Crime in the Suites: An Analyis of Current Issues in White Collar Defense
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Aug 23
2017

How Poking the Bear Gets Your Assets Kicked

For many decades, the 4th Circuit Court of Appeals was viewed as a very conservative place, where prosecutors were usually quite comfortable with the status quo, a largely “law and order” kind of venue.  During the Obama presidency, the Court’s makeup changed dramatically, with a batch of younger, more liberal judges joining the “old guard” from Virginia, North Carolina, and South Carolina.  Consequently, this particular appellate court has become less predictable and often starkly divided.  That is, until the government messed with Will T. Chamberlain, the center of a long-running controversy surrounding pretrial restraint of a defendant’s assets.

The facts in Mr. Chamberlain’s case are deceptively simple:  After the defendant was indicted for stealing $200,000 from the government, the U.S. Attorney’s Office sought to prevent him from selling some real property worth about $200,000.  They had properly included a forfeiture provision in their indictment, and the allegation concluded by referring to an intent to pursue “substitute assets” if others could not be used to satisfy an eventual judgment.  Until this case, Fourth Circuit precedent has been clear that the government can seek a restraining order to prevent liquidation of substitute assets, which is the term of art for property which does not fall into the categories of criminal proceeds, facilitating property, or property associated with an ongoing criminal enterprise – in short, untainted property belonging to a criminal defendant.  Other Circuit Courts of Appeal have regularly read Title 21 U.S.C. § 853(p) as only applying to those “tainted” forms of property, and particularly so in the face of defendants seeking to engage in financial transactions that allow them to hire their counsel of choice.  The Fourth Circuit, however, relied upon legislative intent analysis from a 1989 Supreme Court opinion[1] that dealt with tainted assets, but included a general admonition that “federal restraint provisions must be construed liberally to prevent defendants from moving assets beyond the reach of the court in order to evade their forfeiture upon conviction.”  United States v. McKinney (In re Billman), 915 F.2d 916, 919 (4th Cir. 1990).

While the facts and issues were relatively simple, the procedural history in Mr. Chamberlain’s case was flat out ugly for the government.  So ugly that it led to a rare moment of complete unanimity within the Fourth Circuit.  At briefing, the government acknowledged that the subject property was untainted and that following recent Supreme Court precedent, the pretrial restraint of innocently-obtained property was unconstitutional when the property was needed by the defendant to obtain counsel.[2]  Here, however, the government had defense counsel on record saying this particular fund was not needed for legal fees.  After the initial briefing, the defense submitted a government brief from another pending Supreme Court matter[3] in which the government specifically asserted that under Luis, 21 U.S.C. § 853 does not permit pretrial restraint of substitute property.  The government then moved the Fourth Circuit panel to remand the case upon representation that they would no longer seek pretrial restraint of any of Mr. Chamberlain’s assets.  Instead, the now fully-poked bear voted unanimously to set the matter for immediate en banc review.  The government’s supplemental brief for the looming en banc disaster agreed with the defendant’s position and led to last week’s rare-as-an-eclipse en banc published opinion without any oral argument from the parties.  Referring to the reach of 21 U.S.C. § 853, the Fourth Circuit expressly overruled prior Circuit precedent and found that “[t]he plain language of the statute, therefore, provides no authority to restrain substitute assets prior to trial.  United States v. Chamberlain, 2017 WL 3568493, at *5 (4th Cir. 2017).

The opinion has two interesting side streets.  First, for a case that is ultimately predicated on Sixth Amendment issues regarding whether right to counsel means right to counsel of choice, there are precious few words devoted to that underpinning. Maybe the perceived maneuvering of the government, including its starkly inconsistent positions between a Supreme Court filing and Fourth Circuit position, made this a particularly easy rally-cry for the usually divided court.

The other interesting aspect is the case’s effect on the RICO forfeiture provisions, which had previously been cited as support for the Court’s pre-Chamberlain position on freezing substitute assets.  Most likely, the RICO provisions will be deemed a “related restraint provision” and subject to the exact same ruling.  Interestingly, the DOJ attorneys responsible for supervising and advising RICO prosecutions across the country, the Organized Crime and Gang Section,[4] had a long history of preaching caution to Assistant U.S. Attorneys who sought to seize or freeze assets which the defendant needed for obtaining counsel.  While the RICO statute and Fourth Circuit precedent permitted the action, a now-retired forfeiture expert for the Section consistently tried to talk AUSA’s into compromise or release of the funds in those circumstances.  His usual admonition to these prosecutors was a prescient one — “don’t poke the bear.”

[1] United States v. Monsanto, 491 U.S. 600 (1989).

[2] Luis v. United States, 136 S. Ct. 1083 (2016)

[3] Honeycutt v. United States, 137 S. Ct. 1626 (2017)

[4] Full disclosure—I was Chief of that Section from 2010-2017.

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Jul 21
2017

Why Banning Criminals from the Web Doesn’t Work

A few weeks ago, the Supreme Court issued a unanimous ruling in Packingham v. North Carolina, 137 S. Ct. 1730 (U.S. 2017) invalidating a state law outlawing registered sex offenders from accessing websites which could facilitate offender-minor direct communication.  While the majority opinion and concurrence seems grounded in, and specific to, sex offender restrictions, the underlying characterizations and beliefs about websites has far-reaching consequences for other criminal defendants in state or federal courts.

Lester Packingham pled guilty to having sex with a 13-year-old girl when he was 21.  Eight years after his conviction, Lester bragged on Facebook about a happy day in traffic court, using the screen name J.R. Gerrard, and exclaiming:

“Man God is Good!  How about I got so much favor they dismissed the ticket before court even started?  No fine, no court cost, no nothing spent…Praise be to GOD, WOW!  Thanks JESUS!”

Apparently offended by the concept that someone would celebrate dodging a speeding ticket with such religious fervor, a police officer tracked down court records, obtained a search warrant, and determined that “J.R.” was actually Lester Packingham.  Lester was soon convicted of illegally accessing a “commercial social networking Web site,” as broadly defined by the North Carolina legislature.

The Supreme Court reversed the conviction based on the First Amendment’s protection of free speech, with Justice Kennedy criticizing the unnecessarily broad prohibition on accessing social networking sites, which prevented sex offenders from accessing the “vast democratic forums of the Internet,” that serve as principal sources of information on things such as employment opportunities, current events, and unrestricted opinions or ideas that have no connection to criminal plans or potential victimization of children.  Justice Alito’s concurrence agreed with striking down the North Carolina statute, pointing out that the statute’s definition of social networking sites included websites such as Amazon, the Washington Post, and WebMD. However the concurrence emphasized that states could still draft narrower, and constitutionally valid restrictions because of their legitimate interest in thwarting recidivist sex offenders.

The most interesting part of this decision is its future.  Is it really possible for a state legislature to sufficiently narrow its sights on offender/child communication to the point where the law has its intended effect while still passing constitutional muster?  If there is a North American Man Boy Love Association (“NAMBLA”) version of Tinder or Match.com, then there may be a way to characterize the “social site” in a permissible and effective way.  However, like the ones for the Washington Post or Amazon, many websites allow for user IDs for the very point of communicating with other visitors to that site, even if simply editorializing on a Washington Post story.  While the ensuing communications may not be fairly called a “chat room,” they are close enough to a “bulletin board” to bring us right back into the perils of North Carolina’s now-invalidated law.

And what of the defendants facing internet restrictions for reasons other than molestation or child pornography violations?  There are numerous defendants who are bounced off the Internet as a condition of probation or supervised release because the internet was an instrumentality for their crimes.  This probation condition that imposes an Internet ban is often referred to as CIMP- the computer and Internet monitoring program. It is imposed for both crimes that cannot be committed without a computer and also the use of a computer to facilitate the commission of traditional crimes. Some common computer-assisted offenses in the federal system that don’t require a computer per se are securities and credit card fraud, network manipulation, and on-line gambling.

Packingham will make for an interesting argument when one of these defendants is brought before the judge on a violation of probation, and the courts may have to balance constitutional concerns with facts that are much more ominous than Lester’s happy day in traffic court.

Even without the constitutional concerns, a strict CIMP condition has problems with satisfying the three statutory sentencing purposes: adequate deterrence, protection of the public from further crimes, and rehabilitation of the defendant in the most effective manner, 18 U.S.C. § 3553(a)(2)(B)-(D). While a strict ban obviously satisfies the adequate deterrence and public protection purposes, it does not further the purpose of rehabilitation.  It can even frustrate the rehabilitation purpose because an unreasonably restrictive Internet ban often means that defendants are unable to comply and end up in violation of their probation conditions. For example, below are some sample probation conditions that are quite onerous and likely to result in a probation violation:

  • You must not possess and/or use computers (as defined in 18 U.S.C. § 1030(e)(1)) or other electronic communications or data storage devices or media.
  • You must not access the Internet.
  • You must not access the Internet except for reasons approved in advance by the probation officer.

Generally, the imposition of monitoring and access by probation of a defendant’s computer remains problematic in many cases because- like in the sample conditions listed above-  it imposes a greater deprivation of liberty than is reasonable necessary. This was acknowledged by the 10th Circuit, which stated as a matter of general principle that, “conditions imposing complete prohibitions on Internet use or use of Internet-capable devices will typically constitute greater deprivations of liberty than reasonably necessary, in violation of § 3583(d)(2).”  With constantly evolving technology and the Court’s balancing act as evidenced in Packingham, it is likely that additional similar cases will wind their way through the state and federal appellate courts this year. Meanwhile, we would advise counsel and defendants to vigorously push back against any imposition of a restriction on Internet access (whether via a CIMP condition or otherwise) and to impress upon the judge at sentencing that these conditions raise both constitutional concerns and sentencing policy concerns.

Jul 13
2017

The Lowdown on Takedowns

Attorney General Jeff Sessions and a battery of other federal law enforcement officials today announced the “largest health care fraud takedown” in U.S. history, with 412 charged defendants, including 56 doctors, accused of defrauding taxpayers of roughly $1.3 billion.  Importantly, the takedown focused on the over-prescription of opioids, a phenomenon that has led to thousands of addictions and overdoses across the U.S.  Takedowns like this one serve an important purpose in highlighting law enforcement’s focus on fighting a particular type of crime, and they tend to encourage and heighten public awareness as well.

Depending on the types of crimes at play, takedowns can be remarkably challenging actions.  When I worked at the DOJ Organized Crime & Gang Section, I was involved in several of these operations.  Anytime an official in Washington, D.C. tries to coordinate across multiple federal and local law enforcement agencies in various states to establish a single “D-Day” for the takedown, he or she embarks on a painful process that makes cat herding look easy.  A true takedown requires a tremendous amount of resources – agents to make arrests, officers executing search warrants, and prosecutors ready for initial appearances, to name a few.  Getting 10, 20, or 100 cases to track the same timeline is a serious challenge.  More so when the underlying crimes involve violence, guns, or any form of ongoing victimization.  For example, imagine asking a local officer to hold off on arresting gang members who murdered a teenager because you want to “bundle” that case into a takedown narrative.  Letting criminals continue their access to guns, drugs, human trafficking, or ongoing fraud schemes draining grandma’s savings account in the name of “coordination” of a takedown is rightly frowned upon.

Consequently, many takedowns are not very contemporaneous events by law enforcement but more of a generalized update that might span weeks or months of activity.  In fact, a narcotics takedown several years ago included such uncoordinated, barely related targets that the national media succumbed to “takedown fatigue,” failing to cover several takedowns that ensued because of their cynicism regarding the six degrees of separation approach that had underscored the anti-cartel operation.  Interestingly, Attorney General Sessions’ comments refer to “the 8th year of the Health Care Fraud Takedown.”  If the staggering numbers provided to the press are actually an accumulation of eight years’ worth of work, then it may be time to come up with a more apt phrase than “takedown,” which sounds to the untrained ear to be a reference to overnight raids and arrests.  None of this is to suggest that dedicating resources to fighting the opioid epidemic is a bad idea – it is not, and including corrupt doctors and facilities within the cross-hairs is appropriate and overdue.  But know that behind the press conference curtain is a wild mix of activity, including coordination challenges, interagency spats, risk assessments, and closed-door governmental decisions on cases for inclusion, as well as the time-frame to be used in announcing the coordinated numbers that make up a takedown press release.

Mar 02
2017

When A Threat Becomes A Crime

A Miami Beach man was recently accused of threatening President Trump on Twitter. He sent the threat directly to Secret Service, challenging them to stop his Inauguration Day surprise. They did, and Dominic Puopolo, who used the screen name of Lord Jesus Christ, is now in federal custody.

Sending a threat to the President, to an ex-wife, or to a judge is a federal felony, punishable by as much as 20 years in the federal penitentiary. But what constitutes a threat? What if the person sending a letter or email is merely angry and has no intention of carrying out the threat? What if the author is demonstrably suffering from mental problems? And are there times where the pre-trial process greatly exceeds the length and difficulty of the eventual trial of a threats case?

When it comes to threatening communication prosecutions, federal prosecutors are increasingly finding themselves stuck at the intersection of crazy and criminal. It is a juncture where seemingly serious threats might actually be meaningless rambling but where internet rants might actually reflect a true intent to harm or kill the stated victim. And in today’s bitter, divided, and tumultuous political climate, would anyone bet against threatening communications being sent to 1600 Pennsylvania Avenue? If so, please contact me, as I’ll definitely take the other side of that wager.

“The President must die. When I am released I will kill him.” U.S. v. Rendelman, 641 F.3d 36, 40 (4th Cir. 2011).

[If the President refuses to meet with me, he] “will get the worse Christmas present ever, “will suffer for 30 days,” and “will wish for death but death will not come for him.” U.S. v. Dillon, 738 F.3d, 284, 288 (D.C. Cir. 2013).

“Enough elementary schools in a ten-mile radius to initiate the most heinous school shooting ever imagined…And hell hath no fury like a crazy man in a Kindergarten class.” U.S. v. Elonis, 135 S. Ct. 2001, 2006 (2015).

The Easy Case

Certainly, a decent chunk of these prosecutions stem from imprisoned inmates taking the time to send a “I can’t wait to kill you” letter to their prosecutor (usually spelled “persecutor” in these letters) or to the judge who sentenced them to the “outrageous” sentence, often a term of imprisonment that lies perfectly within the sentencing guidelines. Further, these jail bards conveniently tend to include a return address, handwriting suitable for comparison, their name and even their inmate number, to so to avoid confusion. The sole issue in this type of case tends to be simply whether additional consecutive time will make any sort of difference to our “Cape Fear” penitentiary pal.

The Harder Case

Creatively worded threats, however, occasionally generate serious issues as to sufficiency. For example, in U.S. v. Zavrel, 384 F.3d 130 (3rd Cir. 2004), the defendant and her roommate mailed 17 envelopes containing corn starch to juveniles whom she blamed for her son’s juvenile prosecution for, wait for it, terroristic threats. The corn starch resembled anthrax, a deadly chemical that had in fact been mailed to several potential victims in late 2001. The issue decided by the Third Circuit was whether the simple mailing of corn starch established a “communication” for purposes of proving a threatening mailing under 18 U.S.C. Section 876.   It was.

The other common issue, which made its way all the way to the Supreme Court, is whether the sender of the threat has to in fact intend to harm the recipient (subjective standard) or whether the sender must simply intend to communicate threatening words which are reasonably understood by the recipient to constitute a threat (objective standard). In Elonis, (2015) Chief Justice Robert’s opinion adopted the latter standard, resolving a Circuit-split that had existed for some time. Still, the issue of whether the recipient reasonably views the letter or email as a threat remains a regular feature of these cases.

The Hardest Case

The hard case is when the defendant says horrible things that are directed toward some public, possibly political figure, but it’s not clear that he or she constitutes a “true threat” to the recipient.  And, the defendant already is serving a substantial prison sentence. These are the class of cases that the federal criminal justice system is least likely to deal with in a satisfactory way. There tends to be a perfect storm of factors coming together to complicate the superficially simple case: “important” victims, such as judges, the President, or prosecutors; a defendant with a serious, pre-existing mental health problem, and threatening language that is both graphic and somewhat implausible.

For example, one defendant claimed that he literally would crucify his intended victim, before signing off with “I am the Alpha and the Omega,” and some defendants openly discuss the jurisprudence of threatening communications while enlightening readers to the fact that a person “who placed a mortar launcher in the cornfield across from his wife’s residence would have a clear line of sight through the sun room…” Elonis, at 2005. And the man who threatened President Trump via Twitter casually mentioned that he is Jesus.

The typical court process for such a case is that the judge orders a mental health evaluation for competency, which results in the prisoner being shuttled to one of several federal facilities which include competency and criminal responsibility assessments. Not surprisingly, some of these defendants are kept months before they decide not to take the prescribed medications, often based upon the belief that the prison medical personnel are just part of a grand conspiracy that continues to manifest itself through each of the defendant’s cases. Not a lightly undertaken process, forcible medication of a defendant requires significant, and often lengthy, litigation as well. To the extent that the defendants fire their attorneys out of frustration, a fairly common development, the case slows to a snail’s pace.

The Future

And this becomes the most obvious challenge to the criminal justice system in this realm – the defendant, clearly suffering from some mental deficiency, is incarcerated pre-verdict for longer than his applicable sentencing guidelines and in some instances at, or approaching, the statutory maximum for his crime. Yet, he may in fact pose a danger to the recipient of his threat, so dismissing the charge is not a favored result either. In the current climate where the likelihood of these challenging cases is on the rise, the question is whether anyone or any institution will take the lead in balancing ideas of deterrence and punishment with the practical reality that many of these defendants fall outside the mainstream in terms of mental health as well as case resolution. Nobody wants to travel down the wrong road at this intersection, so bet on reaction, not pro-action.

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About Ifrah Law

Crime in the Suites is authored by the Ifrah Law Firm, a Washington DC-based law firm specializing in the defense of government investigations and litigation. Our client base spans many regulated industries, particularly e-business, e-commerce, government contracts, gaming and healthcare.

Ifrah Law focuses on federal criminal defense, government contract defense and procurement, health care, and financial services litigation and fraud defense. Further, the firm's E-Commerce attorneys and internet marketing attorneys are leaders in internet advertising, data privacy, online fraud and abuse law, iGaming law.

The commentary and cases included in this blog are contributed by founding partner Jeff Ifrah, partners Michelle Cohen and George Calhoun, counsels Jeff Hamlin and Drew Barnholtz, and associates Rachel Hirsch, Nicole Kardell, Steven Eichorn, David Yellin, and Jessica Feil. These posts are edited by Jeff Ifrah. We look forward to hearing your thoughts and comments!

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