Just after this blog highlighted Judge Gleeson's thoughtful decision in Surgent holding that personal money judgments are not authorized in forfeiture proceedings, see here, the Second Circuit rules otherwise in United States v. Awad, 07-4483-cr (2d Cir. March 11, 2010). Forfeiture money judgments may be imposed as part of a defendant's sentence under 21 U.S.C. § 853(a), and such judgment "does not depend on a defendant's assets at the time of sentencing." The Court specifically notes Judge Gleeson's decision in Surgent and finds its reasoning "unpersuasive."
As the [Awad] district court reasoned, when "a defendant lacks the assets to satisfy the forfeiture order at the time of sentencing, the money judgment . . . is effectively an in personam judgment in the amount of the forfeiture order." . . . This is so because "[m]andatory forfeiture is concerned not with how much an individual has but with how much he received in connection with the commission of the crime." . . . A contrary interpretation could have the undesirable effect of creating an incentive for an individual involved in a criminal enterprise to "rid[] himself of his ill-gotten gains to avoid the forfeiture sanction."
Federal Defender Roland Thau demonstrates the power of that most basic defense technique: crime scene investigation. In United States v. Gomez, 2010 WL 431878 (S.D.N.Y. February 8, 2010), Mr. Thau’s client was arrested for trespass in a public park at midnight, searched and charged with possession of the “hard metal object” found in his pocket. Thau moved to suppress the gun on the grounds that the arrest was made without probable cause. Trespass under New York State law requires that the defendant enter property “fenced or otherwise enclosed in a manner designed to exclude intruders” and “notice [of the trespass] is given by posting in a conspicuous manner.” Thau’s crime scene investigation established that the park’s many entrances were wide open at night and the signage regarding opening hours could be “practically invisible,” depending on one’s approach to the park. There was therefore no reasonable suspicion, much less probable cause, to believe that Mr. Gomez had committed the crime of trespass, and SDNY Judge Sweet suppressed the seized gun. Well done Roland!
Lawyers: Roland Thau, Federal Defenders, Inc. (Defendant); AUSA Jessica Ortiz
Lawyers: Roland Thau, Federal Defenders, Inc. (Defendant); AUSA Jessica Ortiz
Government Not Entitled to Personal Money Judgment in Criminal Forfeiture Proceeding
[Update 3/11/2010: In United States v. Awad, issued 3/11/2010, Second Circuit disagrees with Surgent's holding and finds its reasoning "unpersuasive."] The gem of this series of cases is United States v. Surgent, 2009 WL 2525137 (E.D.N.Y. August 17, 2009), a key decision on the availability of personal money judgments in criminal forfeiture proceedings. Ruling that “nothing in § 982, § 853, or the jurisprudence of the Second Circuit authorize[d him] to enter a personal money judgment, as opposed to an order forfeiting specific property, in sentencing a defendant convicted of a money laundering offense,” EDNY Judge Gleeson denied the government’s motion for the entry of a money judgment of $2.3M. The ruling has broad implications for many other criminal cases, which involve similarly-worded forfeiture statutes.
Stripping bare the echo chamber of precedents used to justify money judgments in forfeiture cases (many of the cases “which assume[d] the propriety of personal money judgments in forfeiture proceedings, are subsequently read as establishing the propriety of such judgments”), Judge Gleeson points out that “[t]he fact that the statutes in question do not provide for the enforcement of money judgments suggests that they do not authorize such judgments.” There is a key difference between money judgments and forfeiture orders: the former may be enforced like any civil judgment, whereas the latter may only be enforced by the judge who entered it. Congress hardly “deem[ed] this difference irrelevant, as there are legitimate reasons to prefer that the sentencing court oversee both the imposition and the execution of sentences containing federal forfeiture awards.”
The government’s recourse may lie in an order for substitute assets, assuming the defendant has some nominal assets at the time of conviction. Under Fed.R.Crim.P. 32, this order may be amended at any time if the defendant later obtains assets. As a practical matter, however, without a money judgment, the government is likely to leave the defendant alone.
Lawyers: Steven Kessler (Third Party Petitioner Regina Surgent); AUSA Kathleen Nanden
Early Termination of Supervised Release Granted Despite Restitution Balance Owing
A defendant secured early termination of his supervised release term in United States v. Harris, 2010 WL 723762 (S.D.N.Y. March 1, 2010), based on “[p]ost-conviction conduct [that] has been beyond reproach” and the fact that supervised release status has created “multi-faceted obstacles” to his employment prospects. The Government had opposed termination, citing the large balance owing on the defendant’s $200M restitution obligation. SDNY Judge Haight concluded, however, that “t]he desirability of Harris’s continued rehabilitation through enhanced professional opportunity trumps whatever minimal restitution might be obtained by continued supervision.” Interestingly, he noted that unlike cases that have “devastated individual victims” like that of Bernard Madoff, “the victims of Harris’s fraud were a consortium of sophisticated international banks, advised by accountants and attorneys, whose existence and business activities survived the fraud.” Moreover, “[k]eeping Harris’s supervised release restitution obligation in effect until March 2012 will have no effect whatsoever upon the balance sheets of the bank victims.”
Restitution Denied for Losses Not Proximately Caused by Offense
In United States v. Morrison, 2010 WL 480866 (E.D.N.Y. February 12, 2010), EDNY Judge Hurley reminds us that “restitution may be ordered only for the loss caused by the specific conduct that is the basis of the offense of conviction.” Morrison was convicted of a RICO conspiracy aimed at distributing cigarettes that lacked the applicable New York State tax stamps. Concluding that New York State was a victim of this conspiracy under the MVRA (Mandatory Victims Restitution Act), the Court held, however, (for the first time in this circuit it appears), that the amount of the restitution would be limited by “the specific temporal scope of the criminal conduct as outlined in the indictment.” After all, since “the government has control over the drafting of the [indictment], it bears the burden of includ[ing] language sufficient to cover all acts for which it will seek restitution.” New York City, on the other hand, was not a victim for restitution purposes. Its harm – that the bootleg sales deprived of it of local tax revenue – was “far too attenuated to demonstrate direct and proximate causation.” The case is a lesson in not taking the government’s restitution claims at face value.
Lawyers: William Murphy and Kenneth Ravenell of William H. Murphy, Jr. & Associates, Peter Smith of Law Offices of Peter Smith & Associates, Daniel Nobel, Richard Levit of Levitt & Kaizer(Defendant); Eric Proshansky, Corporation Counsel of the City of New York, Law Department (the City of New York); David Paldy, Department of Taxation and Finance, Office of Tax Enforcement, Special Investigations Unit ( the State of New York); AUSAs James Miskiewicz, John Durham, Diane Leonardo-Beckman.
Court Denies Victim’s Request for Priority in Distribution of Restitution Monies
In United States v. Dreier, 2010 WL 424706 (S.D.N.Y. February, 5, 2010), SDNY Judge Rakoff tried to bring some sanity and order to the sprawling mess generated by the fraud schemes of convicted lawyer, Marc Dreier. In the decision, he approved proposed settlement agreements between the government, the SEC and the bankruptcy trustees, noting that “[t]he forfeiture laws [.] authorize the Government to compromise competing claims to forfeited assets” and ) “nothing in the [Crime Victims' Rights Act] requires the Government to seek approval from crime victims before negotiating or entering into a settlement agreement.” Notably, he rejected the claim of one victim that he should get priority since he was an “individual as opposed to an institutional investor.” Confirming his previous order of pro rata distribution, Judge Rakoff noted:
The truth is that a fraud as large and egregious as Dreier’s is like an earthquake that savages its victims at random and is followed by a series of aftershocks that destroys still further assets. Any alternative to the pro rata approach would entail a costly and extensive inquiry into the circumstances of each victim's loss, which would likely devolve into a war of recriminations, to the detriment of all concerned.
Guest contributor Marshall Mintz writes:
Fraud based on the “deprivation of honest services” is a controversial charge likely to elicit some notable rulings from the Supreme Court this term, as noted here. In particular, the cases of Jeffrey Skilling and Conrad Black may produce decisions that reign in the reach of honest services fraud in the context of private businesses, two varieties of which have been identified by the Second Circuit in United States v. Rybicki: cases involving bribes or kickbacks, and cases involving self-dealing. Bribery/kickback cases need no introduction. Self-dealing cases, on the other hand, usually involve the defendant causing his employer to do business with a corporation or enterprise in which the defendant has a secret, undisclosed interest. In Rybicki, the Second Circuit adds that "[i]n the self-dealing context, though not in the bribery context, the defendant's behavior must [.] cause, or at least be capable of causing, some detriment – perhaps some economic or pecuniary detriment – to the employer.”
This distinction is at issue in United States v. Demizo, 2009 WL 2163099 (EDNY July 20, 2009), where the defendant was convicted after trial of securities fraud and making false statements. Because EDNY Judge Gleeson concluded, however, that there was no factual predicate to treat the case as a self-dealing one, he declined to defendant’s requested jury charge on the issue of detriment. The case also includes an interesting discussion on the issue of permitting the defendant to introduce at trial a statement the government made in a brief under the "admission of a party opponent” rule.
Refusal to Charge:
Relying on the Second Circuit’s decision in United States v. Rybicki, 354 F.3d 124 (2d Cir. 2003), the court rejected the argument that the jury should have been instructed that the fraud involved self-dealing as opposed to kickbacks, and the government was therefore required to prove a possible detriment to the employers.
Assuming the validity of the legal argument, the court deemed any such instruction inappropriate because the defense “failed to identify any evidence in the record that could permit the jury to find that this was a self-dealing case.” As the Second Circuit has suggested, self-dealing involves a situation where the defendant causes the employer to do business with a corporation or other enterprise in which the defendant has a “secret interest.” That term has not been defined, but the relevant cases all involve defendants who had undisclosed ownership interests in those entities and Demizio “did not argue that the record showed he had such a cognizable interest in the firms to which he steered his employer’s business.”
The court also rejected the defense’s argument that the case involved self-dealing because the government alleged a conflict of interest because, “every fraud case, including the kickback scheme at issue in Rybicki, involve a conflict of interest in that every individual has a personal interest in pocketing a kickback while every employer has an interest in hiring people who eschew such conduct.”
Refusal to Admit a Statement from a Government Brief
The defense also argued that it should have been permitted to introduce into evidence a government pre-trial brief submitted in opposition to a request for a bill of particulars, reasoning that statements made by an attorney concerning a matter within his employment may be admissible against the represented party.
The court explained that while the Second Circuit has previously considered the admissibility of statements made in a bill of particulars and opening statements made by defense counsel at a previous trial and found that, while not inadmissible per se, policy concerns weigh against allowing such statements to be admitted as admissions by a party-opponent. Against that backdrop, Judge Gleeson reasoned that because the brief was a legal memoranda and not a formal pleading, it was merely an assertion about the charges in the indictment – which is a charge of the grand jury – and could not properly be deemed a statement by the government .
Finally, rejecting the claim that the brief was evidence that the government had changed its theory during the trial, the court found the assertion irrelevant “to any factual issue submitted to the jury” and, in any event, the probative value was substantially outweighed by the risk of confusion.
Attorneys: David Spears, Charlita Mays (Spears & Imes LLP) (defendant); AUSA’s Winston Chan, Kelly T. Currie, Winston Paes
Fraud based on the “deprivation of honest services” is a controversial charge likely to elicit some notable rulings from the Supreme Court this term, as noted here. In particular, the cases of Jeffrey Skilling and Conrad Black may produce decisions that reign in the reach of honest services fraud in the context of private businesses, two varieties of which have been identified by the Second Circuit in United States v. Rybicki: cases involving bribes or kickbacks, and cases involving self-dealing. Bribery/kickback cases need no introduction. Self-dealing cases, on the other hand, usually involve the defendant causing his employer to do business with a corporation or enterprise in which the defendant has a secret, undisclosed interest. In Rybicki, the Second Circuit adds that "[i]n the self-dealing context, though not in the bribery context, the defendant's behavior must [.] cause, or at least be capable of causing, some detriment – perhaps some economic or pecuniary detriment – to the employer.”
This distinction is at issue in United States v. Demizo, 2009 WL 2163099 (EDNY July 20, 2009), where the defendant was convicted after trial of securities fraud and making false statements. Because EDNY Judge Gleeson concluded, however, that there was no factual predicate to treat the case as a self-dealing one, he declined to defendant’s requested jury charge on the issue of detriment. The case also includes an interesting discussion on the issue of permitting the defendant to introduce at trial a statement the government made in a brief under the "admission of a party opponent” rule.
Refusal to Charge:
Relying on the Second Circuit’s decision in United States v. Rybicki, 354 F.3d 124 (2d Cir. 2003), the court rejected the argument that the jury should have been instructed that the fraud involved self-dealing as opposed to kickbacks, and the government was therefore required to prove a possible detriment to the employers.
Assuming the validity of the legal argument, the court deemed any such instruction inappropriate because the defense “failed to identify any evidence in the record that could permit the jury to find that this was a self-dealing case.” As the Second Circuit has suggested, self-dealing involves a situation where the defendant causes the employer to do business with a corporation or other enterprise in which the defendant has a “secret interest.” That term has not been defined, but the relevant cases all involve defendants who had undisclosed ownership interests in those entities and Demizio “did not argue that the record showed he had such a cognizable interest in the firms to which he steered his employer’s business.”
The court also rejected the defense’s argument that the case involved self-dealing because the government alleged a conflict of interest because, “every fraud case, including the kickback scheme at issue in Rybicki, involve a conflict of interest in that every individual has a personal interest in pocketing a kickback while every employer has an interest in hiring people who eschew such conduct.”
Refusal to Admit a Statement from a Government Brief
The defense also argued that it should have been permitted to introduce into evidence a government pre-trial brief submitted in opposition to a request for a bill of particulars, reasoning that statements made by an attorney concerning a matter within his employment may be admissible against the represented party.
The court explained that while the Second Circuit has previously considered the admissibility of statements made in a bill of particulars and opening statements made by defense counsel at a previous trial and found that, while not inadmissible per se, policy concerns weigh against allowing such statements to be admitted as admissions by a party-opponent. Against that backdrop, Judge Gleeson reasoned that because the brief was a legal memoranda and not a formal pleading, it was merely an assertion about the charges in the indictment – which is a charge of the grand jury – and could not properly be deemed a statement by the government .
Finally, rejecting the claim that the brief was evidence that the government had changed its theory during the trial, the court found the assertion irrelevant “to any factual issue submitted to the jury” and, in any event, the probative value was substantially outweighed by the risk of confusion.
Attorneys: David Spears, Charlita Mays (Spears & Imes LLP) (defendant); AUSA’s Winston Chan, Kelly T. Currie, Winston Paes
Guest contributor Justin Sher writes:
In two recent cases involving former public officials – Joseph Bruno, the former majority leader of the New York State Senate, and Bernard Kerik, the former police commissioner of New York City – federal courts in New York declined to narrow the scope of the “honest services” theory of fraud. In United States v. Bruno, the court reaffirmed the principle that a state official may commit the federal crime of honest services fraud even if his conduct is legal under state law. In United States v. Kerik, the court ventured further by holding that a public official could commit the crime of honest services fraud by engaging in influence peddling even when the influence is directed at areas that are beyond the scope of the official’s authority. Both decisions highlight the difficulty many courts have had applying this vague and controversial statute, which Justice Scalia has described as “nothing more than an invitation for federal courts to develop a common-law crime of unethical conduct.” They also raise some of the same issues that are likely to be addressed by the Supreme Court this term in Weyhrauch v. United States.
Background on Honest Services Fraud
The honest services theory of fraud is codified in 18 U.S.C. § 1346. It provides that the federal statutes prohibiting mail and wire fraud extend to schemes that “deprive another of the intangible right of honest services.” Congress enacted section 1346 in 1988 in response to McNally v. United States, in which the Supreme Court ruled that the scope of the mail and wire fraud statutes was limited to the deprivation of tangible property rights. Since Congress’s abrogation of McNally through the adoption of section 1346, courts have struggled to define the honest services theory of fraud so that it applies to cases of clear corruption, such as those involving bribery and kickbacks, without applying to every instance of unethical or dishonest conduct.
United States v. Bruno
Facts
Joseph Bruno, the former Majority Leader of the New York State Senate, was charged with honest services fraud for failing to disclose conflicts of interest. The indictment alleged that Mr. Bruno had accepted employment that impaired his independent judgment, used his official position to secure unwarranted privileges and accepted unauthorized gifts. Mr. Bruno sought to dismiss the indictment on the grounds that the honest services statute is unconstitutionally vague both on its face and as applied. Mr. Bruno also argued that the charges violated principles of federalism because they served as a mechanism through which the federal government could regulate the ethical conduct of state officials. As part of his federalism argument, Mr. Bruno maintained that, as in other circuits, the government should be required to allege and prove an underlying state violation in order to charge a state official with honest services fraud. Finally, Mr. Bruno sought a stay pending the Supreme Court’s decision in Weyhrauch, where the Court is expected to address this very issue.
Holding
In a decision dated August 21, 2009, the court rejected all of Mr. Bruno’s arguments. United States v. Bruno, 2009 WL 2601249, No. 09 Cr. 29 (N.D.N.Y. Aug. 21, 2009). The court reaffirmed the pre-McNally rule announced in United States v. Margiotta, 688 F.2d 125 (2d Cir. 1982), that the government was not required to demonstrate a violation of a New York statute or a duty imposed by New York law in order to convict a state official of honest services fraud. The Court also held that the statute was neither unconstitutionally vague on its face nor as applied. Finally, noting that the law on these issues was “clear” in the Second Circuit and declining to speculate as to what the Supreme Court might do, the court refused to issue a stay.
Mr. Bruno’s trial is currently underway in the Northern District of New York.
United States v. Kerik
Facts
Bernard Kerik was charged with committing honest services fraud while he held the positions of Commissioner of the New York City Department of Corrections from 1998 through 2000 and New York City Police Commissioner from 2000 through 2002. The omnibus indictment also included charges, which are not relevant here, of tax fraud, mortgage fraud and making false statements to the federal government in connection with his nomination for the position of Secretary of the Department of Homeland Security.
The government alleged that Mr. Kerik used his influence as Commissioner of Corrections and subsequently as Police Commissioner, to “vouch” for XYZ Company, a construction company with ties to organized crime, in order to influence regulators and other public officials who were considering whether XYZ should be permitted to do certain municipal-regulated business in New York City. In return, Mr. Kerik received approximately $255,000 in renovations to his apartment in Riverdale.
Mr. Kerik moved to dismiss the honest services fraud on the ground that the alleged conduct – influence peddling where the public official was acting outside the context of his official duties – does not constitute honest services fraud. Mr. Kerik’s attorneys attempted to draw a “sharp distinction between the use, or even misuse, of the influence of office in activities falling outside a defendant’s official duties – which cannot support a prosecution for federal honest services fraud – and corruption in connection with the performance of a defendant’s official duties – which can.”
Holding
In a decision in May 2009, Judge Stephen Robinson acknowledged that the honest services fraud crime is “nebulous” and that the court was not the first to struggle with its scope. United States v. Kerik, 615 F. Supp. 2d 256, 263 (S.D.N.Y. 2009). In fact, the court admitted that it “desire[d] to cabin the breadth of section 1346.” Id. at 265. Nonetheless, the court determined that the indictment alleged that Kerik had used his office to vouch for XYZ Company and would not have been able to do so but for his official status. Quoting United States v. Bloom, a Seventh Circuit case, the court explained that, “misuse of office (more broadly, misuse of position) for private gain is the line that separates run of the mill violations of state-law fiduciary duty . . . from federal crime.” Although the case “teeter[ed] on the boundaries of 18 U.S.C. § 1346,” the Court concluded that the indictment charged a colorable allegation of honest services fraud.
On November 5, 2009, Bernie Kerik pled guilty to eight felonies, including charges of tax fraud relating to his acceptance of $255,000 of renovations from XYZ Company. As part of the plea agreement, the government dropped the charges that were based on honest services fraud. Thus, while Kerik’s plea led to his release for the holidays, his case will not lead to any further clarification of the honest services fraud theory.
Conclusion
In both Bruno and Kerik, the courts declined to limit the reach of the honest services theory of fraud. As the law currently stands in the Second Circuit, a state official may be convicted of depriving citizens of their intangible right of honest services even if the official is not acting within the scope of his or her duties and even if his or conduct is perfectly legal under state law. It remains to be seen whether the Supreme Court will come out differently in Weyhrauch.
In two recent cases involving former public officials – Joseph Bruno, the former majority leader of the New York State Senate, and Bernard Kerik, the former police commissioner of New York City – federal courts in New York declined to narrow the scope of the “honest services” theory of fraud. In United States v. Bruno, the court reaffirmed the principle that a state official may commit the federal crime of honest services fraud even if his conduct is legal under state law. In United States v. Kerik, the court ventured further by holding that a public official could commit the crime of honest services fraud by engaging in influence peddling even when the influence is directed at areas that are beyond the scope of the official’s authority. Both decisions highlight the difficulty many courts have had applying this vague and controversial statute, which Justice Scalia has described as “nothing more than an invitation for federal courts to develop a common-law crime of unethical conduct.” They also raise some of the same issues that are likely to be addressed by the Supreme Court this term in Weyhrauch v. United States.
Background on Honest Services Fraud
The honest services theory of fraud is codified in 18 U.S.C. § 1346. It provides that the federal statutes prohibiting mail and wire fraud extend to schemes that “deprive another of the intangible right of honest services.” Congress enacted section 1346 in 1988 in response to McNally v. United States, in which the Supreme Court ruled that the scope of the mail and wire fraud statutes was limited to the deprivation of tangible property rights. Since Congress’s abrogation of McNally through the adoption of section 1346, courts have struggled to define the honest services theory of fraud so that it applies to cases of clear corruption, such as those involving bribery and kickbacks, without applying to every instance of unethical or dishonest conduct.
United States v. Bruno
Facts
Joseph Bruno, the former Majority Leader of the New York State Senate, was charged with honest services fraud for failing to disclose conflicts of interest. The indictment alleged that Mr. Bruno had accepted employment that impaired his independent judgment, used his official position to secure unwarranted privileges and accepted unauthorized gifts. Mr. Bruno sought to dismiss the indictment on the grounds that the honest services statute is unconstitutionally vague both on its face and as applied. Mr. Bruno also argued that the charges violated principles of federalism because they served as a mechanism through which the federal government could regulate the ethical conduct of state officials. As part of his federalism argument, Mr. Bruno maintained that, as in other circuits, the government should be required to allege and prove an underlying state violation in order to charge a state official with honest services fraud. Finally, Mr. Bruno sought a stay pending the Supreme Court’s decision in Weyhrauch, where the Court is expected to address this very issue.
Holding
In a decision dated August 21, 2009, the court rejected all of Mr. Bruno’s arguments. United States v. Bruno, 2009 WL 2601249, No. 09 Cr. 29 (N.D.N.Y. Aug. 21, 2009). The court reaffirmed the pre-McNally rule announced in United States v. Margiotta, 688 F.2d 125 (2d Cir. 1982), that the government was not required to demonstrate a violation of a New York statute or a duty imposed by New York law in order to convict a state official of honest services fraud. The Court also held that the statute was neither unconstitutionally vague on its face nor as applied. Finally, noting that the law on these issues was “clear” in the Second Circuit and declining to speculate as to what the Supreme Court might do, the court refused to issue a stay.
Mr. Bruno’s trial is currently underway in the Northern District of New York.
United States v. Kerik
Facts
Bernard Kerik was charged with committing honest services fraud while he held the positions of Commissioner of the New York City Department of Corrections from 1998 through 2000 and New York City Police Commissioner from 2000 through 2002. The omnibus indictment also included charges, which are not relevant here, of tax fraud, mortgage fraud and making false statements to the federal government in connection with his nomination for the position of Secretary of the Department of Homeland Security.
The government alleged that Mr. Kerik used his influence as Commissioner of Corrections and subsequently as Police Commissioner, to “vouch” for XYZ Company, a construction company with ties to organized crime, in order to influence regulators and other public officials who were considering whether XYZ should be permitted to do certain municipal-regulated business in New York City. In return, Mr. Kerik received approximately $255,000 in renovations to his apartment in Riverdale.
Mr. Kerik moved to dismiss the honest services fraud on the ground that the alleged conduct – influence peddling where the public official was acting outside the context of his official duties – does not constitute honest services fraud. Mr. Kerik’s attorneys attempted to draw a “sharp distinction between the use, or even misuse, of the influence of office in activities falling outside a defendant’s official duties – which cannot support a prosecution for federal honest services fraud – and corruption in connection with the performance of a defendant’s official duties – which can.”
Holding
In a decision in May 2009, Judge Stephen Robinson acknowledged that the honest services fraud crime is “nebulous” and that the court was not the first to struggle with its scope. United States v. Kerik, 615 F. Supp. 2d 256, 263 (S.D.N.Y. 2009). In fact, the court admitted that it “desire[d] to cabin the breadth of section 1346.” Id. at 265. Nonetheless, the court determined that the indictment alleged that Kerik had used his office to vouch for XYZ Company and would not have been able to do so but for his official status. Quoting United States v. Bloom, a Seventh Circuit case, the court explained that, “misuse of office (more broadly, misuse of position) for private gain is the line that separates run of the mill violations of state-law fiduciary duty . . . from federal crime.” Although the case “teeter[ed] on the boundaries of 18 U.S.C. § 1346,” the Court concluded that the indictment charged a colorable allegation of honest services fraud.
On November 5, 2009, Bernie Kerik pled guilty to eight felonies, including charges of tax fraud relating to his acceptance of $255,000 of renovations from XYZ Company. As part of the plea agreement, the government dropped the charges that were based on honest services fraud. Thus, while Kerik’s plea led to his release for the holidays, his case will not lead to any further clarification of the honest services fraud theory.
Conclusion
In both Bruno and Kerik, the courts declined to limit the reach of the honest services theory of fraud. As the law currently stands in the Second Circuit, a state official may be convicted of depriving citizens of their intangible right of honest services even if the official is not acting within the scope of his or her duties and even if his or conduct is perfectly legal under state law. It remains to be seen whether the Supreme Court will come out differently in Weyhrauch.
Guest contributor Eric Creizman writes:
Every defense lawyer knows that even though the mandatory Sentencing Guidelines regime is a thing of the past, the calculation of a defendant’s advisory Guidelines range remains a very meaningful component of sentencing. Although they are not bound by a defendant’s Guidelines range, courts nonetheless are instructed to “begin all sentencing proceedings by correctly calculating the applicable Guidelines range.” United States v. Savage, 542 F.3d 959, 963-64 (2d Cir. 2008). And while the Second Circuit has directed sentencing courts not to presume that a Guidelines sentence is reasonable, see United States v. Cavera, 550 F.3d 180, 189 (2d Cir. 2009), adherence to the Guidelines (and the comfort they provide) runs deep. Accordingly, although defense lawyers are not restricted as they were under the pre-Booker regime in requesting below-Guidelines sentences, many defense lawyers recognize that effective advocacy under the Guidelines is a substantial, if not the most important, part of the battle at sentencing.
One of the biggest challenges for defense lawyers at sentencing is overcoming the often-enormous Guidelines enhancements based on a client’s prior offenses. Two recent sentencing decisions in the Southern District of New York rejected such sentencing enhancements, likely sparing the defendants in those cases substantial additional prison time.
United States v. Johnson, 2009 WL 3415334 (S.D.N.Y. Oct. 23, 2009)
One frequently-litigated enhancement for prior offenses is the upward adjustment for “adult convictions” under the firearm offenses guideline as applied to Youthful Offender (“YO”) adjudications under New York state law. Although New York does not regard YO adjudications as convictions under state law, the Second Circuit has held that they may be considered “convictions” for the purposes of the federal sentencing Guidelines because under New York procedure, a defendant must first plead guilty to, and be convicted of, a criminal offense before a judge, in his or her discretion, rules that the conviction be changed to a YO adjudication. See United States v. Cuello, 357 F. 3d 162 (2d Cir. 2004). Moreover, although YO defendants are, by definition, not “adults,” the Second Circuit has held that a state’s classification of a conviction is not dispositive for the purposes of applying the enhancement under the Guidelines. Under the Second Circuit’s approach, whether a conviction was an “adult” conviction depends on whether the defendant was treated as an adult, an assessment the district court must make after examining “the nature of the proceedings, the sentences received, and the actual time served.” Cuello, 357 F.3d at 168-69.
Because YOs in New York are always adjudicated in an adult court (Supreme Court), and sentences of imprisonment are generally served in adult facilities, courts in the Second Circuit frequently have considered YO adjudications “adult convictions” for the purposes of the Guidelines enhancement. Indeed, in an unpublished opinion, the Second Circuit even upheld an enhancement for a YO adjudication which resulted in a probationary sentence on the grounds that probation is a punishment adult defendants regularly receive, and (like all New York YO probationary sentences), the defendant was supervised by a probation department that supervised adults . See United States v. Cruz, 136 Fed. Appx. 386 (2d Cir. 2006). Because the decisional law makes YO adjudications an almost can’t win proposition, only very infrequently have judges ruled in favor of the defense on this issue. For a notable defense victory, see Valle.
In United States v. Johnson, No. 09 Cr. 139 (RWS), 2009 WL 3415334 (S.D.N.Y. Oct. 23, 2009), however, Judge Sweet refused to apply the “adult conviction” enhancement based on a YO adjudication that the defendant received at the age of fourteen for a crime the defendant committed fourteen years later. In Johnson, the defendant, Jamal Johnson, was sentenced on a guilty plea to one count of possession of a firearm by a felon (18 U.S.C. § 922(g)(1)). The government argued that Mr. Johnson’s prior YO adjudication for second-degree robbery when he was fourteen years old qualified for the “adult conviction” enhancement because he served eight months in an adult prison. See Johnson, 2009 WL 3415334, at *3. Mr. Johnson, however, served the great majority of his four-year prison term for the YO adjudication in a juvenile detention facility. Id. Moreover, Judge Sweet noted that in the many cases where the Second Circuit has deemed a YO adjudication a basis for the “adult conviction” enhancement, the defendants were at least sixteen years old. Mr. Johnson’s “considerable youth at the time is grounds for excluding that adjudication in calculating his base offense level for the purposes of this sentence.” Id. at *4.
United States v. DeJesus-Quezada, No. 09-CR-628, 2009 WL 3519505 (S.D.N.Y. Oct. 28, 2009)
In United States v. DeJesus-Quezada, No. 09-CR-628 (JSR), 2009 WL 3519505 (S.D.N.Y. Oct. 28, 2009), Judge Rakoff addressed whether a conviction under foreign laws qualifies for an “aggravated felony” statutory enhancement and for a “crime of violence” guideline enhancement in sentencing for the crime of illegal reentry. There, the defendant was deported from the United States after it was discovered that he had been convicted of the Dominican analogue of voluntary manslaughter for having fatally shot his wife. DeJesus-Quezada, 2009 WL 3519505, at *1. In addressing the statutory enhancement, Judge Rakoff noted that on its face, voluntary manslaughter is a “crime of violence,” which seemingly would trigger the “aggravated felony” enhancement. Id. Judge Rakoff explained, however, that the Second Circuit requires the district court to take a “categorical approach” to determining whether the enhancement applies, which means that the specific circumstances of the defendant’s conduct are not considered; only the “minimum criminal conduct necessary to sustain a conviction under a given statute is relevant.” Id. (internal citations omitted). Although defense counsel creatively suggested scenarios where passive conduct, like starving a child, without using any force, may violate the Dominican statute, Judge Rakoff held that the “categorical approach” does not require that “all commissions of the crime require use of force, but only that there be a substantial risk of force inherent in the crime’s nature.” Id. at 2. In any event, all of defense counsel’s hypotheses would also constitute violations of New York’s first-degree manslaughter statute, which, categorically, is a “crime of violence” under the illegal reentry statute. Id.
Judge Rakoff reached a different conclusion with respect to the sixteen-level “crime of violence” enhancement under the Guidelines. Id. at 2. Unlike the statutory enhancement, the Guidelines enhancement “only relates to crimes of violence committed in violation of domestic laws.” Indeed, the commentary to the guideline provides that the enhancement applies to “offenses under federal, state, or local law.” U.S.S.G. § 2L1.2(b)(1) cmt. N.1(B)(iii). Judge Rakoff held that if the Sentencing Commission wished to include foreign crimes as a basis for the enhancement, it should have explicitly done so. Without plain language incorporating foreign crimes as a basis for the enhancement, it is reasonable to assume that the Sentencing Commission concluded that foreign convictions should not count toward the enhancement “because such convictions frequently lack the procedural safeguards typical of U.S. convictions.” Id. at *2.
Comment
Both Johnson and Dejesus-Quezada underline the importance of a defense counsel subjecting every aspect of the Guidelines calculation to scrutiny and challenge, and not simply relying solely on the sentencing factors set forth in 18 U.S.C. § 3553(a) to minimize the client’s exposure. There remain battles to be fought, and won, in determining the applicable Guidelines range. Once a favorable Guidelines range is achieved, it is the baseline from which the §3553(a) factors can be used to advocate more credibly for a sentence even farther below the sentence advocated by the government.
Every defense lawyer knows that even though the mandatory Sentencing Guidelines regime is a thing of the past, the calculation of a defendant’s advisory Guidelines range remains a very meaningful component of sentencing. Although they are not bound by a defendant’s Guidelines range, courts nonetheless are instructed to “begin all sentencing proceedings by correctly calculating the applicable Guidelines range.” United States v. Savage, 542 F.3d 959, 963-64 (2d Cir. 2008). And while the Second Circuit has directed sentencing courts not to presume that a Guidelines sentence is reasonable, see United States v. Cavera, 550 F.3d 180, 189 (2d Cir. 2009), adherence to the Guidelines (and the comfort they provide) runs deep. Accordingly, although defense lawyers are not restricted as they were under the pre-Booker regime in requesting below-Guidelines sentences, many defense lawyers recognize that effective advocacy under the Guidelines is a substantial, if not the most important, part of the battle at sentencing.
One of the biggest challenges for defense lawyers at sentencing is overcoming the often-enormous Guidelines enhancements based on a client’s prior offenses. Two recent sentencing decisions in the Southern District of New York rejected such sentencing enhancements, likely sparing the defendants in those cases substantial additional prison time.
United States v. Johnson, 2009 WL 3415334 (S.D.N.Y. Oct. 23, 2009)
One frequently-litigated enhancement for prior offenses is the upward adjustment for “adult convictions” under the firearm offenses guideline as applied to Youthful Offender (“YO”) adjudications under New York state law. Although New York does not regard YO adjudications as convictions under state law, the Second Circuit has held that they may be considered “convictions” for the purposes of the federal sentencing Guidelines because under New York procedure, a defendant must first plead guilty to, and be convicted of, a criminal offense before a judge, in his or her discretion, rules that the conviction be changed to a YO adjudication. See United States v. Cuello, 357 F. 3d 162 (2d Cir. 2004). Moreover, although YO defendants are, by definition, not “adults,” the Second Circuit has held that a state’s classification of a conviction is not dispositive for the purposes of applying the enhancement under the Guidelines. Under the Second Circuit’s approach, whether a conviction was an “adult” conviction depends on whether the defendant was treated as an adult, an assessment the district court must make after examining “the nature of the proceedings, the sentences received, and the actual time served.” Cuello, 357 F.3d at 168-69.
Because YOs in New York are always adjudicated in an adult court (Supreme Court), and sentences of imprisonment are generally served in adult facilities, courts in the Second Circuit frequently have considered YO adjudications “adult convictions” for the purposes of the Guidelines enhancement. Indeed, in an unpublished opinion, the Second Circuit even upheld an enhancement for a YO adjudication which resulted in a probationary sentence on the grounds that probation is a punishment adult defendants regularly receive, and (like all New York YO probationary sentences), the defendant was supervised by a probation department that supervised adults . See United States v. Cruz, 136 Fed. Appx. 386 (2d Cir. 2006). Because the decisional law makes YO adjudications an almost can’t win proposition, only very infrequently have judges ruled in favor of the defense on this issue. For a notable defense victory, see Valle.
In United States v. Johnson, No. 09 Cr. 139 (RWS), 2009 WL 3415334 (S.D.N.Y. Oct. 23, 2009), however, Judge Sweet refused to apply the “adult conviction” enhancement based on a YO adjudication that the defendant received at the age of fourteen for a crime the defendant committed fourteen years later. In Johnson, the defendant, Jamal Johnson, was sentenced on a guilty plea to one count of possession of a firearm by a felon (18 U.S.C. § 922(g)(1)). The government argued that Mr. Johnson’s prior YO adjudication for second-degree robbery when he was fourteen years old qualified for the “adult conviction” enhancement because he served eight months in an adult prison. See Johnson, 2009 WL 3415334, at *3. Mr. Johnson, however, served the great majority of his four-year prison term for the YO adjudication in a juvenile detention facility. Id. Moreover, Judge Sweet noted that in the many cases where the Second Circuit has deemed a YO adjudication a basis for the “adult conviction” enhancement, the defendants were at least sixteen years old. Mr. Johnson’s “considerable youth at the time is grounds for excluding that adjudication in calculating his base offense level for the purposes of this sentence.” Id. at *4.
United States v. DeJesus-Quezada, No. 09-CR-628, 2009 WL 3519505 (S.D.N.Y. Oct. 28, 2009)
In United States v. DeJesus-Quezada, No. 09-CR-628 (JSR), 2009 WL 3519505 (S.D.N.Y. Oct. 28, 2009), Judge Rakoff addressed whether a conviction under foreign laws qualifies for an “aggravated felony” statutory enhancement and for a “crime of violence” guideline enhancement in sentencing for the crime of illegal reentry. There, the defendant was deported from the United States after it was discovered that he had been convicted of the Dominican analogue of voluntary manslaughter for having fatally shot his wife. DeJesus-Quezada, 2009 WL 3519505, at *1. In addressing the statutory enhancement, Judge Rakoff noted that on its face, voluntary manslaughter is a “crime of violence,” which seemingly would trigger the “aggravated felony” enhancement. Id. Judge Rakoff explained, however, that the Second Circuit requires the district court to take a “categorical approach” to determining whether the enhancement applies, which means that the specific circumstances of the defendant’s conduct are not considered; only the “minimum criminal conduct necessary to sustain a conviction under a given statute is relevant.” Id. (internal citations omitted). Although defense counsel creatively suggested scenarios where passive conduct, like starving a child, without using any force, may violate the Dominican statute, Judge Rakoff held that the “categorical approach” does not require that “all commissions of the crime require use of force, but only that there be a substantial risk of force inherent in the crime’s nature.” Id. at 2. In any event, all of defense counsel’s hypotheses would also constitute violations of New York’s first-degree manslaughter statute, which, categorically, is a “crime of violence” under the illegal reentry statute. Id.
Judge Rakoff reached a different conclusion with respect to the sixteen-level “crime of violence” enhancement under the Guidelines. Id. at 2. Unlike the statutory enhancement, the Guidelines enhancement “only relates to crimes of violence committed in violation of domestic laws.” Indeed, the commentary to the guideline provides that the enhancement applies to “offenses under federal, state, or local law.” U.S.S.G. § 2L1.2(b)(1) cmt. N.1(B)(iii). Judge Rakoff held that if the Sentencing Commission wished to include foreign crimes as a basis for the enhancement, it should have explicitly done so. Without plain language incorporating foreign crimes as a basis for the enhancement, it is reasonable to assume that the Sentencing Commission concluded that foreign convictions should not count toward the enhancement “because such convictions frequently lack the procedural safeguards typical of U.S. convictions.” Id. at *2.
Comment
Both Johnson and Dejesus-Quezada underline the importance of a defense counsel subjecting every aspect of the Guidelines calculation to scrutiny and challenge, and not simply relying solely on the sentencing factors set forth in 18 U.S.C. § 3553(a) to minimize the client’s exposure. There remain battles to be fought, and won, in determining the applicable Guidelines range. Once a favorable Guidelines range is achieved, it is the baseline from which the §3553(a) factors can be used to advocate more credibly for a sentence even farther below the sentence advocated by the government.
A review of 2008 sentencing statistics reveals some fascinating facts: courts in the Eastern and Southern districts of New York impose non-government-sponsored below-Guidelines sentences in about a third of the cases (30% in the Eastern; 33% in the Southern) – well more than twice the equivalent departure rate nationally (13%) – but they incarcerate at a rate equal to their national counterparts. In fact, 87% of all federal offenders sentenced last year in New York’s busiest two districts were sent to prison.
In other words, as I noted on this blog two years ago, New York judges are flexing their post-Booker departure muscle to tinker with the machinery of incarceration-nation, but they are not dismantling it. Not surprisingly then, as Jay Hurst found out for us under FOIA, most of the federal prisons where New York’s sentenced offenders are serving their time, are seriously overcrowded. (e.g. Otisville FCI – Gen Pop is 57% overcapacity; Fort Dix FCI is 24% overcapacity; Lewisburg USP is 50% overcapacity; Schuykill FCI is 50% overcapacity).
But like the old joke about God sending several worldly rescue missions to the drowning man who later claimed God had abandoned him, appellate courts keep sending reminders to district judges that they do not need action from Congress or the Sentencing Commission before they can impose non-custodial sentences in most cases.
United States v. Rigas
The latest lifebelt is United States v. Rigas, 2009 WL 3166066 (2d Cir. October 5, 2009), in which the Court rejected defense arguments that the 17 and 12-year sentences imposed on Aldephia’s former executives for fraud were substantively unreasonable. (His lawyers pointed out that these sentences were only marginally shorter than some convicted terrorists.) Acknowledging that its previous definitions of “substantive unreasonableness” have given credence to an echo chamber, the Court held in Rigas that the concept is the same idea as that captured in the “manifestly unjust” standard or the “shock-the-conscience” standard – standards that “provide a backstop for those few cases that, although procedurally correct, would nonetheless damage the administration of justice because the sentence imposed was shockingly high, shockingly low, or otherwise unsupportable as a matter of law.” In other words, appellate review of the reasonableness of a sentence “necessarily places great trust in sentencing courts” and will “provide relief only in the proverbial ‘rare case.’” Or, I know it when I see it.
Comment
In case after case, the Supreme Court and the Second Circuit could not be clearer in their insistence on the centrality of the district judge’s sentencing discretion. Rigas is yet another shot of courage to judges who are dismayed by the appalling federal incarceration rate in this country. It also underlines the importance of defense counsel ensuring a procedurally sound hook for the judge’s hat at sentencing. And a reminder not to hold out too much hope if your appeal is based on the substantive unreasonableness of the sentence.
Lawyers: Stephen McAllister (Thompson Ramsdell & Qualseth); Lawrence, KS, Neal Katyal (Morgan Legal Consulting) Lawrence G. McMichael, (Dilworth Paxson, LLP) (defendants); AUSAs William Johnson, Katherine Polk Failla; Douglas Berman, Stephanos Bibas, Marc Miller, Michael O’Hear, Mark Osler, Sandra Guerra Thompson (Amicus Curiae)
In other words, as I noted on this blog two years ago, New York judges are flexing their post-Booker departure muscle to tinker with the machinery of incarceration-nation, but they are not dismantling it. Not surprisingly then, as Jay Hurst found out for us under FOIA, most of the federal prisons where New York’s sentenced offenders are serving their time, are seriously overcrowded. (e.g. Otisville FCI – Gen Pop is 57% overcapacity; Fort Dix FCI is 24% overcapacity; Lewisburg USP is 50% overcapacity; Schuykill FCI is 50% overcapacity).
But like the old joke about God sending several worldly rescue missions to the drowning man who later claimed God had abandoned him, appellate courts keep sending reminders to district judges that they do not need action from Congress or the Sentencing Commission before they can impose non-custodial sentences in most cases.
United States v. Rigas
The latest lifebelt is United States v. Rigas, 2009 WL 3166066 (2d Cir. October 5, 2009), in which the Court rejected defense arguments that the 17 and 12-year sentences imposed on Aldephia’s former executives for fraud were substantively unreasonable. (His lawyers pointed out that these sentences were only marginally shorter than some convicted terrorists.) Acknowledging that its previous definitions of “substantive unreasonableness” have given credence to an echo chamber, the Court held in Rigas that the concept is the same idea as that captured in the “manifestly unjust” standard or the “shock-the-conscience” standard – standards that “provide a backstop for those few cases that, although procedurally correct, would nonetheless damage the administration of justice because the sentence imposed was shockingly high, shockingly low, or otherwise unsupportable as a matter of law.” In other words, appellate review of the reasonableness of a sentence “necessarily places great trust in sentencing courts” and will “provide relief only in the proverbial ‘rare case.’” Or, I know it when I see it.
Comment
In case after case, the Supreme Court and the Second Circuit could not be clearer in their insistence on the centrality of the district judge’s sentencing discretion. Rigas is yet another shot of courage to judges who are dismayed by the appalling federal incarceration rate in this country. It also underlines the importance of defense counsel ensuring a procedurally sound hook for the judge’s hat at sentencing. And a reminder not to hold out too much hope if your appeal is based on the substantive unreasonableness of the sentence.
Lawyers: Stephen McAllister (Thompson Ramsdell & Qualseth); Lawrence, KS, Neal Katyal (Morgan Legal Consulting) Lawrence G. McMichael, (Dilworth Paxson, LLP) (defendants); AUSAs William Johnson, Katherine Polk Failla; Douglas Berman, Stephanos Bibas, Marc Miller, Michael O’Hear, Mark Osler, Sandra Guerra Thompson (Amicus Curiae)
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