Summary Summary

Well, it’s taken months, but at last there are three summary orders worth noting. So, in reverse order, here they are:

United States v. Persing, no. 10-638-cr (2d Cir. August 26, 2011), concerned the district court’s admission of a loan-shark’s computer records. Those records revealed the extent of his business, and other evidence showed that the defendant intervened to try to have those same loans repaid. The government argued he was trying to take over the business, while the defendant argued that he was trying to protect the debtors from the loan-shark. In order for the records to be admissible as a co-conspirator’s declarations, the district court needed to find that there was a single conspiracy that included both the loan-shark and the defendant. The district court did not; in fact, most of its findings on the question, although kind of confusing, seemed to support the defendant’s theory. The circuit refused to assume that the court made the necessary finding and simply assess the sufficiency of support for it because, here, a finding that the conspiracy existed might well have been clearly erroneous. Given the uncertainty, the circuit sent the case back on a Jacobson remand so that the district court could make an explicit finding and explain the evidentiary support for it. It further directed that if the court found no conspiracy, it should vacate the affected counts.

In United States v. Baadhio, no. 09-2395-cr (2d Cir. September 22, 2011), the sentencing judge omitted from the written judgment its recommendation that the BOP designate the defendant to a medical facility. Even though the defendant had been released, the court found a live question. It entertained the argument on the ground that “the presence of such an instruction may well have an effect on [defendant’s] supervised release.” The appellate court ducked the question of whether such a recommendation was an appealable “final order” noting that, regardless, it was “free to send the case back” for the district court to “consider whether, given all the circumstances, ... it thinks it is appropriate to conform its written judgment to its oral pronouncement.” The court ordered a limited remand for that purpose.

In United States v. Roy, no. 10-1733-cr (2d Cir. November 8, 2011), the defendant was sentenced without counsel, but the district court failed to conduct proper Faretta inquiry. It merely confirmed that the defendant had filed a motion to fire his trial counsel, then proceeded to sentence him pro se. The circuit vacated the ensuing 300-month sentence and remanded for a Faretta inquiry and resentencing.

2B, Or Not 2B?

United States v. Bahel, No. 08-3327 (2d Cir. October 26, 2011) (Pooler, Raggi, CJJ, Korman, DJ)

Sanjaya Bahel, a chief procurement officer at the United Nations, was convicted of honest services fraud and bribery offenses in connection with a kickback scheme in which he improperly steered lucrative U.N. procurement contracts to a friend, in exchange for money. This long opinion covers a lot of very fact-specific issues. This post focuses only on the sentencing claim.

Both U.S.S.G. § 2B1.1 and U.S.S.G. § 2C1.1 can apply to fraud convictions. The difference is that § 2C1.1 applies to specifically to “public officials” and carries a higher base offense level. The district court sentenced Bahel under § 2C1.1, over objection; on appeal, and the circuit rejected his claim that the court should have used § 2B1.1.

Under the relevant definition, which is to be “construed broadly,” Bahel was a “public official.” That he was employed at an international organization does not take him out of § 2C1.1. Indeed, the commentary to § 2B4.1 specifically indicates that that “officials” of, inter alia, “public international organizations” are covered by Chapter 2, Part C. And other guideline provisions support this analysis. For example, the commentary to § 2C1.1 defines “public official” to include anyone who is “in a position of public trust with official responsibility for carrying out a government program or policy.”

As Chief of Commodity Procurement, Bahel was clearly a “high ranking U.N. official” and not the “baggage porter” with a “ministerial job” that he compared himself to, in reliance on a 1921 Supreme Curt decision. Rather, Bahel’s position was “closer to that of a foreign diplomat, political party official, or a tribal leader, all of whom are expressly covered by” § 2C1.1, not § 2B1.1.

Family Matters

United States v. Banki, N o. 10-3381-cr (2d Cir. October 24, 2011) (Cabranes, Pooler, Chin, CJJ)

Defendant Banki is an Iranian-born United States citizen. Starting in 2006, his family transferred about $3.4 million from Iran to the United States, all of which was effectuated through the “hawala” system. Banki’s hawala broker used a “matching” system to facilitate these transfers. When he knew that Banki’s family wanted to send money to the United States, he would find someone in the U.S. who wanted to send approximately the same amount to Iran. The U.S.-based contact would transfer into Banki’s account a sum comparable to the amount Banki’s family wished to send. Banki’s hawala broker would then pay an equivalent sum to the U.S.-based contact’s intended recipient, or broker, in Iran. Ultimately, Banki received some 56 hawala-related deposits.

Banki would typically email a family member to confirm receipt of each payment. Although most of his emails did not acknowledge a corresponding payout in Iran for each deposit, at least one such email - relating to a $6,000 payment in August of 2006 - displayed his knowledge that that particular sum of money was moving to Iran.

Banki’s financial activity came to OFAC’s attention in 2008 and, after receiving administrative subpoenas, Banki gave some spurious answers. He was ultimately charged, inter alia, with two counts of violating the Iranian Transaction Restrictions (the “ITR”). After a two-week jury trial, Banki was convicted of those counts, along with one count of operating an unlicensed money transmitting business and two counts of making false statements.

The circuit reversed the ITR convictions based on a flawed jury instruction. While the ITR have a service-export ban, at trial Banki argued that non-commercial remittances to Iran, specifically family remittances, were exempt. He sought a jury instruction to this effect, but the district court refused to give one. This, according to the circuit, was error.

The regulation at issue authorizes U.S. “depository institutions” to process transfers of funds to or from Iran, if the transfer “arises from an underlying transaction that is not prohibited by this part, such as a ... family remittance not related to a family-owned enterprise.” The government argued that this language permits such family remittances only if they are processed through a U.S. “depository institution.” But, to the circuit, the reg was “at a minimum” ambiguous.

Clearly, “family remittances” are “not prohibited” by the ITR. And, while this does not necessarily lead to the conclusion that they are permitted by the complete regulatory scheme, the language at issue “suggests that such actions do not contravene other applicable laws or regulations.”

And, more importantly, the government’s view - that only U.S. depository institutions are authorized to process the permitted transfers - is inconsistent with the language of the reg. A “fair reading” of the reg is that it tells U.S. depository institutions that they are permitted to process such remittances, but does not provide that they are the only entities that may do so. “Indeed, nothing in [the reg] specifically prohibits anyone from making a family remittance.”

Accordingly, after a lot of back-and-forth over the two sides’ competing views of the meaning - and purpose - of the reg, the court concluded that it was ambiguous. Interpreting it in Banki’s favor under the rule of lenity required that the two ITR counts be reversed.

The court also vacated Banki’s convictions relating to operating an unlicensed money transmitting business, again on a flawed jury charge. Banki wanted the district court to define a “money transmitting business” in a way that would make clear that it had to be an “enterprise” - not a “single transaction” - that was “conducted for a fee or profit.” Not only did the district court refuse, it actually told the jury that “a hawala is a money transmitting business.”

The charge as given was error. Banki’s requested instruction was “legally correct,” and there was a “foundation in the trial evidence” that the government proved Banki’s knowledge of money going to Iran in only a single transaction - the $6,000 transfer in August of 2006 - which the jury could have concluded was a one-time favor for a family friend. Moreover, the “hawala is a money transmitting business” charge compounded the error by “arguably reliev[ing] the government of its burden of proving that Banki’s knowledge that money was moving to Iran extended beyond the $6,000 transaction” and by suggesting that if it found that Banki participated in a hawala, “then he necessarily operated a money transmitting business.”

Between the Cracks

United States v. Rivera, No. 10-1199 (2d Cir. October 21, 2011) (Katzmann, Chin, CJJ, Gleeson, DJ)

This interesting decision answers an unanswered question in the circuit’s jurisprudence on § 3582(c)(2) motions. The outcome is favorable for Mr. Rivera, but will likely not last. An amended version of U.S.S.G. § 1B1.10 goes into effect on November 1, 2011, that is, at least arguably, intended to render defendants in his situation ineligible for a sentence reduction.

Background

Convicted by a jury, Rivera faced a base offense level of 38 for trafficking in more than 1.5 kilograms of crack cocaine. There were no adjustments, so 38 was also his total offense level. He was in criminal history category IV, so his range would have been 324 to 415 months. But, he was a career offender. The highest offense level in the career offender table is 37, so the district court correctly “borrowed” the actual offense level of 38, and matched it to the career offender criminal history category of VI. This produced a range of 360 to life. The court then departed down from level 38 by 3 levels due to Rivera’s mental health; at level 35 and category VI, the range was 292 to 365. The court sentenced him to 292 months’ imprisonment.

Rivera moved pro se for a sentence reduction based on the 2007 retroactive reduction in the guidelines for crack cocaine offenses, but the district court appointed counsel for him. It then twice held that, as a career offender, Rivera was ineligible for a reduction. Here, the circuit reversed.

The Court’s View

Two circuit opinions serve as the background to this. In Martinez, see “PC World,” posted July 28, 2009, the court held that a defendant who received a career offender sentence was ineligible for a sentence reduction under § 3582(c)(2) and § 1B1.10, because his sentencing range “remains unaltered by the crack cocaine amendments.” In that situation, the sentence was not “based on” a range that the Sentencing Commission has subsequently lowered. On the other hand, in McGee, see “Crack a Smile,” posted January 25, 2009, the court held that, where the district court departs from the career offender range to the range provided by the offense guidelines, the defendant is eligible because the sentence is “explicitly based on the range produced by the offense guideline.”

This case is unlike either of those, between the cracks, as it were. Rivera received neither a career offender sentence nor a sentence within the original, non-career offender range. Rather, in his case, the court departed by three levels from the career offender range due to Rivera’s mental health, and the resulting sentence was below, not within, the original offense guideline range.

The court's view of the case turned on a fine analysis of the relevant provisions - § 3582's requirement that the original sentence be “based on” a range that has subsequently been lowered, and § 1B1.10's requirement that a defendant is only eligible if his “applicable guideline range” has been lowered. The court held that the two phrases should be understood to mean the same thing - “the range the initial sentence was ‘based on’ within the meaning of the statute is also generally the range that was ‘applicable’ within the meaning of the guideline.”

And, with that, the court had to decide which range Rivera’s sentence was “based on” - “that is, what was his ‘applicable’ sentencing range?” Was it the career offender range of 360 to life - or was it the departure range of 292-265?

The career offender guideline range would not change under the retroactive amendment - the offense level would drop from 38 (that was the crack quantity, which was higher than the career offender level of 37) to 37 (because applying the amendment to Rivera’s 3.3 kilograms of crack would reduce it to 36, so the career offender level would apply), but both 37 and 38 produce a range of 360 to life at CHC VI.

But, if his sentence was “based on” the range to which the court departed, he would be eligible for a reduction of up to 30 months. Under this scenario, the the starting point would have been level 37, and a departure to 34 would produce a range of 262 to 327. And this is the scenario that the majority went with: “We hold Rivera’s sentence was ‘based on’ the range produced by subtracting three offense levels from the career offender computation. The resulting range was the one the sentencing judge found to be ‘applicable’ to Rivera, and he chose a sentence at the low end of that range. That range is lowered when the retroactive amendment at issue is plugged into its calculation, even if everything else remains the same. Rivera is therefore eligible for a reduction.”

In the end, the circuit followed the reasoning of McGee, rejecting the government’s view that the sentence should be considered “based on” the pre-departure career offender range. Here, as in McGee, the court concluded that it would be excessively formalistic to conclude that the “applicable” range was the one rejected by the sentencing court. The court also found support for this methodology in the Supreme Court’s recent decision in Freeman, in which the plurality held that a court should “isolate whatever marginal effect the since-rejected Guideline had on the defendant’s sentence” and “revisit a prior sentence to whatever extent the sentencing range in question was a relevant part of the analytic framework the judge used to determine the sentence.” Here, that “marginal effect” is “easily isolated” as the 30-month difference between 262 and 292.

Finally, the court reinforced its view that its role in construing retroactive guideline amendments is so as to “allow inequalities to be fixed.” Accordingly, the court “let[s] lenity play a role in the construction of the Guidelines where there is doubt about their scope.” "Where the sentencing judge departs from a range computed under the career offender guideline to a lower range, the sentence imposed was ‘based on’ the latter range” under both § 3582(c)(2) and § 1B1.10. “If a subsequently-lowered guideline range was a relevant part of the analytic framework the judge used to determine the sentence ... a § 3582(c)(2) proceeding [should] be available to allow the sentencing court the opportunity to remedy an injustice.”

The opinion with a long rejection of the approach of other circuits, which have construed the phrase “applicable guideline range” in career offender cases to be limited to the career offender range, regardless of the range within which the defendant is sentenced. To the Second Circuit, that phrase should be construed differently in the context of § 1B1.10 cases, where the question becomes not what the original range was, but what range the sentencing court actually applied, “even if, as in this case, that range different from the one that was the starting point of the initial sentencing proceeding.” Thus, “[n]ow that Rivera seeks a modification of his sentence, the 292-365 month range to which his sentencing judge departed is his applicable range.”

The court closes with an acknowledgment that the November 1, 2011, version of § 1B1.10 will “dramatically alter” this “landscape,” because it will codify a construction of “applicable guideline range” that the court “refuse[s] to give the existing guideline,” and will limit it it to the “pre-departure range from the initial sentencing.” Recognizing that this change would “render Rivera himself ineligible for a sentence reduction if it were applied to his case,” the court held that it could not “fairly be applied retroactively to Rivera” on remand.

Judge Katzmann wrote a concurring opinion, in which he agreed with both the majority’s outcome and its reasoning. But Judge Katzmann would rely more heavily on the rule of lenity. To him, the relationship between § 3582(c)(2)’s “based on a sentencing range that has subsequently been lowered” and § 1B1.10's “applicable guideline range” is a “close and difficult question.” In McGee, the court resolved that question in the defendant’s favor under the rule of lenity, and to Judge Katzmann, McGee requires the same outcome here. The “ambiguity described in McGee does not disappear merely because Rivera’s departure falls under Chapter Five of the Guidelines Manual and was based on his diminished mental condition,” as opposed to the Chapter 4 departure at issue in McGee.

Thorn, Again

United States v. Thorn, No. 11-37-cr (2d Cir. October 20, 2011) (Jacobs, Sack, Raggi, CJJ)

This is Joseph Thorn’s third time in the circuit. Thorn ran an upstate asbestos removal company; he performed dangerous, substandard work, and used the money he earned to grow the business. In 2000, a Northern District jury convicted him of money laundering and environmental crimes, and the district court sentenced him to 65 months’ imprisonment. On the government’s appeal, the circuit vacated the sentence - the guidelines were mandatory then - and on remand the district court downwardly departed to 168 months from what it thought was a 235-month guideline minimum. The government appealed and won again. By this time the guidelines were advisory, however, so while the guideline minimum was now up to 292 months, the district court sentenced Thorn to 144 months.

Three years later, Thorn filed a 2255 motion, seeking to vacate his money laundering conviction as legally insufficient under United States v. Santos, 553 U.S. 507 (2008), which held that the term “proceeds” in the money laundering statute means “net profits,” and not “gross receipts.” The district court granted the motion, vacated the money laundering count, and resentenced Thorn to 132 months on the remaining counts.

On this, the government’s third appeal, the circuit reversed, agreeing that the Santos claim was procedurally barred because Thorn did not raise it on direct appeal, and no exception to procedural default applied.

While Thorn’s direct appeal argued that the money laundering conviction was legally insufficient, he challenged only the “intent to promote” element, not the “proceeds” element. And he could not establish cause and prejudice to excuse the default. Thorn argued that the “proceeds” theory was “so novel that its legal basis [was] not reasonably available to counsel” at the time. But the circuit disagreed. The futility test is strict - it asks not whether it would have been difficult to raise an issue but whether the claim was “available at all.” It was. By the time of Thorn’s direct appeal, several attorneys had argued for a narrow construction of the term “proceeds,” and the question was open in the Second Circuit. Even if it is true that the circuit would likely have rejected the claim had Thorn pursued it, he still could not establish cause - a defendant does not establish cause by showing “simply that a claim was unacceptable to that particular court at that particular time.” Accordingly, since Thorn did not establish cause, the circuit skipped the question of prejudice.

Thorn argued alternatively that he was actually innocent, which can also excuse a procedural default. But actual innocence means “factual innocence,” not mere legal insufficiency. Thorn had to demonstrate that “in light of all of the evidence,” it is “more likely than not that no reasonable juror would have convicted him.” Here, even assuming that Santos would have required proof that Thorn laundered only the profits, and not merely the receipts, of his fraudulent asbestos abatement scheme, he could not meet this standard. The trial evidence clearly established that Thorn’s company used money realized from existing abatement jobs to finance new projects, and the realized monies included profits.

With this, the court vacated the amended judgment and 132-month sentence, and ordered the court to reinstate the money laundering conviction and the 144-month sentence it had previously imposed.

PC World

There have been two interesting per curiams in the past couple of weeks.

Sometimes immigration law and criminal law intersect. They did in Prus v. Holder, No. 10-599-ag (2d Cir. September 28, 2011) (Calabresi, Wesley, Lynch, CJJ). Here, the court held that the New York offense of promoting prostitution in the third degree under Penal Law §§ 20.00 and 230.35 is not an aggravated felony. The term "prostitution" is not defined in the aggravated felony statute. But, under the immigration statute rendering aliens who enter the United States to engage in prostitution inadmissible, prostitution is defined as "promiscuous sexual intercourse for hire." Since identical words in different parts of the same act are construed to have the same meaning, the same definition should be used in the ag-fel section. But the New York offense of promoting prostitution encompasses a definition of "prostitution" - it includes "sexual conduct" - that is clearly broader. Since the New York offense includes acts other than the "specific act of sexual intercourse," it is not an aggravated felony.

United States v. Leslie, No. 10-2994-cr (2d Cir. October 3, 2011) (Calabresi, Wesley, Lynch, CJJ) (per curiam) rejected the argument that a defendant's incarceration, standing alone, should be treated as a withdrawal from the conspiracy for sentencing purposes. Leslie was the architect of a bank fraud scheme that capitalized on a flaw in the People's Bank ATM system. He not only devised the scheme, he also taught others how to do it. Leslie started serving a four-year state bank fraud sentence in 2005, but during his incarceration others continued the scheme. In 2009, Leslie was transferred to federal custody and pled guilty to the same scheme. The total loss was more than $300,000, but Leslie argued that he was only responsible for the losses incurred until his July 1, 2005, incarceration, although he admitted that he had taken no affirmative steps to withdraw from the conspiracy, such as cooperating with law enforcement or telling his co-conspirators that he had abandoned it. While the circuit agreed that incarceration could be some evidence of withdrawal, the defendant had the burden of showing something more, even for sentencing purposes. "The defendant's imprisonment is but one factor to consider in deciding whether withdrawal occurred."

A Bridge To FARC

United States v. al Kassar, No. 09-1051-cr (2d Cir. September 21, 2011) (Jacobs, Hall, CJJ, Scheindlin, DJ)

Defendants were convicted of various terrorism offenses in connection with a sting operation in which a CI, who was working for the DEA, introduced al Kassar to two undercover DEA agents posing as members of FARC, the left-wing Colombian guerrilla group. The defendants agreed to supply FARC with weapons, including surface to air missiles (“SAM”s) to use against United States military personnel and equipment in Colombia.

All of the criminal conduct occurred outside of the United States - mostly in Lebanon, Spain, Bulgaria and Romania. The district court denied the defendants’ motions to dismiss the indictment on jurisdictional grounds, and in this opinion, the circuit affirmed.

There is a presumption that acts of Congress do not apply extraterritorially, but even if the statute is not explicit, an intent can be inferred from the nature of the offense. Here, four of the five statutes of conviction contain explicit provisions applying them extraterritorially. The fifth, conspiracy to kill U.S. officers of employees under 18 U.S.C. §§ 1114, 1117 does not, but the nature of the offense - “protecting U.S. personnel from harm when acting in their official capacity” - implies an intent that it apply outside of the United States.

Even so, due process limits the extraterritorial reach of federal statutes. “There must be a sufficient nexus between the defendant and the United States, so that such application would not be arbitrary or fundamentally unfair.” For non-citizens acting entirely abroad, a jurisdictional nexus exists when the “aim of that activity is to cause harm inside the United States or to U.S. citizens or interests.”

Here, the nexus existed because the defendants’ stated aim was to “sell arms to FARC with the understanding that they would be used to kill Americans and destroy U.S. property.” Nor did it matter here that this case involved a sting operation taking place entirely outside of the United States and involving only foreign citizens. Since the goal of activity was to harm U.S. citizens or interests, or threaten the security or government functions of the United States, there is a sufficient jurisdictional nexus. And the goal alone is enough. It does not matter that the defendants never came close to harming any U.S. interest. Jurisdiction is determined by the “aims of the conspiracy, not its effects.”

The circuit also rejected the defendants’ “fair warning” argument. “Fair warning does not require that the defendants understand that they would be subject to criminal prosecution in the United States, so long as they would reasonably understand that their conduct was criminal and would subject them to prosecution somewhere.”

Finally, the circuit rejected the defendants’ claim of “manufactured jurisdiction.” Manufactured jurisdiction is a collection of three distinct defense theories: outrageous government conduct, entrapment, and a failure by the prosecution to prove an essential element of the crime.

None of those theories applies here. As to outrageous government conduct - also raised as an independent appellate claim - the DEA’s pervasive involvement in the weapons deal did not violate due process. There was no coercion, intimidation or physical force by the DEA agents. And the absence of a conspiracy prior to the government’s involvement merely shows that the government created the “opportunity for illegal conduct.” The tactics used were neither coercive nor outrageous - they were simply the “commonplace and often necessary tactics for infiltrating criminal enterprises.” Thus, while this was an “elaborate and prolonged” sting operation, “nothing done was outrageous or a shock to the conscience.”

Nor were the defendant’s entrapped “as a matter of law,” since they clearly had a predisposition. They already knew how to procure and smuggle arms, and reacted positively to the idea that the arms would be used to kill Americans.

Finally, the “unproved-element” theory is satisfied if the government “supplies an essential element of a crime”; “in effect,” the government has failed to prove it. But even if the government “initiates” an element of the crime, jurisdiction is not manufactured where the defendant “takes voluntary actions that implicate” it.” Here, every element of the crimes of conviction was established by voluntary action by the defendants. And the DEA agents did not create the jurisdictional nexus by “injecting the notion that the weapons were going to FARC for use against Americans.” That the DEA agents “lied to the defendants” does not make the nexus artificial or invalid.

Aliens vs. Predator

United States v. Archer, No. 10-4684-cr (2d Cir. September 20, 2011) (Newman, Calabresi, Hall, CJJ)

Thomas Archer, a solo-practitioner immigration lawyer in Queens, ran a visa fraud mill. His specialty was the I-687, an amnesty program that permitted certain aliens who were here illegally in the 1980's to adjust their status and receive a visa. In 2004 and 2005, Archer filed nearly 240 I-687 applications; the DHS denied them all.

Convicted of visa fraud and conspiracy to commit visa fraud, his appeal concerned both trial issues - centered around his claim that he did know know that his assistants were filing forms with false information - and sentencing issues. The circuit affirmed Archer’s conviction, but remanded for resentencing and recalculation of the restitution.

The Trial Issues

At trial, an immigration agent who had reviewed 175 I-687 applications that Archer’s office filed, testified that almost all of them had certain suspicious factual allegations in common. That said, however, only three clients actually testified about the preparation of their fraudulent I-687's, and the government entered only four applications into evidence. The aliens' stories had much in common: their I-687 applications contained information that they knew was false; Archer or his staff gave them supporting affidavits for others to sign that were already filled in, and; Archer’s office told them to abandon the application process once they had received temporary work permits, but before their interview.

Archer’s principal trial defense was that he was unaware of the fraudulent actions of his staff. To this end, he requested two jury instructions. First he sought a “Philips” instruction that “the fact that a defendant is a solo practitioner, without more, is an insufficient basis from which to infer his guilt because, even though he is the only lawyer in the office, he may not be aware of everything his staff is doing.” He also sought a “Maniego” instruction that “attorneys are not held to a higher duty to investigate than non-lawyers and have no special obligation to verify independently information give to them by clients.” The district court rejected these requests and instead gave a fairly generic “knowingly” charge that simply told the jurors to consider whether Archer knew that the visa applications contained false statements but nevertheless presented them.

The circuit affirmed. Although it agreed that both the Philips and the Maniego instructions contain legally sound principles, here the instruction that the court gave was accurate and “left no room for the jury to convict Archer if it believed that he merely ran an office from which fraudulent documents were filed.”

The Sentencing Issues

The circuit found fault with the district court’s findings on two sentencing enhancements and its restitution order.

First, based solely on the agent’s statistical review of the 175 I-687 applications, the court enhanced Archer’s guideline range by nine-levels for creating 100 or more fraudulent documents, even though only the government admitted only four applications at trial. The circuit found that this statistical review failed the Shonubi “specific evidence” test. The principal problem was that the government “presented no evidence that the four applications proven false at trial were ... a representative slice of the 175 applications” that the agent reviewed because the government did not “randomly select[]” them; they were the applications associated with particular witnesses that the government chose to call and, most likely, “the most egregious cases.”

In addition, even though there was a suspicious statistical similarity among the applications reviewed, there was no “baseline” - evidence of what the national pool of I-687's, most of them likely filed by honest lawyers, actually looked like. Finally, the government did not explain why the similarities among Archer’s I-687 applications were “in themselves incriminating.” The only facts at issue were dates of entry and of travel and those facts were not “so peculiar” or “obvious” “that no further explanation is needed.”

The second sentencing error concerned the obstruction of justice enhancement. The district court imposed it because Archer texted a former employee, Singh, asking him whether he was going to be a government witness. When Archer concluded that the answer was “yes,” he texted Singh again, this time calling him a “Pussy.” According to the PSR, Singh felt “very threatened” by those messages.

Here, there was no direct and obvious threat; Archer’s statements to Singh were ambiguous. Where this occurs, the circuit usually defers to the district court’s findings on the speaker’s meaning and intent, but here the district court made none. And a “reasonable reading” of the messages would not support a finding of intent sufficient to support the enhancement. To the circuit, the “most obvious” reading of the texts was that Archer wished to know whether Singh would testify against him, and was displeased to learn that he would. Thus, even though Archer called Singh an “unpleasant name” and Singh was, subjectively, “afraid,” it was error to impose the obstruction enhancement.

The district court also erred in imposing restitution to 234 of Archer’s former clients - the total was more than $300,000 - because there was insufficient evidence that all of the clients were “victims” under the MVRA. The clients were only “victims” if Archer’s conspiracy to commit visa fraud caused their losses. This turns not so much on whether the aliens had “clean hands” but on whether their losses arose from the visa fraud or from an uncharged consumer fraud - Archer’s effort to cheat them of their money. After all, a person can commit visa fraud without accepting any money from the applicants.

If Archer’s clients though they were buying his honest legal services, then they may well have been victims of the visa fraud conspiracy. But, if they knew they were buying the “cover that his law practice gave to their false visa applications” then the visa fraud was not the proximate cause of their loss. There are some cases where it will be clear that no reasonable person would have given the defendant money if he had known of his plan. In those cases, a generalized description of the fraud is enough to support restitution. But, where it is “plausible that some individuals would have paid the defendant even if they had been informed of his fraudulent plan, then the government must proffer some individualized evidence to meet its burden of showing that each alleged ‘victim’ was actually a victim.”

This case is in that latter category. At least some of the aliens clearly knew that their visa applications contained falsehoods, but went along with the process anyway. In addition, filing a “false but plausible I-687 application was anything but a sure loser.” While the application was pending, the alien obtained a temporary work permit, and there was always the possibility, however, small the applicant would receive a visa. Given the resulting lack of certainty as to which clients were victims, the court remanded for recalculation of the restitution order.

Procedures on Remand

This decision has a particularly interesting discussion of the procedures that the district court is to undertake on remand. For sentencing issues, the “consensus” among the other circuits is “where the government knew of its obligation to present evidence and failed to do so, it may not enter new evidence on remand” unless the “government’s burden was unclear,” the “trial court prohibited discussion of the issue,” or the “evidence was, for a good reason, unavailable.”

The circuit “join[ed] that consensus” - sort of - but it still punted. It did not resolve the issue other than to remand for resentencing with instructions that the district court “consider in the first instance whether the justifications ... for allowing the government to present new evidence on remand exist in this case.” If the court allows no new evidence, it should recalculate Archer’s sentencing range without the 100-or-more-documents and obstruction enhancements. It if chooses to consider new evidence it should recalculate the range based on its findings with respect to that evidence and impose a sentence based on this and, of course, all of the other § 3553(a) factors.

For the restitution problem, there is yet another twist to the remand. To satisfy its burden, the government will have to show that each fee-paying client “did not know of the fraud and would not have paid a fee had” he known. Since the government has to “prove two negatives,” “some refinement in the proper allocation” of the evidentiary burdens is necessary.

Ordinarily, according go the circuit, “where the prosecution’s burden of proof would require it to prove a negative and the facts at issue are more readily ascertainable by the defendant,” the defendant assumes a burden of producing “at least a triable issue as to the fact at issue,” after which the prosecution assumes the burden of persuasion. That is the “appropriate” allocation of burdens here. Archer is “more likely than the government to ascertain whether a client knew of the fraud or would have paid a fee even if the client had known of the fraud,” since this knowledge would have come from Archer himself or someone in the firms.

Since the district court did not follow this program in the first instance, on remand, the court will have to reconsider which of Archer’s clients is entitled to restitution. The court will also have to consider whether to allow new evidence, as discussed above. But on the restitution question, the lack of clarity on the parties’ respective burdens “would seem to favor allowing additional evidence on the issue.” Even if there is no new evidence, however, the parties are “free to make new arguments based on the evidence already in the record.”

Comment

Mr. Archer now faces something of a dilemma. On remand, each client that he alleges knew what was going on - and hence is not a “victim” for restitution purposes - will add one at least more admittedly fraudulent document to the potential offense level enhancement. Will he stop at ninety-nine to keep his offense level lower, and make restitution to the others? Or will he go all the way, and claim that none of his clients were "victims?" In other words, which will he choose - money or freedom?

No Need to Remand Me

United States v. Elbert, No. 10-72-cr (2d Cir. September 19, 2011)(Jacobs, Cabranes, CJJ, Kravitz, DJ)

A recent anomaly in circuit practice has been its treatment of cases where the district court did not provide a written statement of reasons for the sentence that complies with 18 U.S.C. § 3553(c)(2). In cases where appellate counsel files a merits brief, counsel can waive a remand for a statement of reasons. But, where counsel files an Anders brief, under United States v. Hall, 499 F.3d 152 (2d Cir. 2007), failure to provide a statement of reasons always necessitates a remand.

Until now. This decision abrogates Hall to the “limited extent that it uniformly require remand in these circumstances.” Hall was based on the court’s understanding that the statement of reasons “assists” the BOP and the Sentencing Commission “in the collection of data.” While that is “no doubt for the good,” its effect is to require appellate counsel to seek a remand when “a remand would be of no benefit for the client” or “the court.” All Hall does is “set[] the lawyer to work for the” BOP and the Commission, and “doing a futile job of it in any event.” Thus, the bright line rule of Hall “may undermine, rather than serve, the goals of vigorous representation” that underlie the Anders brief procedures.

In a case where the absence of a written statement could benefit the client, counsel can seek a remand. But a bright line rule is not necessary to effectuate this, particularly since there might be situations where a remand for a written statement of reasons would be “detrimental to a defendant,” such as where the statement would memorialize the defendant’s cooperation or other information he would not want disseminated. “Requiring a defendant’s lawyer to elicit such information goes against the grain of advocacy.”

Even in the context of an Anders brief, then, counsel should “make an independent judgment as to whether deficiencies in a written statement of reasons present a non-frivolous appellate issue.”

Re: Joinder

United States v. Page, No. 10-3150-cr (2d Cir. September 16, 2011) (Walker, Hall, Chin, CJJ)

Defendant was tried on five drug counts and a felon-in-possession count. In the district court, he moved to sever the gun count so that the jury considering the drug charges would not learn that he had a felony conviction. The court denied the motion and the circuit, finding no prejudice, affirmed.

Background

In 2007 and 2008, Page was selling drugs - first crack, then heroin - in Norwich, Connecticut. During this time, he became involved in an altercation outside a bar, and brandished a gun; to avoid trouble, he stashed the gun at his girlfriend’s apartment. Agents raided the apartment the next day and found the gun and some drugs.

Page ultimately faced a six-count indictment; the first five counts alleged drug offenses - although the government ultimately dropped one of these - and count six charged the felon-in-possession. The district court refused to sever count six, noting that Page’s stipulation to the felony conviction did not describe its underlying facts, and that there would be a limiting instruction. These together assured a lack of undue prejudice. Page was convicted, and received a 210-month sentence.

The Circuit’s Decision

On appeal, Page argued that the gun count should have been severed, or at least bifurcated, from the others, citing United States v. Jones, 16 F.3d 487 (2d Cir. 1994). But the circuit found no abuse of discretion, particularly given the heavy burden of establishing prejudice by an allegedly improper joinder.

First, there was a “sufficient logical connection” between the drug counts and the gun count. The gun was recovered along with some of the drugs and Page admitted that both were his. For this reason, separate trials would have required “much of the same evidence.” Evidence of the presence of the drugs in his girlfriend’s apartment would have been probative of his knowing possession of the gun, while conversely, at a separate drug trial, evidence of the gun would have been admissible as a “tool of the trade.”

In addition, the district court took adequate measures to avoid prejudice. The stipulation was bare-bones and the limiting instruction was adequate, even though it did not specifically charge that the prior conviction could not be considered in relation to the narcotics counts.

Finally, there was overwhelming evidence against Page - his own confession and the testimony of the girlfriend.

The court also distinguished Jones on its facts. There, the felon-in-possession count appeared only in a superseding indictment after the jury deadlocked 10 to 2 for acquittal in a bank robbery case. Although the court reversed the bank robbery conviction because the felon-in-possession should have been severed, it did so because it looked to the court like the government had added the count only to “buttress its case” on the robbery. There was also a “retroactive misjoinder” problem with respect to a second felon-in-possession charge. But, since neither of those “unique circumstances” was present here, the district court did not abuse its discretion in refusing to follow Jones.

Jones does not stand for the proposition that a felon-in-possession count must always be severed or bifurcated from other charges. Where “there is a logical connection between” them, a “similarity in the evidence necessary to prove the different charges,” the trial court takes steps to limit the prejudice and gives a proper limiting instruction, and there is no unfair prejudice, it is not an abuse of discretion to refuse to sever or bifurcate. If, on the other had, the district court concludes that a bifurcation would “better protect the defendant from prejudice than a limiting instruction would” it is free to do so.

Tipper Gored

United States v. Gansman, No. 10–0731-cr (2d Cir. September 9, 2011) (Cabranes, Chin, CJJ, Keenan, DJ)

From 2005 to 2007, James Gansman, an attorney at Ernst and Young, was having an affair with one Donna Murdoch. Perhaps as part of their “pillow talk,” Gansman - the “tipper” - would pass Murdoch material, non-public information, on which Murdoch - the “tippee” - traded profitably. Gansman was ultimately prosecuted for securities fraud under the “misappropriation” theory - as described by the Supreme Court, this occurs when a defendant misappropriates confidential information for securities trading purposes, in breach of a duty owed to the source of the information.Liability can attach even if the defendant does not trade on it himself.

Gansman, whose defense was that he did not intend to commit securities fraud, sought a jury instruction under SEC Rule 10b5-2, asking the court to instruct that Gansman shared information with Murdoch as part of a relationship of trust and confidence in which they had a pattern of sharing personal confidences - the aforementioned “pillow talk” - such that Gansman reasonably expected that Murdoch would keep the confidences to herself and not trade on them.

The district court gave a version of the charge that was only slightly different in wording contained in Gansman’s request. The court instructed that Gansman contended that he did not provide Murdoch with insider information with the understanding that she would use it to buy and sell securities, because he shared the information with her as part of a relationship in which they shared work and personal confidences.

Both sides took issue with this in the circuit. Gansman complained that the district court should have used his own wording, but the circuit held that the charge adequately conveyed his theory of defense - many facts in the record contradicted that theory, however - and that the charge was not error.

More importantly, the court rejected the government’s argument that the charge should not have been given at all. In prosecuting a “tipper” under the misappropriation theory of insider trading, the government must prove as an element of the offense that the tipper conveyed material non-public information to his “tippee” with the understanding that it would be used for securities trading. Otherwise, at least where the tippee owes a duty of trust or confidence to the tipper, and the tipper conveys confidential information without intending that the tippee trade on it, only the tippee is liable on a misappropriation theory. And here, it was “perfectly appropriate” for Gansman to defend against the charge by arguing that his relationship with Murdoch exemplified those circumstances. Indeed, there have been cases where a tipper was not liable even though the tippee was. If the jury here had agreed with this theory - it did not, of course, - Gansman would have been acquitted.

Porn Free

United States v. Aumais, No. 10-3160-cr (2d Cir. September 8, 2011) (Jacobs, Winter, McLaughlin, CJJ)

In this interesting opinion, the court weighs in on a subject of national controversy: whether a defendant convicted of possessing or receiving child pornography should be ordered to pay restitution to those depicted in the images. On the facts here the court, largely bucking the national trend, concluded that restitution was not appropriate.

This case involves images of a woman who uses the pseudonym Amy. Her uncle abused her for years when she was a child; he photographed the abuse and the images made their way to the internet. The uncle went to prison, but the images are still widely circulated. The effects of this on Amy have been devastating, and far transcend the harm caused by the abuse itself. She is so fearful of being identified in public from one of the images that she can barely function, and faces years of therapy to help her cope. Her restitution claim totals about $3.3 million, and she seeks to collect it from every person convicted of possessing one of her images.

The defendant here pled guilty to possessing a large collection of child pornography, including pictures of Amy. The district court, after a lengthy hearing in which a therapist who evaluated Amy testified, ordered more than $48,000 in restitution. But the circuit reversed.

To get there, the court first had to engage in some statutory interpretation and, in doing so, the court deepened an existing circuit split.

Title 18 U.S.C. § 2559, the restitution statute for victims of sex crimes involving children, provides for mandatory restitution of a victim’s full losses, and enumerates a number of specific costs, such as medical and psychiatric treatment, rehabilitation, and associated transportation costs. The last subsection on the list, § 2559(b)(3)(F), covers “any other losses suffered by the victim as a proximate result of the offense.” Most circuits have held that this proximate causation requirement applies to those losses enumerated in subsections that precede § (b)(3)(F). But one, the Fifth Circuit, has held that the proximate causation requirement is limited to the “catch-all” subsection. In that circuit, any causation is sufficient to trigger restitution under the others.

The circuit here joined the majority, holding that “under § 2559, a victim’s losses must be proximately caused by the defendant’s offense.” Proximate cause is a “deeply rooted principle in both tort and criminal law” that Congress did not intend to “abrogate when it drafted § 2259.”

Here, the district likewise held that proximate causation was required, and went on to hold that the standard was met. But the circuit disagreed. Amy had no direct contact with Aumais, or even know of his existence. Her victim impact statement did not mention him and, since she was evaluated before Aumais was even arrested, the doctor could not speak to the impact that Aumais caused her. Thus, “in the absence of evidence linking Aumais’ possession to any loss suffered by Amy,” his conduct was not a proximate cause those losses.

The court also noted, in dicta, the “baffling and intractable issue that this case would otherwise present in terms of damages and joint and several liability.” The district court held that Amy’s harm was the result of both the uncle’s abuse and others’ possession of the images and that the resulting counseling costs could not be separated. But, if her future counseling costs are partly the result of her uncle’s abuse, then “Aumais cannot be responsible for all of those losses,” even though § 2259 requires full restitution. Moreover, a restitution award to Amy would “raise issues as to joint and several liability.” Amy has sought restitution in hundreds of cases. In a 2010 case, her attorney estimated that she had received $170,000 in payments. But, since the law prohibits recovery of more than the victim’s actual losses the need for national monitoring to police this “would pose significant practical difficulties.” There does not even seem to be be a government body that would be responsible for, or even able to, track “payments that may involve defendants in numerous jurisdictions across the country.”

That said, however, the court did not intend to “categorically foreclose payment of restitution to victims of child pornography from a defendant who possesses their pornographic images. But, where the victim impact statement and the psychological evaluation were drafted before the defendant was even arrested “or might as well have been,” emphasis added, “as a matter of law,” the defendant’s possession of the victim’s image was not a proximate cause of the victim’s loss.

Big Brother Listens To Big Sister

United States v. Rodriguez, No. 10-2724-cr (2d Cir. August 25, 2011) (Miner, McLaughlin, Pooler, CJJ)

While detained at the MDC, Rodriguez called his sister and asked her to tell their brother to contact Rodriguez’ attorney so that they could discuss whether he should “cop out” before being indicted. He indicated that the sooner he spoke with his attorney the better, and that they should tell the lawyer to tell the prosecutor that he wanted to plead guilty to the “five-to-40" drug charge in the complaint.

The district court found that the call was not covered by the attorney-client privilege because Rodriguez knew that the BOP was recording it. It allowed the government to play the recording at Rodriguez’ trial, and the circuit affirmed.

First, the court had to decide on a standard of review. Whether the attorney-client privilege applies is reviewed de novo, while a finding that it has been waived is reviewed for abuse of discretion. Even though the district court seemed to look at the issue one of application, on appeal Rodriguez framed the issue as one of waiver. Accepting this, and noting that the question “involves the application of the attorney-client privilege as our case law has already developed it to the novel set of facts before us” and did not “require us to address the scope of the privilege itself in a novel way,” the court reviewed only for abuse of discretion.

Here, it found none. “[O]n the basis of the undisputed fact that Rodriguez was aware that his conversation was being recorded by BOP, Rodriguez’s disclosure to his sister of his desire to engage in plea discussions with his attorney was not made in confidence and thus constituted a waiver of the privilege.” Rodriguez did not claim that he had no way to reach out to his attorney directly, and under BOP regulations, that call would not have been monitored. Accordingly, he could “just as easily” have contacted his attorney directly to discuss his options in confidence.

Rodriguez’ second argument was based on Fed. R. Evid. 410, which privileges statements made in the course of plea discussions. The court made short work of this, noting that the rule only covers discussions with “an attorney for the prosecuting authority.” While the district court did not rule on this issue, the circuit found the inapplicability of Rule 410 to a conversation with one’s sister to be so clear that it did not remand for a ruling.

Comment

This is a disturbing precedent, not because it seems incorrect, but because of its policy implications.

On the government’s part, it seems fairly short sighted to use conversations like this against defendants at trial, since the practice might deter incarcerated defendants from taking whatever steps are in their limited power to resolve the case quickly. Any action of the government that might chill the speedy resolution of criminal cases through plea negotiations would seem to be inadvisable.

On the court’s part, the decision seems to take very little account of the difficulties of prison life. Inmates at the MDC have limited mobility, restricted funds, irregular access to telephones and a limited number of “minutes” per month. Even though Rodriguez did not claim that these obstacles restricted his ability to contact his counsel directly, they most likely - at least to some degree - informed his choice to seek to contact counsel through a family member.

Have Guns, Will Travel

United States v. Nadirashvili, No. 08-4211-cr (2c Cir. August 23, 2011) (Winter, Pooler, Hall, CJJ)

Six-defendant appellants appealed their convictions in a wide-ranging firearms conspiracy that had both international and domestic components. One part of the activity involved trafficking in “foreign defense articles” - here, grenades, warheads, missiles and launchers, amongst other things - under 22 U.S.C. 2278(b), and the other part involved domestic firearms trafficking under 18 U.S.C. § 922(a)(1)(A). Apart from one sentencing glitch, the circuit affirmed.

The opinion contains two interesting discussions of statutory requirements that the criminal activity involve those who are “in the business” of weapons dealing.

First, two defendants argued that there was insufficient evidence to support their § 922(a)(1)(A) convictions because they were aware of only a single gun transaction, and the evidence did not show that they knew the seller was engaged in the business of trafficking in firearms. The court agreed that the statute requires proof of “more than just a single sale of weapons,” since the statute uses the phrase “engaged in the business” of dealing in firearms and defines this as involving their “repetitive purchase and resale.” But the evidence is sufficient under this section where a seller holds himself out as a source of firearms who is ready to procure them for his customers. The evidence supported this, albeit barely, since while “[p]erhaps not every rational trier of fact would” convict on the evidence here, at least some might, and that was enough.

Next, the court considered - and rejected - an “as applied” vagueness challenge to 22 U.S.C. 2278(b)(1)(A)(ii), which covers “engag[ing] in the business of brokering activities with respect to ... any defense article.” Brokering includes any action that “facilities the manufacture, export, or import of a defense article.” While the court suggested that there might be “ambiguity at the outer reaches” of this definition - perhaps merely providing information about prices and availability might be problematic - here the challenge failed, since the defendant’s activities clearly fell within its intended scope.

Finally, the court agreed that, for one defendant, the district court used the wrong evidentiary standard for certain sentencing enhancements. The court applied a preponderance standard but, this case was governed by the conspiracy guideline, § 2X1.1(a). This section provides that for a conspiracy that is not covered by a specific offense guideline, the court should apply the base offense level from the guideline for the substantive offense, plus any adjustments from that guideline for “any intended offense conduct that can be established with reasonable certainty.” Since the offense level adjustments in guideline section 2K2.1(b) “make no mention of a conspiracy,” the court should have applied the “reasonable certainty” standard instead of the preponderance standard.

Gone To Pot

United States v. Celaj, No. 10-2792-cr (2d Cir. August 22, 2011)(Miner, Cabranes, Straub, CJJ)

Din Celaj headed a crew that would rob - or try to rob - drug dealers. When successful, they would obtain drugs, which they would themselves sell, money and firearms.

He went to trial on several Hobbs Act robbery and associated 924(c) counts, was convicted, and received a 601-month sentence. On appeal, he made a sufficiency claim as to the jurisdictional element of the Hobbs Act counts where the goal was to steal marijuana. He did so despite entering into a stipulation at trial that “marijuana is grown outside of the state of New York and travels in interstate and foreign commerce to arrive in the New York City area.” The circuit affirmed.

The court began by surveying the area. In Parkes, see "Government Has No Evidence; Court Deems It Sufficient," posted September 23, 2007, the court found the evidence sufficient even though there was no specific evidence about the origin of the marijuana that was stolen, where there was evidence that the object of the robbery was a “small but going” marijuana enterprise, the theft netted several bags of marijuana and $4,000 in cash, and an expert testified that marijuana is typically trucked in through Mexico and very little is grown in New York. By contrast, in Needham, see "Reefer Gladness," posted May 23, 2010, the court found the evidence - which was limited to the amount of money obtained - insufficient since there was no proof that the marijuana sold by the robbery victims had either originated or been sold out of state.

“Guided by” these cases, the court concluded that the evidence here “achieve[d] the same effect as the evidence offered in Parkes,” which was sufficient. There, the “key evidence” was the expert testimony. Here, the stipulation conveyed “the same information about the interstate nature of the marijuana trade.” And, unlike Neeham, there was more evidence than just drug money, because Celaj had made statements that he was in the business of stealing marijuana and selling it.

PC World

United States v. Echeverry, No. 10-2828-cr (2d Cir. August 19, 2011) (Winter, Parker, Chin, CJJ) (per curiam)

The facts of this latest per curiam could have been pulled straight from a law school exam. During an ongoing narcotics conspiracy, Echeverry and his accomplice attempted to recover stolen narcotics from a third person; they possessed and brandished a gun but, during the incident, the intended victim grabbed it and discharged it, wounding the accomplice.

The issue was whether Echeverry should get the seven-year brandishing § 924(c) sentence or the ten-year discharge § 924(c) sentence. The district court gave him the longer sentence, holding that if a defendant possesses a firearm during a drug-trafficking offense he is responsible for a subsequent discharge of that firearm, no matter who fires it.

The circuit affirmed. The statute provides that the enhanced sentence applies “if the firearm is discharged,” and “does not require that the firearm be discharged by the defendant.” In addition, the recent Supreme Court case, Dean v. United States, which held that the discharge enhancement applied when the gun went off accidentally, controls. The use of the passive voice in the statute indicates that the statute focuses “on an event that occurs without respect to any specific actor.” Thus, a defendant “need not directly cause a discharge to be subject to the firearm-discharge enhancement.”

Crew Bayou

United States v. Marino, 09-1965-cr (2d Cir. August 18, 2011) (Jacobs, Winter, McLaughlin, CJJ)

Matthew Marino was at the margin of the Bayou Hedge Fund Group disaster - a Ponzi scheme that defrauded its investors of more than $300 million. The fund was opened in 1996 by two principals, who hired Marino’s CPA brother, Daniel Marino, to keep its books. This defendant, Matthew Marino, was hired by Bayou in 2002 and over the next three years took steps to help perpetuate and conceal the fraud. The scheme came crashing down in 2005, and the principals, including Marino’s brother, all pled guilty to fraud charges.

Appellant Marino, on his part, pled to one count of misprision of felony, covering his actions between January and August of 2005, a period during which investors lost $60 million in the Bayou scheme. He received a twenty-one month prison sentence. This appeal concerns only his challenge to the $60 million restitution order. In this very long decision - the slip opinion runs to nearly thirty-two pages - the circuit rejects Marino’s claim that he was not the “direct and proximate” cause of that loss.

The restitution statute that the court applied to Marino, 18 U.S.C. § 3663A, defines a “victim” as “any person directly and proximately harmed as a result of” the commission of the offense. According to the circuit’s review of the legislative history, Congress included this causation standard as a way of avoiding complex restitution litigation that might unduly prolong the sentencing proceedings.

Applying this standard here, the circuit concluded that Marino’s actions constituted both direct and proximate causation.

Marino’s knew of, failed to report, and helped conceal the Bayou fraud during 2005. Had Marino disclosed the fraud, no investor would have injected fresh cash into the scheme. Accordingly, his crime was a “cause in fact” - a direct, “but for” cause - of those losses. And it was not merely “speculative” for the circuit to assume that the losses would have ceased if Marino had reported the fraud. An insider-whistleblower is much more likely to be “taken seriously by enforcement officials.”

As for proximate causation, under the circuit’s “zone of risk” approach - thanks again, Mrs. Palsgraf - his actions were “clearly the proximate cause” of the victims’ losses, even if his actions were not like the “wantonly fraudulent” conduct of the Bayou principals. His role in the losses was significant, since he vouched for the accuracy of the fund’s books to the Bayou investors. It therefore does not matter that Marino’s actions were “less serious” than those of the principals. During the period of his criminal activity, his acts remained “essential to” the “criminal scheme.”

Tamper Proof

United States v. Simels, No. 09-5117-cr (2d Cir. August 12, 2011) (Newman, Calabresi, Hall, CJJ)

Former defense attorney Robert Simels appealed his conviction, after a jury trial, of various counts relating to a witness-tampering scheme, and his fourteen-year sentence. The circuit dismissed two minor counts as insufficient but otherwise affirmed.

The case arose from Simels’ representation of one Shaheed Khan, a Guyanese narcotics trafficker, who was detained at the MCC. The case against Simels had three main components. First, he lied to prison officials in an effort to speak to another prisoner, David Clarke, whom he believed to be a witness against Khan, by saying he was Clarke’s attorney. Second, an associate of Khan’s, Selwyn Vaughn, had several conversations with Simels, in which Simels discussed bribing and threatening potential witnesses against Khan. Vaughn had approached the DEA when he learned that Simels was reaching out to him, and wore a wire during these discussions. Third, the government recorded conversations between Simels and Khan in an attorney-client visiting room at the MCC.

Khan ultimately pled guilty and, in doing so, waived any claim that the government violated the Fourth, Fifth and Sixth Amendments in investigating him. He also also waived his work-product and attorney-client privilege claims with respect to the investigation of Simels.

Simels raised a number of significant issues on appeal about the way the evidence against him was gathered, but the circuit affirmed.

Evidentiary Issues

Simels' first argument was based on the Sixth Amendment. The court agreed that the use of an informant to meet with him and discuss his defense of Khan “potentially raise[d] serious issues concerning the Sixth Amendment rights of the lawyer’s client and other issues arising from intrusion into the attorney-client relationship.”

Simels asserted third-party standing over Khan’s Sixth Amendment rights. But the court, having identified the importance of the standing question, did not really resolve it. The court held that the “law is unclear” on the point, but would “assume that Simels can assert a Sixth Amendment right on behalf of his client” for the purposes of his own appeal.

As to the merits of the Sixth Amendment claim, the opinion is similarly inconclusive. It wonders whether investigators who believe that an attorney is attempting to obstruct justice in the course of representing a client “are constitutionally required to have a reasonable basis for their suspicion of possible obstruction before sending an informant to contact the lawyer,” but stops short of holding that the requirement exists. Instead, it concludes only that “the existence of such a basis adequately allays any concern that the attorney-client relationship has been improperly invaded.”

And here, the district court’s finding that the DEA had reasonable basis was adequate. It relied on Simel’s deception so that he could meet with Clarke, and Vaughn’s initial report to the DEA that he believed that Khan and Simels wanted to recruit him to assist in intimidating Clarke and others.

Simels also raised an interesting wiretap issue. The district court had held that the government obtained the recordings of Simels and Khan at the MCC in violation of Title III and suppressed them. But the court allowed the government to use the recordings to impeach Simel on cross-examination. The circuit again affirmed. Although 18 U.S.C. § 2515 provides that illegally obtained wire communications may not be “received in evidence in any trial,” Title III was not meant to provide more protection than the Fourth Amendment, and it has long been recognized that evidence obtained in violation of the Fourth Amendment can be used for impeachment purposes.

Sufficiency Issues

The circuit had no trouble finding that there was sufficient evidence to support the bulk of the counts of conviction - the attempted obstruction of various individual witnesses - but agreed that two counts relating to the importation and possession of certain electronic surveillance devices had to be tossed. The evidence established that the devices were inoperable, and the circuit concluded that the statute - 18 U.S.C. 2512 - which covers devices “which can be used to intercept” communications, excludes inoperable equipment. But, since Simels received time served and no supervised release on these counts, and since there was no “prejudicial spillover" affecting the other counts, all that was necessary was a limited remand for the entry of a corrected judgment reflecting the dismissal of these counts.

Sentencing Issues

Of Simels’ three sentencing claims, one stands out. He received a fourteen-year sentence and, at his request, the judge recommended that he be housed at the camp at FCI Otisville. At the time of sentencing, the judge was unaware that the BOP will not designate a prisoner to a camp, absent a BOP waiver, if the defendant is sentenced to more than ten years’ imprisonment. The judge only learned this after Simels was sentenced. Even so, for reasons unexplained, “the sentence was not imposed under a misunderstanding of facts that would impair the validity of the sentence.”

Ex-Facto Knife

United States v. Riggi, No. 09-4391-cr (2d Cir. August 10, 2011) (Jacobs, Wesley, Chin, CJJ)

Philip Abramo’s case has been running for several years. He was originally convicted after trial of murder and racketeering charges, and received a life sentence. But the circuit reversed, finding that the admission of eight of his co-conspirators’ plea allocutions violated Crawford. See The Three Racketeers, posted September 6, 2008. On remand, Abramo pled guilty to reduced charges, carrying an eighteen-year statutory maximum. His plea agreement used the 2008 guideline manual, under which his range exceeded eighteen years, making eighteen years his guideline sentence. It also contained an appeal waiver, under which Abramo agreed not to challenge any sentence of eighteen years or less.

At sentencing, Abramo pointed out a potential ex post facto violation. The Commission increased significantly the guidelines for murder conspiracy in 1990, but the conspiracy to which he pled guilty ended in 1989. Under the 1989 guidelines, the sentencing range was 78 to 97 months. Nevertheless, the district court, looking to the nature of Abramo’s conduct, imposed an eighteen-year sentence.

On appeal, the circuit enforced the waiver and dismissed the appeal. The court agreed that the “violation of a fundamental right warrants voiding an appeal waiver” and reviewed the kinds of issues that trigger this. It also noted, however, that “other meaningful errors are insufficient” to void the waiver. The “decisive considerations dividing these cases appear to be the nature of the right at issue and whether the sentence was reached in a manner that the plea agreement did not anticipate.”

Here, “neither consideration” warranted voiding Abramo’s appeal waiver. While there is dicta in a 1997 case, Rosa, suggesting that an ex post facto violation might cause the court to set aside a waiver, even there the court enforced the waiver. Moreover, there was nothing about the sentence itself that warranted voiding the waiver. The judge was not biased, did not “abdicate his judicial responsibility,” and imposed the sentence that was contemplated by three separate provisions of the plea agreement.

Finally, the court rejected Abramo’s claim that, since he was unaware of his ex post facto rights, his “contract” - the plea agreement - was void as based on a mutual mistake of fact. The court ducked this, suggesting instead that it might be better “subsumed by a claim based on ineffective assistance of counsel. ” Such a claim can “survive an appeal waiver where the claim concerns the advice the defendant received from counsel.”

Custody Battle

United Stateds v. FNU LNU, No. 10-419-cr (2d Cir. August 9, 2011)
(Jacobs, Calabresi, Lohier, CJJ)

Defendant, traveling under the name Sandra Calzada, arrived at JFK on a flight from the DR. A border patrol agent noticed that Calzada had an open arrest warrant, and flagged her for secondary inspection. An “armed guard” escorted her to the secondary inspection room, from which she was not free to leave, and the agent questioned her for 90 minutes without first reading the Miranda warnings.

The interrogation included questions about her pedigree, passport and the like. Eventually, the agent found some discrepancies: she did not look like the photograph on the original passport application, gave inconsistent biographic information, and could not recall any of her addresses in Puerto Rico, where she said she was born.

The district court refused to suppress the statements, holding that Miranda warnings were not required during a “routine border crossing inquiry” and because the questioning was not interrogation. The agent’s “function or intent” was to determine the defendant’s true identity.

The circuit affirmed, albeit on different grounds. The majority squarely rejected the notion that routine border questioning could never be “custodial interrogation” requiring Miranda warnings. While there is a Fourth Amendment exception for routine border searches, there is “no similar exception to Miranda’s prophylactic requirement under the Fifth Amendment.” The circuit has long held that where a “stop” was permissible under the Fourth Amendment is “irrelevant to the Miranda analysis.”

The question thus remains, for Miranda purposes, whether the suspect was “in custody.” The standard is whether “a reasonable person in the suspect's position would have understood herself to be subjected to restraints comparable to those associated with a formal arrest.” This is a very fact-bound determination requiring close consideration of the circumstances surrounding the encounter with the authorities - the interrogation’s duration, its location, whether the suspect volunteered for the interview, whether the officers used restraints, whether weapons were present or drawn, where the officers told the suspect she was free to leave or under suspicion, and a juvenile suspect's age. A “reasonable person’s expectations about how the questioning is likely to unfold are also relevant.” This last consideration is important at borders, since a reasonable traveler will “expect some constraints as well as questions and follow-up,” without considering himself to be under arrest.

Here, the court identified “several” facts to suggest that the interrogation was custodial - “it took place in a closed room, out of public view; armed guards escorted the defendant there and remained in the vicinity; it lasted for 90 minutes ... [and the agent] took the defendant’s fingerprints and did not inform her she was free to go. On the other hand, “the officers never drew their weapons, no physical restraints were used; and, crucially, a reasonable person would recognize that the questions being asked were “par for the course of entering the country from abroad.”

That said, after seventeen pages of reasoning, here is the court’s entire analysis - a single sentence: “In light of the totality of these circumstances, we conclude that a reasonable person in the defendant’s position would not have considered what occurred to be the equivalent of a formal arrest.”

Conviction affirmed.

Chief Judge Jacobs concurred in result, but did not sign on. He thought this case was too easy, and did not “remotely” merit a “tour d’horizon of Miranda law” or “pages of tendentious analysis in which useful precedents of this Circuit are deconstructed.” To the chief, the majority opinion “unnecessarily complicates what should be a straightforward holding.” Miranda warnings are simply not required in a routine secondary inspection when a reasonable person would consider the questions asked to be relevant to an admissibility or customs determination.