. His friend also told the police that Bailey lived there. The officers took Bailey into custody and told him that the detention was incident to the search of the target location. Bailey answered that he did not live there and would not cooperate with the investigation.

Back at the original location, a gun and drugs were found in the apartment. Bailey was arrested and his keys were seized incident to the arrest. One of them opened the door of the apartment.

In the district court, Bailey moved to suppress the evidence obtained as a result of his detention - his statements and the physical evidence, including his keys. The district court denied the motion, citing Summers.

The Circuit’s Reasoning

On Bailey’s appeal, the circuit affirmed. Like the district court, it relied on Summers, which had concluded that the intrusion associated with being detained during a lawful search was minimal, while the justifications for it were substantial: law enforcement’s interests in preventing a suspect from fleeing; minimizing the risk of harm to the officers; and completing the search in a “orderly” manner.

The circuit had little difficulty concluding that the authority to detain an occupant “at” the premises during the search also covered detaining an occupant who “leaves” the premises “during or immediately before the execution of a search warrant.” The court noted that three circuits had extended Summers to these facts, while two had not, and decided to join with the majority, citing the “guiding principle ... of reasonableness.”

The circuit concluded that, like a detention at the premises, the intrusion of an off-premises detention is “de minimis” and the law enforcement interests substantial. Summers does not draw a “bright line” at “the residence’s curb.” Rather, the interests identified in Summers also permit detention of an occupant “nearby, but outside of, the premises.”

The court noted that this rule would prevent officers from having to make the “Hobson’s choice” of either immediately detaining an occupant who is leaving - thus risking officer safety and the destruction of evidence - or letting him leave the scene - thus risking the inability to arrest him if incriminating evidence is found.

On these grounds, then, Bailey’s detention was lawful. Detaining him out of view of the house out of concern for the officers’ safety and to prevent alerting other possible occupants was, here, “reasonable and prudent.” Moreover, the detention was not “unreasonably prolonged.” By the time Bailey was returned to the location the search was underway, and he was placed under arrest within five minutes of the execution of the warrant.

The court ended with a “note of caution.” Summers is not “a license for law enforcement to detain ‘occupants’ of premises subject to a search warrant anywhere they [may] be found incident to that search.” Rather, the rule announced here applies only when the occupant “is seen leaving those premises and the detention is effected as soon as reasonably practicable.” The court also announced its expectation that these geographic and temporal limitations “will be policed vigilantly by the courts.”

Summary Summary

It has been a while, but here are three more summary orders of interest.

In United States v. Mancuso, No. 10-2420-cr (2d Cir. June 30, 2011), the court identified several sentencing errors in connection with a prosecution for environmental crimes. First, the district court erred in applying the multi-object conspiracy guideline, U.S.S.G. § 1B1.2(d). When a defendant is convicted of multi-object conspiracy, this section requires the court to sentence as if the defendant had been convicted on a "separate count of conspiracy for each offense that the defendant conspired to commit." The sentencing court is to sit as the trier of fact and determine, using the reasonable doubt standard, whether it "would convict the defendant of conspiring to commit the particular objects" Here, the district court did not make any specific findings under this section, so the circuit remanded the case for further findings. Second, the district court committed plain error in applying the four-level enhancement for permitless disposal of a hazardous substance, because the relevant offense statutes did not involve permits. Third, the court made insufficient findings to support the obstruction of justice enhancement as to one defendant's testimony, because it did not make an explicit finding that the defendant's false testimony was willful.

United States v. Doe, No. 10-2095-cr (2d Cir. June 29, 2011), involves a complicated interaction between two unnamed litigants. One defendant, Roe, who appears to be an attorney, filed a civil RICO suit against the other, Doe, in the Southern District, which included sealed and confidential materials from Doe's Eastern District criminal case, including the fact that Doe had cooperated with the government. Judge Glasser eventually enjoined Roe from disseminating confidential information about Doe. Several hearings and orders followed, all restricting Roe's ability to disseminate information about Doe. On appeal, the circuit rebuffed a First Amendment challenge to an order permanently enjoining Roe from disseminating Doe's presentence report, since that order contained adequate findings that releasing proof of Doe's cooperation would put him at risk. That same order also concluded that Roe had deliberately defied the order sealing Doe's PSR, a finding that the circuit also upheld. The circuit also upheld an Eastern District order preventing Roe from disclosing other sealed or confidential information about Doe.

Finally, in United States v. Sleiman, No. 10-1865-cr (2d Cir. June 28, 2011), the circuit did not make adequate findings to support its use of the November 1, 2001, guideline manual in a money laundering case. The November 1, 2000, manual would have resulted in a sentencing range about half as long as that recommended by the next year's book. The circuit ordered a Jacobson remand: the district court must either determine that the government has proven that the offense conduct extended into the time period covered by the November 1, 2001, manual or resentence the defendant under the 2000 manual.

PC World

United Sates v. Gravel, No. 10-1045-cr (2d Cir. June 20, 2011) (Pooler, Wesley, Chin, CJJ) (per curiam)

The court’s latest per curiam looks at the firearm guideline’s six-level enhancement for "machineguns." See U.S.S.G. § 2K2.1(a)(5).

The defendant’s gun was a Colt machinegun, initially designed to fire automatically, but had been retrofitted to fire only semi-automatically. Defendant argued that since the definition uses the present tense - a machinegun is “any weapon which shoots, is designed to shoot, or can be readily restored to shoot, automatically more than one shot” - his now semi-automatic weapon should not receive the enhancement. Looking to the dictionary definition of “designed,” the court held that, when applied to a “manufactured object such as a firearm,” the word referred to what the gun was “conceived of and designed for and not to any modifications made afterwards.”

Here, since the gun was made for use as an automatic weapon, the retrofitting did not “change the fundamental design of the weapon” or “redesign” it into something else.

Circuit Says SDNY Jury Selection Is “Trivial”

United States v. Gupta, No. 09-4738-cr (2d Cir. June 17, 2011) (Walker, Parker, Hall, CJJ)

Anyone who has ever selected a jury in the Southern District knows that the typical voir dire there is a perfunctory affair indeed: a few questions about potential bias, a few about household composition, then you exercise your challenges and open after lunch. Perhaps that’s why the panel majority here held that the exclusion of the entire public for an entire SDNY voir dire was covered by the circuit’s “triviality exception” to the Sixth Amendment right to a public trial.

Before jury selection began at Gupta’s immigration fraud trial, the district court closed the courtroom to the public, preventing - at a minimum - Gupta’s girlfriend and brother from attending. The court acted without notice to the parties and, when later called upon to do so, gave two reasons for the closure: the need to “accommodate the large number of jurors in the venire” and to protect the members of the venire from having contact with any members of the public.

The majority had no trouble finding a Sixth Amendment violation - even the government agreed that the court’s reasons for the closure violated the four-factor test of Waller v. Georgia. But the majority also held that the Second Circuit’s so-called “triviality exception” covered this situation.

The court has been using this exception since 2005; as the court described it then, the exception does not look for prejudice or harm to the defendant. Rather, it looks to “whether the actions of the court and the effect that they had on the conduct of the trial deprived the defendant ... of the protections conferred by the Sixth Amendment.” In other words, the court asks whether a closure undermines the values that the Sixth Amendment was intended to protect.

A few years back, in a habeas case, the court used this exception to avoid finding structural error where the defendant’s mother was excluded from a portion, but not all of, the voir dire. See Structural Failure, posted February 6, 2009. The majority here found that there was no difference between a partial voir dire closure and the closure of the entire proceeding. Either way, “nothing of significance happened” in the absence of public scrutiny, and this was true whether the closure was for all of, or only part of, jury selection.

The majority also identified a “broader, institutional reason” for finding the closure “trivial”: here members of the public - the venire itself - were present. And, according to the majority, “members of the venire remain public wittneses during much of the voir dire proceedings.”

Finally, the majority rejected the argument that a 2010 Supreme Court decision, Presley v. Georgia, invalidated the triviality exception. In Presley, the Georgia Supreme Court had found no Sixth Amendment violation where the trial judge excluded the defendant’s mother from the voir dire, because the defendant did not present the trial court with alternatives to the closure. The Supreme Court reversed, holding that trial courts are not excused from Waller's requirement that they consider alternatives merely because the defendant did not suggest any.

As the majority here saw it, since all the Court did in Presley was conclude that the state misapplied Waller “from the onset,” it had “no occasion to consider a ‘trivilaity exception’ to the public trial guarantee.”

The majority’s opinion prompted a stinging rebuke from Judge Parker in dissent. To Judge Parker, there was nothing at all “trivial” about the closure here. He first noted the exception “was never meant to apply, and should not now be applied” to the “entirety of jury selection,” particularly where, as here, the closure was undisclosed to the parties. “A trial judge’s undisclosed exclusion of the public from jury selection, without the knowledge or assent of the accused or the lawyers, seriously undermines the basic fairness of a criminal trial and the appearance of fairness so essential to public confidence in the system.”

Judge Parker then surveyed all of the reported decisions holding that a closure during voir dire was too trivial to warrant reversing a conviction. He concluded that in all of them the closure was (1) for only part of the voir dire, (2) limited to certain spectators, or (3) inadvertent. “Never, until today, has any court held that a judge’s intentional, unjustified, and undisclosed exclusion of the public for the entirety of voir dire can be brushed aside as a merely ‘trivial' affront to the Sixth Amendment.”

Judge Parker also took issue both with the notion that “nothing of significance happened” - since what happened was “the entire process of selecting the jury" - and that the right to a public trial was protected because the prospective jurors were present. “This reason makes no sense” because the panel members had received summonses and were “required to be there and [be] part of the judicial process itself.”

Judge Parker concluded by characterizing the result here as “so self-evidently inconsistent with Supreme Court jurisprudence that I would hope that it becomes the subject of certiorari.”

Mommy Dearest

United States v. O’Connor, No. 08-5968-cr (2d Cir. June 16, 2011) (Kearse, Pooler, Hall, CJJ)

Linda O’Connor began sexually abusing her daughter, S.O., when S.O. was ten years old. O’Connor also allowed her friend - he was also her occasional financial benefactor and sex partner - George Lang, to do so; O’Connor even sometimes joined in. Lang died of cancer before he could be prosecuted, and O’Connor then passed S.O. on to her landlord, co-defendant Dean Sacco, in lieu of paying rent. Sacco raped S.O. many times, and also took pictures of the abuse. Finally, on two occasions, O’Connor brought S.O. to a motel in Binghamton, where strangers raped her for money, while O'Connor looked on and ordered her to follow the men’s instructions.

O’Connor and Sacco were convicted of various sex trafficking and child pornography offenses; she was sentenced to 30 years and he to life. This opinion affirms their convictions.

Sacco

Sacco’s main claim on appeal was that the district court abused its discretion in denying his attorney’s motion to withdraw.

The facts are quite unusual. Sacco had a court-appointed attorney, who worked on the case for about two months. He researched and investigated the case and reviewed voluminous discovery materials. Just days before the scheduled trial date, however, the attorney moved to withdraw, saying that the intensity of his personal feelings about the case would affect his ability to zealously represent Sacco.

The attorney cited in particular the recent disclosure of a single item of evidence: a used condom recovered from Sacco’s belonging that had S.O.’s DNA on the outside. The attorney said that this evidence had caused him to shift his “moral and technical perspective” on the case such that he could no longer be effective. The government opposed the motion to withdraw, while Sacco himself took “no firm position” on it. He was largely pleased with his attorney’s performance, although he expressed frustration that they had not communicated more. Sacco also indicated that he wanted to go to trial as quickly as possible, but questioned whether his attorney was truly ready. With this as the record, the district court found that there was an insufficient basis for the attorney to withdraw and denied the motion.

The circuit found no abuse of discretion. While the attorney had tried to based his arguments in the district court on New York’s then-applicable rules of professional responsibility, the circuit noted that the attorney never argued that he would be in violation of any Disciplinary Rule if he continued representing Sacco. And the relevant Ethical Considerations actually supported the district court’s ruling. While an attorney’s personal feelings might permit him to refuse an assignment, they do not permit withdrawal. Withdrawal must be for “compelling reasons,” which “do not include such factors as the repugnance of the subject matter of the proceeding.”

Here, the DNA evidence that prompted the motion to withdraw, whether it suddenly made the subject matter repugnant to the attorney or simply made him realize that his client was guilty, could not serve as a valid basis for withdrawal. Moreover, on appeal, represented by different counsel, Sacco could point to nothing in the record to suggest that his attorney’s representation was actually impaired.

O’Connor

O’Connor had two main appellate claims - sufficiency challenges and the denial of her motion to be severed from Sacco for trial. The circuit disposed of these challenges with little trouble. The sufficiency claims were all quite thin. And,for the severance claim, the circuit began by noting the great deference owed to district courts’ severance decisions.

Here, the nature of the charges “made the joint trial of O’Connor and Sacco particularly appropriate,” since O’Connor was charged with selling S.O. to Sacco for the purpose of producing child pornography. The court also rejected O’Connor’s claim that her defense was antagonistic to Sacco’s, since both defendants argued that S.O.’s testimony was not worthy of belief. Nor was there any risk of “spillover” prejudice. While there was highly damaging evidence admitted against Sacco alone, the judge carefully instructed the jury that each charge and each defendant had to be considered separately.

O’Connor also raised an interesting evidentiary issue. A witness with whom S.O. stayed for two months during the charged time period testified that, when cleaning S.O.’s room she found a note in S.O.’s handwriting that said, “I hate my mother. She used me,” although the witness had not preserved the note.

The circuit found no hearsay error. The district court had admitted the contents of the note under the “state of mind” exception in Fed. R. Evid. 803(3). But that covered only the “I hate my mother” sentence, and not “She used me.” But this latter statement was covered by Rule 801(d), the “prior consistent statement” rule, which makes a statement not hearsay if the declarant testifies, is cross-examined on the statement, and the statement is used to rebut a claim of recent fabrication. Here, both defendants had argued that S.O.’s fabrications began on a date after the note was written, so the prior consistent statement was admissible.

Coffee, Tea or Venue?

United States v. Tzolov, No. 10-562-cr (2d Cir. June 15, 2011) (Feinberg, Parker, Wesley, CJJ)

Eric Butler, the appellant here, was one of the conspirators in a securities fraud scheme arising from the failure of the auction rate securities market. The scheme operated largely out of an office in Manhattan, but Butler was prosecuted in the Eastern District, where he was convicted of securities fraud and conspiracy to commit securities and wire fraud. The scheme’s ties to EDNY were, to put it mildly, scant - on occasion the defendants would fly out of JFK to meet with investors in other cities and try to scam them. But, apart from that, everything happened elsewhere.

On appeal, the circuit agreed that venue was improper in EDNY for the substantive securities fraud count, but affirmed as to the conspiracy counts. In light of the dismissal of one count, the court also remanded the case for resentencing.

Securities Fraud

The securities fraud statute has its own venue provision, 15 U.S.C. § 78aa, which provides that a criminal proceeding may be “brought in the district wherein any act or transaction constituting the violation occurred.” The circuit had “little difficulty concluding” that merely flying out of JFK did not satisfy this language. There was no evidence that those flights constituted an “act or transaction constituting” the securities fraud.

To the contrary, the conspirators made all of the fraudulent statements that constituted the fraud either in their Manhattan office or in meetings with investors. “None of this activity occurred in the Eastern District.” Nor did they commit securities fraud by boarding a plane at JFK. Those flights were not acts “constituting” securities fraud; they were merely “preparatory acts,” and, for a substantive crime, “venue is not proper in a district in which the only acts performed by the defendant were preparatory to the offense and not part of the offense.” Thus, venue was not proper in the Eastern District for the securities fraud count.

The Conspiracy Counts

The court reached a different conclusion for the conspiracy counts, because those counts “require[d] a different analysis.” For a conspiracy, “venue is proper in any district in which an overt act in furtherance of the conspiracy was committed.” That can be “any act performed by any conspirator for the purpose of accomplishing” the scheme’s objectives, even if not unlawful.

Here, a “reasonable jury” could have concluded that the defendants’ flights out of JFK to meet the investors that they were trying to con furthered the conspiracy because without the flights those face-to-face meetings would not have occurred. In addition, the flights showed the conspiracy “at work” and not just “a project still resting solely in the [conspirators’] minds.” Finally, the court reject the argument that the flights did not demonstrate “substantial contacts” with EDNY, such that venue there would be “unfair or prejudicial.” Although the court did not hold that any overt act in a situs district will constitute a “substantial contact,” it found that the flights out of JFK here were sufficient.

PC World

Here are two per curiams in white collar cases, decided on the same day.

First, in United States v. Lauerson, No. 09-0255-cr (2d Cir. June 7, 2011) (McLaughlin, Pooler, Sack, CJJ) (per curiam), the circuit agreed that the district court lacked the authority to waive the delinquency and default penalties arising from the defendant’s falling behind on his restitution payments. The relevant statute, 18 U.S.C. § 361, permits courts to, in some circumstances, modify or remit the restitution order itself, but does not permit waiver of those penalties.

And, in United States v. Wolfson, No. 10-2786-cr (2d Cir. June 7, 2011) (Kearse, Pooler, Lynch, CJJ), the court found no error in the jury instructions at a“pump and dump” securities fraud trial. The scheme operated by having corrupt stock brokers selling overvalued stocks, for which they were rewarded with “exorbitant” commissions that they either failed to disclose at all or lied about. Wolfson argued that the brokers had no duty to disclose their commission, and thus that it was error for the district court to give a fiduciary duty instruction. But the circuit noted that, while there is no “general” fiduciary duty inherent in the ordinary broker/customer relationship, there is a “relationship of trust and confidence.” A properly instructed jury “may find that stock brokers have a duty to disclose material commissions to their customers, and can convict brokers who breach that duty.”

What's Drug Dealer To Do?

United States v. Figueroa, No. 10-2050-cr (2d Cir. May 16, 2011) (Miner, Cabranes, Straub, CJJ)

Several months ago, in a per curiam, the court held that it was not error for a district court to treat the combination of BZP and TFMPP, which is commonly sold on the street as ecstasy, but for which there is no dedicated guideline, as ecstasy (“MDMA”) . This opinion deals with BZP alone, and reaches a different result.

Here, the defendants had about 20,000 pills containing BZP, combined with trace - the circuit called it “unmeasurable” - amounts of other substances, including TFMPP. The district court treated the pills as containing pure BZP, then analogized BZP to MDMA for guidelines purposes. The defense disputed this, and asked for a hearing, but the district court refused even that, relying on the DEA’s lab report and the fact that BZP is sold as MDMA on “the street.”

On appeal, the court found that this record presented an insufficient basis to conclude that BZP alone is most analogous to MDMA for guidelines purposes. It noted that the interchangeability of the two drugs “on the street” could not justify the conclusion, since the relevant guideline provision, Application Note 5 to § 2D1.1, requires consideration of such factors as chemical structure and effect on the central nervous system.

The court also observed, however, that this decision might result in a harsher punishment on remand, since it is possible that amphetamine might be found to be the most analogous drug to pure BZP, and amphetamine has a higher marijuana equivalency than MDMA. Here, likening BZP to amphetamine instead of MDMA would result in a two-level increase.

Moreover, the court could not ascertain at oral argument that the defendants were aware of this risk and wished to proceed anyway, since the appeal was submitted for decision without argument. The court accordingly stayed the mandate for an additional 30 days to give counsel an opportunity to confer with the defendants about the risks of pursuing the appeal, and offered them the opportunity to withdraw the appeal “at anytime prior to the issuance of the mandate.”

A Condition Precedent

United States v. Spencer, No. 10-1869-cr (2d Cir. May 20, 2011) (Parker, Pooler, Lohier, CJJ)

Joseph Spencer left much to be desired as a supervised-releasee.

He was originally sentenced to time served and three years’ supervised release for bank fraud, then, after a hearing, the district court found that he, in essence, committed the same crime while on supervision. Spencer was also subject to Standard Condition 6, which required him to “notify the probation officer at least ten days prior to any change in residence or employment,” and the district court also found that Spencer violated Condition 6. The court sentenced him to a total of fourteen months’ imprisonment for everything. While Spencer did not challenge the finding of new criminal conduct on appeal, the circuit agreed that his other violation conduct was not “clearly and specifically forbidden by Condition 6"; it vacated and remanded for resentencing.

The evidence at the hearing established that Spencer had been fired from his job in April of 2007, but for several months continued to tell his probation officer that he was still employed there. In addition, the hearing established that for a brief period in early 2008, after a fight with his girlfriend, Spencer lived at a different address, but did not tell his probation officer about the change.

The district court rejected Spencer’s arguments that the government failed to establish that he had ten days’ notice of either the loss of his job or the need to relocate temporarily, and thus that he did not violate Condition 6. The court held that the “purpose” of Condition 6 is to keep the probation officer informed about a changed circumstance “whether it has changed after ten days’ notice or not.”

The circuit, however, held that the “purpose” of the condition could not trump its plain terms. Conditions of supervision must be “sufficiently clear and specific to serve as a guide for the defendant’s conduct.” And a “person of ordinary intelligence” on supervision would not be expected to “ignore the explicit ‘at least ten days prior’ limitation of Condition 6.” Since Condition 6 does not include “periods of notice less than ten days,” and since there was “no evidence that Spencer had at least ten days prior notice” before being fired, the district court erred in finding that he violated Condition 6 by not telling his probation officer about the firing.

Simiarly, the facts before the district court could not support a finding that Spencer violated Condition 6 by failing to report a temporary change in residence precipitated by difficulties with his girlfriend. The lower court did not determine whether Spencer even had the ability to notify his probation officer ten days in advance of the change. Absent such a finding, it was error to conclude that Spencer violated Condition 6.

Spencer had also argued that the term “residence” in Condition 6 referred to the releasee’s permanent residence, and not a temporary stay outside his home. While both the district court and the circuit found this to be a “plausible” reading of the condition, the circuit did not conclusively rule on it.

Since the district court did not say that it had based the violation sentence on only on the new criminal conduct, the circuit concluded that the errors with respect to Condition 6 were not harmless, and that Spencer should be resentenced.

Body of Evidence

United States v. Perisco, No. 08-5266-cr (2d Cir. May 3, 2011) (Jacobs, Kearase, Leval, CJJ)

Defendants Perisco and DeRoss, former high-ranking members of the Colombo crime family, were convicted of murder-in-aid-of racketeering and related offenses in connection with the murder of one William Cutolo, in connection with an intra-family power struggle. In this long opinion, which deals with several not-very-interesting evidentiary and sufficiency claims, the circuit affirms.

The opinion addresses only one noteworthy issue. At the time of the defendant's trial, Cutolo's body had not been located. And the theory of the government, based on other evidence, was that the body had been dumped at sea. Post-trial, the body was found buried on Long Island, which prompted the defendants to move for a new trial under Fed. R. Crim. P. 33.

The circuit affirmed the denial of that motion. It agreed with the district court that the discovery of the body was not "material" and was not "likely to result in an acquittal." While the discovery was "relevant," it did not impeach the credibility of any of the government's key witnesses, even if it did contradict the "theory advanced in summations as to how Cutolo's dead body had been concealed." Moreover, nothing about the discovery undercut the government's contention that the murder was brought about by Perisco and DeRoss.

Bad Cop, Bad Cop

United States v. Cedeno, No. 09-1857-cr (2d Cir. May 2, 2011) (Jacobs, Calabresi and Chin, CJJ)

In 1990, the Appellate Division specifically found that a New York City detective lied at a suppression hearing, by “patently tailor[ing]” his testimony to avoid suppression. Here, the circuit held that it was error for the district court to categorically preclude cross-examination of that same detective at trial about the adverse credibility finding.

The district court, relying on United States v. Cruz, 894 F.2d 41 (2d Cir. 1990), had held that the Appellate Division’s finding went to the detective's credibility in a specific hearing, not that he lacked veracity generally, and that, here, the subject matter of the testimony would be different because the detective would not be testifying about the constitutionality of a search.

The circuit faulted this inquiry as “too narrow,” because Cruz did not “purport to set out a rigid two-part test.” A too-rigid application of Cruz risks violating both Fed. R. Evid. 608(b), which gives district courts the discretion to permit cross-examination into “specific instances of conduct” if the conduct is “probative of” the witness’ character for truthfulness or untruthfulness,” and the Confrontation Clause.

The circuit also noted that, several years before Cruz, it had upheld a district court’s ruling that a witness could be cross-examined based on occasions where his testimony in other cases had been found to be unworthy of belief.

Thus, here, before ruling, the district court should have also considered, “for example,” whether the lie was under oath in a judicial proceedings, whether it was about a significant matter, the passage of time and whether there had been any intervening credibility determinations, the motive for the lie and whether there was a similar motive in the current case, whether the witness had an explanation for the lie, and whether that explanation was plausible.

That said, the court also concluded that the error was harmless and affirmed the conviction.