Critical defense exhibits excluded for failure to comply with Rule 16(b) reciprocal discovery obligations

Fri, 01 Jan 2010 19:48:18 GMT

Federal Rule of Criminal Procedure 16(b) imposes discovery requirements on the defense which are triggered when the government complies with its own, initial disclosure obligations. Some defense counsel treat the reciprocal obligation as more or less voluntary, betting that they will be spared the district court’s wrath and will avoid the sanction of evidence preclusion due to the defendant’s transcendent Sixth Amendment rights. In at least one recent case that bet proved to be a resounding loser.

In United States v. Hardy, 586 F.3d 1040 (6th Cir. 2009), the defendant had been charged with embezzling $250,000 from her employer, a box manufacturer, by transferring funds under her control to another company. Hardy’s defense was that the transfers amounted to a repayment of loans she had earlier caused to be made to the box company, and sought to introduce at trial check stubs in her possession documenting the alleged, earlier loan. Defense counsel had not supplied the government with copies of those defense exhibits prior to trial, and explained the omission by saying that he had not intended to use them and was only obliged to do so when a duces tecum subpoena served on the box company failed to yield original documentary evidence of the loans. The government objected, and the trial court precluded use of the defense check stubs because of a failure to comply with FRCP 16(b).

The Sixth Circuit affirmed the resulting conviction. Under FRCP 16(b), the defense was required to produce in discovery papers and documents in the possession of the defense which are intended for use in the defense’s case-in-chief. Under FRCP 16(c), the obligation is a continuing one. The appeals court viewed the non-disclosure as willful, making exclusion a proper remedy. To the defense counsel’s strained argument that the requirements of FRCP 16(b) apply only to admissible records and the admissibility of the defense’s copies could only be determined when the subpoena seeking original versions proved unavailing, the Sixth Circuit had an emphatic response: the disclosure obligation exists when (a) the defense possesses the document and (b) intends to offer it, regardless of the outcome of any anticipated dispute over admissibility. The Sixth Amendment’s guaranteed right to present exculpatory evidence was not absolute, and could be overcome by the countervailing interests represented here by FRCP 16(b).

The Hardy case is a useful reminder that, while a risk-benefit analysis may justify delaying disclosure until as late in the pre-trial process as possible, that analysis may tilt unalterably against defense counsel if disclosure is not finally made at some point prior to the actual start of the trial.

Trial court may cut off cooperator cross-examination on need for "truthfulness"

ALeibman@foxrothschild.com (Alain Leibman) — Mon, 08 Jun 2009 19:05:22 GMT

Typically, cross-examining a cooperator regarding the impact of the Sentencing Guidelines (e.g., its reduction of, say, a five-year exposure on each mail fraud charge in an Information to nothing more than 12-18 months in the aggregate even before a downward reduction) or the intricacies of a 5K1.1 variance motion can be dicey under the best of circumstances. Intuitive-sounding strategies can backfire (e.g., showing a jury that a cooperator really faces only 12-18 months despite numerous charges may be intended to convey that he got a sweetheart deal, but it also educates a sharp jury to the relatively limited amount of jail time a defendant might receive, making it more palatable to convict him) and Booker/Gall/Kimbrough have diminished the importance of the 5K as the exclusive jail-cell key.

But the Seventh Circuit has made the cross-examination even harder, holding in a recent case that the Sixth Amendment right of confrontation means only that a defense attorney must be permitted to raise the subject of the Guidelines and their impact, but that the attorney need not be given a full opportunity to explore their consequences for truth-telling.

In United States v. Recendiz, 557 F.3d 511 (7th Cir. 2009), the attorney for one of the defendants had crossed a cooperator by having the witness acknowledge familiarity with the Guidelines and with his potential sentencing range, and then obtaining a concession that the witness could get a reduced sentence by testifying truthfully. However, when counsel asked cooperator Herrera who would determine what was truthful and what "truth" really meant, the district court cut off questioning.

On appeal, the Seventh Circuit affirmed. While the Sixth Amendment guarantees an opportunity for effective cross-examination, the opportunity is not unlimited and the trial judge can impose reasonable restrictions. When a core Sixth Amendment value is at stake, like the ability to expose a witness's motivation for testifying, his bias, or motive to lie, the review is de novo. Here, the court explained, defense counsel was allowed to explore the witness's motive for testifying, so the constitutional right of confrontation was deemed not to be implicated.

Then, applying a lesser and non-constitutional abuse of discretion standard, the appeals court held that the trial judge sufficiently allowed defense counsel to explore the Sentencing Guidelines with the cooperator. Questions about the "truth" and who determined its presence or absence were permissibly found by the trial judge to be confusing to the jury and questions of law beyond the witness's knowledge. Although both of these rationales appear specious -- it could be said to be clarifying, not confusing, for the jury to know that the prosecutor is the sole decider of "truth" and the questions are not legal, but seek the witness's factual knowledge of the agreement he/she signed -- the Seventh Circuit found no abuse of discretion in the lower court's denial of the right to cross-examine the witness in these areas.

Temporal delay between underlying fraud and subsequent wire transfer dooms wire fraud theory

ALeibman@foxrothschild.com (Alain Leibman) — Wed, 29 Apr 2009 19:45:22 GMT

The Ninth Circuit recently reversed wire fraud convictions on the ground that the wire transfers upon which the 18 U.S.C. § 1343 charges were based occurred so long after the underlying activity was completed that the transfers could not be said to be "in furtherance" of a fraud. United States v. Lazarenko, No. 06-10592 (9th Cir., April 10, 2009).

In Lazarenko, the defendant, a Ukrainian official, had allegedly used his position to receive money and ownership interests in various entities, and allegedly had caused millions of dollars in such monies to be deposited into United States bank accounts. In 1993 and 1994, the evidence showed, Lazarenko had received some $14 million which ended up in this country. Years later, in 1997 and 1998 the defendant caused wire transfers of a portion of those funds to be made, and was charged with wire fraud, among other charges. But the Ninth Circuit held that the intervening three or four years, during which time the monies simply remained on deposit, was too long a period of time to conclude that the later transfers were "in furtherance" of the original scheme which led to the deposits:

"If the government's theory were correct, then it would be possible for an ordinary fraud to be converted into wire fraud simply by the perpetrator picking up the telephone three years later and asking a friend if he can store some fraudulently-obtained property in his garage before the police execute a search warrant or later taking the proceeds of fraud and transferring them to another bank." No rational trier of fact could conclude that the later transfers were "in furtherance" of the earlier fraud, and the convictions on those counts were reversed.

Severance granted based on disparity in weight of evidence

ALeibman@foxrothschild.com (Alain Leibman) — Mon, 29 Sep 2008 18:05:11 GMT

Practitioners in this area are wearily familiar with the Zafiro standard for granting severance under FRCP 14: there must be a serious risk that a joint trial will compromise a specific trial right of one of the defendants, or prevent the jury from reaching a reliable verdict. The risk of spillover is not enough, because juries are presumed able to compartmentalize evidence, and inconsistent defenses are not sufficient, since the moving defendant must show that there are “antagonistic” defenses at play, which are irreconcilable and mutually exclusive. See Zafiro v. United States, 506 U.S. 534 (1993).

The Zafiro formulation, and the resulting gloss placed on it by the courts of appeal, leaves defense attorneys with a markedly poor record of successful severance motions. So, when such a motion succeeds, it is worth noting and citing in subsequent motions.

A successful severance argument was recently made in United States v. Troutman, 546 F. Supp.2d 610 (N.D. Ill. 2008). Chicago Alderman Troutman was charged in a years-long scheme under 18 U.S.C. §§ 1341, 1346 with city employee Boone to solicit and accept payments from real estate developers in exchange for various approvals. Moving defendant Gilbert was identified in the indictment as an acquaintance of the alderman.

Gilbert was not charged in the overarching first count, and in only one of fifteen counts in the indictment. Gilbert was charged with a single episode of soliciting a payment from a developer.

Granting the motion by Gilbert to sever his case from that of the other defendants, the district court held that he had shown a “gross disparity” in the evidence which would likely prejudice him despite any limiting instructions. Since Gilbert was charged only in relation to one illegal act, much of the evidence as to the other acts in the indictment would not be admissible in a separate trial for Gilbert. Finally, severance of Gilbert would only “minimally lengthen” trial time since his separate trial was not estimated to exceed eight days in length.

Expert testimony to negate mens rea still admissible despite Insanity Defense Reform Act

ALeibman@foxrothschild.com (Alain Leibman) — Mon, 29 Sep 2008 18:01:44 GMT

The Insanity Defense Reform Act, 18 U.S.C. § 7 generally bars expert testimony to established a diminished capacity defense, if that lessened capacity falls short of demonstrating insanity. However, the Act, as construed by the courts, effects a bar only as to a complete defense predicated on something less than insanity; it does not bar such evidence if it serves to negate an element of the charged offense, such as mens rea. See United States v. Pohlot, 827 F.2d 889 (3d Cir. 1987), cert. denied, 484 U.S. 1011 (1988).

A recent decision illustrates the continuing vitality of expert psychological testimony in a white collar case where specific intent is an essential element of the offense. In United States v. Mister, 553 F. Supp.2d 377 (D.N.J. 2008), the defendant was charged with a Hobbs Act violation for accepting payoffs on behalf of a member of the Pleasantville board of education. The defense wished to argue at trial that Mister was not told explicitly about the nature of the payments and thought the monies he funneled to the council member were campaign contributions, not payoffs for official action.

The defense sought to introduce the testimony of a psychologist who had tested Mister to the effect that the defendant was of low intelligence and also that he was highly suggestible. Acting on the government’s in limine motion to exclude all of the testimony under the Act and Pohlot, the trial court ruled that since an element of the offense was knowledge of the unlawful purpose of the activity, Mister was entitled to rebut that proof with evidence of his low intelligence and perception. However, the court drew the line at the “suggestibility” evidence, since it was not relevant to the issue of knowledge.

The Mister case, then, confirms that there remains an open door to the admission of certain psychological expert testimony in white collar cases. The key is relating the proposed testimony to a particular knowledge or intent element, rather than offering that testimony to more generally rebut the thrust of the government’s charge.

District Judge eases defendant's burden in obtaining a Rule 17(c) subpoena to a third party

ALeibman@foxrothschild.com (Alain Leibman) — Tue, 23 Sep 2008 22:30:50 GMT

A court in the Southern District of New York recently made it easier for a defendant to secure a Rule 17(c) documentary subpoena to a third party, rejecting a more rigorous standard often employed in this circumstance. In United States v. Tucker, 249 F.R.D. 58 (S.D.N.Y. 2008), Judge Scheindlin granted a defense motion and issued a subpoena for BOP audio recordings of cooperators.

Typically, Rule 17(c) subpoenas sought by defendants are scrutinized under the standard of United States v. Nixon, 418 U.S. 683 (1974), requiring a defendant to show that the subpoenaed material is relevant, admissible, and specific (that is, something more than mere hope actuates the request). Id. at 702. In Nixon, of course, the government sought a trial subpoena to obtain third party records, and the Tucker court considered whether a defendant should in fairness be held to the same standard when he seeks third party records. The court considered the relative imbalance between the government's expansive tools for obtaining evidence and the defendant's meager opportunities to gain information through discovery from the government.

The Tucker court concluded that the Nixon standard is too restrictive when applied to a defendant's subpoena to a third party close to the trial date. In those circumstances, the defendant need only show that the subpoena is reasonable, i.e., material to the defense, and no unduly oppressive or burdensome for the responding party.

Defense counsel would be well advised to rely upon Tucker in those jurisdictions where Rule 17(c) subpoenas can be issued and made returnable before trial only upon motion, since the government invariably argues in opposing such motions that the higher, Nixon standard has not been met.

Trial Court Endorses Defense Counsel's Reservation of Right To Give

ALeibman@foxrothschild.com (Alain Leibman) — Mon, 14 Jul 2008 12:54:25 GMT

In the Northern District of Ohio, it appears, the practice is more widespread, and was recently upheld over the government’s objection. In United States v. Amawi, 541 F. Supp.2d 955 (N.D. Ohio 2008), the Court rejected the government’s argument that allowing one defendant to reserve would prejudice both the government and the remaining defendants.

The trial judge observed that, in his experience, defense attorneys “more often than not” reserve opening. The only prejudice suffered by the government in the practice is the denial to the prosecutor of the opportunity to learn early in the trial what strategy the defense intends to pursue.

Trial Court Endorses Delayed Defense Opening

ALeibman@foxrothschild.com (Alain Leibman) — Mon, 14 Jul 2008 12:54:25 GMT

Although not commonly seen in this District, it has always been understood that a defendant's attorney has the right to delay presentation of his or her opening statement until after the close of the government’s case. Advocates of the trial theory of primacy would argue that such a strategy risks denying the fact-finder an alternative view of the facts at an impressionable moment of the trial, but there is no doubt that FRE 611 gives the court the authority to allow the procedure.

In the Northern District of Ohio, it appears, the practice is more widespread, and was recently upheld over the government’s objection. In United States v. Amawi, 541 F. Supp.2d 955 (N.D. Ohio 2008), the Court rejected the government’s argument that allowing one defendant to reserve would prejudice both the government and the remaining defendants.

The trial judge observed that, in his experience, defense attorneys “more often than not” reserve opening. The only prejudice suffered by the government in the practice is the denial to the prosecutor of the opportunity to learn early in the trial what strategy the defense intends to pursue.

Advice of counsel defense limited to "complex" crimes?

ALeibman@foxrothschild.com (Alain Leibman) — Thu, 03 Jul 2008 14:36:23 GMT

Since the vast majority of white-collar offenses are crimes of intent, it is widely thought that a defense based on “advice of counsel” is generally available in defending those cases. However, a district court in the Fifth Circuit which recently explored the defense found it generally not available unless the particular offense charged additionally required proof of willfulness and was a “complex” offense.

Joseph Impastato, a municipal official in Louisiana, entered into a partnership with two business persons as a result of which certain Hurricane Katrina clean-up work was steered in the direction of their entity. Impasto’s partners required him to provide an opinion letter setting forth the legitimacy of such a relationship, and in due course he came up with such a letter.

When Impastato was charged with violations of the Hobbs Act (18 U.S.C. § 1951), federal program fraud (18 U.S.C. § 666), and money laundering (18 U.S.C. § 1956) for obtaining the clean-up work, he sought to offer the attorney opinion letter in his defense to negate the intent elements of the subject offenses. However, the district court ruled that the opinion letter was inadmissible because it was not relevant. United States v. Impastato, 543 F. Supp.2d 569 (E.D. La. 2008).

Relying on Fifth Circuit case law, the Impastato court held that the advice of counsel defense applied only to refute the “willfulness” element of an offense, that is, the requirement that an act be committed voluntarily and purposely, with the specific intent to do something the law forbids. Id. at 574 (citing Fifth Circuit Pattern Jury Instructions). Where a federal offense, such as mailing obscene materials, did not require that a defendant have knowledge of the illegal status of the materials, advice of counsel was not a defense. Id.

The court analyzed each of the charged offenses -- it noted that the color of official right Hobbs Act violation required only simple knowledge that the defendant had obtained a payment to which to which he was not entitled, knowing that the payment was made in return for official acts; that money laundering required only the knowledge that the proceeds were derived from some unlawful activity and knowledge that the transaction was designed to conceal the source or origination of the proceeds; and that program fraud required only “corrupt” action. Id. at 575-578. Thus, in none of the charged offenses was "willfulness" an essential element. Id. The court concluded that the advice of counsel defense is reserved, at least in the Fifth Circuit, “mainly for violation of ‘complex’ statutes” (citing cases; including tax fraud, false subscribing of tax returns). Id. It is "inappropriate” for less complex crimes (citing cases; including mailing obscene materials, illegal receipt of firearm).

Arguably, the Impastato court’s reading of the elements of some commonly-charged specific intent offenses is too narrow, reading the "willfulness" requirement out of those statutes. In the District of New Jersey, however the government’s own charging habits may provide a basis for the advice of counsel defense even when a narrow reading of the statutory elements might preclude it. Commonly- charged offenses such as mail and wire fraud are often expressed in terms of both knowing and “willful” conduct by a defendant. Even within the narrow parameters of a decision like Impastato, the advice of counsel defense would arguably be available against an offense charged in that fashion.

Selective Waiver Exception to Work Product Protection

ALeibman@foxrothschild.com (Alain Leibman) — Thu, 03 Jul 2008 14:26:06 GMT

A corporation which desires to cooperate either with a civil investigative agency, such as the Securities Exchange Commission, or a prosecutive authority, such as the local U.S. Attorney’s Office, is often asked by the government to turn over the results of any internal investigation as a demonstration of its cooperative spirit and as a badge of good corporate citizenship.

Much ink has been spilled, electronically speaking, on the propriety of governmental demands for the fruits of internal investigations, demands which reached their height in the Justice Department under corporate prosecution guidelines issued in 2003 and known as the Thompson Memorandum (http://www.usdoj.gov/dag/cftf/corporate_guidelines.htm), and which continue to a lesser extent under the superseding 2006 McNulty Memorandum (http://www.justice.gov/dag/speeches/2006/mcnulty_memo.pdf). The SEC has sought similar materials under the coercive pressure of the so-called "Seaboard Report" (Exchange Act Release No. 449969, Oct. 23, 2001). Defenders of the attorney-client privilege have rightly argued that exacting the production to the government of the results of internal investigations as a price for non-prosecution severely undermines the privilege and exemplifies overreaching by the government. Another, corollary consequence of the compelled production of such materials has been less widely discussed: production to the government may effect a general waiver of the work product protection attaching to documents such as interview memoranda and attorney-opinion analyses, leaving them subject to discovery in related civil litigation.

Most circuit courts of appeal have been hostile to corporations seeking to preserve opinion work product in the face of disclosure to the government, holding that a disclosure – even in furtherance of cooperation or under compulsion of a subpoena – amounts to a general waiver. E.g., In re Quest Communications, Int’l, 450 F.3d 1179 (10th Cir. 2006); United States v. Mass. Inst. of Technology, 129 F.3d 681(1st Cir. 1997); Westinghouse Electric Corp. v. Republic of the Philippines, 951, F.2d 1414 (3d Cir. 1991); Permian Corp. v. United States, 665 F.2d 1214 (D.C. Cir. 1981).

Only the Eighth Circuit, in Diversified Indus. v. Meredith, 572 F.2d 596 (8th Cir. 1977), has applied a selective waiver approach, holding that a company’s production of internal memoranda to the SEC under compulsion of a subpoena causes the documents to retain their work product protection. The rationale of the Diversified Indus. court was that protecting such materials even after their disclosure to the government would encourage corporations to retain outside counsel to investigate corporate wrongdoing and would facilitate the disclosure of such evidence to the government.

The Second Circuit in In re Steinhardt Partners, 9 F.3d 230 (2nd Cir. 1993) stopped short of Diversified Indus., and held that no work product protection remained for documents which were voluntarily disclosed to the SEC. The Second Circuit, however, left the door to a selective waiver argument open a crack by suggesting that work product protection could be retained where the disclosing party and the government had a “common interest in developing legal theories and analyzing information” or where the SEC had explicitly agreed to maintain the confidentiality of the documents. Id. at 236.

Recently, however, that door was further closed by the district court in In re Initial Public Offering Sec. Litig., 2008 WL 400933 (S.D.N.Y., Feb. 14, 2008). There, Credit Suisse had produced to the SEC and U.S. Attorney’s Office interview summaries created as part of an internal investigation into alleged IPO allocation misconduct. But Credit Suisse only did so after securing confidentiality agreements from both agencies, expecting that by doing so it would enjoy a safe harbor under the Steinhardt analysis.

Stopping just short of rejecting entirely the selective waiver doctrine, since Steinhardt had in theory recognized the possible application of the doctrine to some hypothetical state of facts, the IPO district court concluded that “selective waiver is not in the long-term best interests of the government, the adversarial system, or litigants.” *6. The court held that a “strong presumption” existed against a finding of selective waiver, and that it should not be permitted “absent special circumstances,” id., which were not identified.

Since the Credit Suisse attorneys believed they had followed the prescription of Steinhardt, yet still found that their disclosure to the government had effected a complete waiver of work product protection, the more prudent course of action in the Second Circuit – at least until the court of appeals speaks again to the selective waiver doctrine - - is to assume that disclosure to the government constitutes a waiver as to the rest of the world.

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