In an effort to reinstate powers stripped from them by the Court of Appeals in U.S. v. Newman and Chiasson, prosecutors have sought a rehearing of the landmark Second Circuit decision which severely curtailed the scope of insider trading cases.
The case is one which has already seen a dramatic reversal, so it is perhaps no surprise that prosecutors are hoping for the tide to turn in their favor. In trial court, the jury heard evidence that financial analysts received insider information from sources at two companies, Dell and NVIDIA, disclosing the companies’ earnings before those numbers were publicly released. The financial analysts in turn passed that information along to hedge fund traders Todd Newman and Anthony Chiasson, who executed trades in the companies’ stock.
Those transactions earned Newman’s funds approximately $4 million and Chiasson’s funds approximately $68 million. The prosecution charged both defendants with insider trading based on the trades they made with early knowledge of the earnings reports. The trial judge instructed the jury that the defendants could be found guilty if they had knowledge that the information “was originally disclosed by the insider in violation of a duty of confidentiality.” On December 12, 2012, the jury returned guilty verdicts for both defendants on all counts.
Newman and Chiasson appealed their convictions, arguing among other things that the prosecution had failed to present evidence that they had engaged in insider trading and that the trial judge improperly instructed the jury as to the level of knowledge required to sustain a conviction. Newman and Chiasson argued that the government must prove beyond a reasonable doubt not only that the information was originally disclosed by the insider in violation of the duty of confidentiality, but that the insider disclosed the information in exchange for personal benefit.
The Court of Appeals agreed with their arguments, and found that the government had failed to present sufficient evidence that the insider received any personal benefit from sharing the information, or that Newman and Chiasson had knowledge of any such personal benefit an insider received from sharing the tip.
The Second Circuit’s December 10, 2014 opinion clearly lays out the requirements for “tippee liability,” that is, liability for one who received a tip originating from a corporate insider:
(1) The corporate insider was entrusted with a fiduciary duty; (2) the corporate insider breached the fiduciary duty by (a) disclosing confidential information to a tippee (b) in exchange for personal benefit; (3) the tippee knew of the tipper’s breach, that is, he know the information was confidential and divulged for personal benefit; and (4) the tippee still used that information to trade in a security or tip another individual for personal benefit.
Based on this standard, the Court of Appeals concluded that “without establishing that the tippee knows of the personal benefit received by the insider in exchange for the disclosure, the Government cannot meet its burden of showing that the tippee knew of a breach.”
The opinion also issued a stern rebuke of “recent insider trading prosecutions, which are increasingly targeted at remote tippees many levels removed from corporate insiders.” This admonition could be fairly interpreted as being directed toward Manhattan United States Attorney Preet Bharara, who has been aggressively prosecuting Wall Street insider trading cases and has obtained approximated 85 convictions so far. Mr. Bharara issued a statement saying that the decision “interprets the securities law in a way that will limit the ability to prosecute people who trade on leaked inside information.”
The court has yet to rule on the prosecution’s January 23, 2015 request for a rehearing of the case. Until any modification is issued, the Newman ruling remains the controlling law of the Second Circuit and it will affect other cases. Already, at least a dozen criminal defendants in the Southern District of New York have cited to the case in requesting to overturn their conviction or vacate their guilty pleas.
For instance, soon after the Second Circuit issued its ruling in Newman, a federal judge in Manhattan vacated the guilty pleas of four men charged with insider trading related to IBM: Daryl Payton, Thomas Conradt, David Weishaus, and Trent Martin. Instead of bringing the case to trial, the prosecutors instead asked Judge Andrew Carter to dismiss the indictment. However, the prosecutors indicated that if the Newman decision is altered on rehearing or appeal, they might consider bringing the charges again. Appeals of previously convicted defendants will likely remain on hold pending the court’s decision on the requested Newman rehearing. Regardless of the outcome on rehearing, the Newman decision is a strong indication that courts are making a concerted effort to rein in prosecutorial overreach.
It’s not every day that a federal court likens an Assistant U.S. Attorney’s argument to that “of a grade schooler seeking to avoid detention.” But, in a recent opinion, Judge Emmet G. Sullivan of the D.C. District Court did just that. In so doing, he reminded us that—despite the government’s (admitted) routine abuse of its subpoena power—the privacy rights of inmates matter, and a standard practice is not tantamount to a legal basis.
The overall case, one involving an alleged conspiracy to commit visa fraud, had taken some rare procedural twists before landing in Judge Sullivan’s courtroom: for example, the government had effectively incarcerated Ms. Truc Huynh (a former co-defendant) to postpone her deportation to Vietnam and ensure her availability to testify at a deposition against a remaining co-defendant. The primary issue addressed in Judge Sullivan’s recent ruling, however, was whether the U.S. Attorney’s Office violated the law when it issued subpoenas to the Central Treatment Facility (a local jail) for Ms. Huynh’s visitation logs, call logs, and recorded telephone calls—without notifying the Court, Ms. Huynh, or the defendant against whom Ms. Huynh was set to testify.
As a general matter, Rule 17 governs the issuance of subpoenas in criminal cases and allows the government to subpoena a witness to testify at a hearing or trial and may require the concurrent production of documents. It does not, however, allow for pretrial fishing expeditions for potentially relevant information. But that is precisely what the government had done in this case by “inviting” the jail to comply with the subpoena by promptly providing the requested documents directly to the Assistant U.S. Attorney handling the case. Within a matter of days, the jail complied with the production of 200 recordings, which were in Ms. Huynh’s native Vietnamese.
After having initially agreed to the defendants’ request for English language transcripts, the government later argued that compliance would be unduly burdensome because (upon review) the calls appeared to be irrelevant to the case. In so doing, the government showed its hand: the Assistant U.S. Attorneys had, essentially, used the Court’s subpoena power to conduct a fishing expedition into Ms. Huynh’s private phone calls without specific reason to believe that the calls would be admissible at trial.
To make matters worse, a similar subpoena had been issued for the remaining defendant’s jailhouse calls. When defense counsels moved to quash the subpoenas, the Assistant U.S. Attorneys failed to offer any legal authority in support of their actions—arguing instead that this was their general practice and they didn’t know of any authority saying they couldn’t. Fortunately for the defendants, Judge Sullivan—known for holding the government to account (see, e.g., his handling of the Ted Steven’s trial and the IRS scandal)—was not inclined to excuse such behavior. At oral argument, the Judge pushed back, “So that’s your authority: There’s nothing that says we can’t do it?” and the Assistant U.S. Attorney responded: “Right … That’s my authority.” The Court was not persuaded.
In his written opinion, Judge Sullivan held that the government had, indeed, overstepped Rule 17 by “inviting” the subpoena recipient to provide pretrial production of the documents requested. The government’s assertion—that an “invitation” for pretrial discovery did not obligate pretrial discovery—was of no moment, neither were its arguments that defendants lacked standing. Judge Sullivan made clear that “[b]ecause subpoenas are issued with the Court’s seal and backed by the threat of court-posed sanctions, the mere fact that an attorney abuses the subpoena power directly implicates the court itself and creates an embarrassment for the institution.”
In the end, Judge Sullivan boldly vindicated the privacy interests of these individual defendants. It remains to be seen, however, if his opinion will stymie the government’s practice of “inviting” pretrial discovery without court approval. If nothing else, perhaps the Assistant U.S. Attorneys appearing before Judge Sullivan will think twice before doing so.
Many small business government contractors may have to rethink the way they do business. The Small Business Administration issued a proposed rule at the end of December to implement provisions of the National Defense Authorization Act of 2013. The NDAA, which was signed into law in January 2013, requires several significant modifications to the rules for small business concerns, including changes to the Limitations on Subcontracting Rule (13 C.F.R. 125.6).
The proposed rule suggests a number of changes that would impact small businesses qualifying under one or more of the size or socioeconomic categories for set-aside contracts. These changes would (1) require companies to change how they determine compliance under §125.6, (2) require them to certify compliance in the bidding process, and (3) impose steep monetary penalties for delinquencies.
The Limitations on Subcontracting rule limits the extent to which prime contractors may subcontract obligations to outside entities, say to large companies that would not themselves qualify for a government set-aside. Under the current rule, a cost-based metric controls what prime contractors on set-aside contracts can subcontract to other entities: the prime must incur a certain percentage of the contract costs. For instance, for services contracts, a prime contractor must “perform at least 50 percent of the cost of the contract incurred for personnel with its own employees.” Section 125.6 currently provides different cost-base ratios based upon the type of contract (e.g., services, supplies, construction) and the type of set-aside (e.g., 8(a), SDVOB, HUBZone).
The proposed rule, if implemented, would alter how limitations are calculated, using an income-based, as opposed to a cost-based, metric. Under the proposed rule, prime contractors on set-aside contracts would be required to keep in-house a certain percentage of income—including passive income—paid by the government. For services and supply contracts, no more than fifty percent of the amount paid under the contract could be passed on to subcontractors; for construction no more than eighty-five percent; and for specialty trade, no more than seventy-five percent. (note that these are the same ratios used under the current cost-based metric, but now apply to the income-based metric). There no longer would be a distinction in ratios based upon type of set-aside, however.
An important exception to the rule would exist for “similarly situated entities.” Maintaining the philosophy behind the set-aside program, the proposed rule would allow prime contractors to contract out to companies who also qualify under their set-aside category without that relationship counting towards the income limit. In other words, the entities would be treated the same for purposes of the Limitations on Subcontracting rule. For instance, an SDVOB could subcontract out a services contract to another SDVOB and that contract relationship would not count towards the fifty percent income limit. However, the subcontractor must qualify under the same set-aside category as the prime in order to take advantage of this exception.
Another exception is that the rule would not apply to contracts valued under $150,000.
Closing a former loophole, the revised §125.6 would count all levels of subcontractor relationship, not just to the first prime-sub relationship. So companies could not get around the subcontract limitation through subcontracting out under the subcontractor.
In order to satisfy the new Limitations on Subcontracting rule, companies would need to address the rule in their contract bids for set-aside contracts. They would be required to certify that they can satisfy the rule. They would further be required to identify any similarly situated entities they planned to subcontract with and to what extent (percentage) they planned to subcontract with them. Any post-award changes would need to be presented to the contracting officer.
Unlike in the past, the proposed rule would institute steep penalties for non-compliance with the Limitations on Subcontracting rule. Companies found violating the rule would be subject to fines “the greater of either $500,000 or the dollar amount spent in excess of the permitted levels for subcontracting.”
The SBA’s proposed changes may seem staggering to small businesses that have carefully defined their business relationships to remain compliant under the current cost-based regime. But the changes could ultimately help to ensure the viability of the SBA’s set-aside programs. When small and disadvantaged prime contractors subcontract the bulk of their work to large businesses, they call into question the purpose of the set-aside structure. Those interested in presenting comments on this proposed change may submit their comments through regulations.gov by February 27, 2015.
The IRS has unveiled a secure web application, the International Data Exchange Service (IDES), for cross-border data sharing. IDES will allow Foreign Financial Institutions (FFIs) and tax authorities from other countries to transmit financial data on U.S. taxpayers’ accounts, via an encrypted pathway, to the IRS.
The tool is part of the IRS’s effort to track U.S. taxpayer income globally. It is intended to assist FFIs and foreign tax authorities in their compliance with the U.S. Foreign Account Tax Compliance Act (FATCA). The act requires that financial institutions send to the IRS financial information of American account holders or face a hefty 30 percent withholding penalty on all transfers that pass through the U.S. With such steep fines, FFIs and their respective countries across the globe have agreed to comply with FATCA and submit account holder information, regardless of conflicts with their local laws. According to the IRS website, some 112 countries have signed intergovernmental agreements with the U.S., or otherwise reached agreements to comply, and more than 145,000 financial institutions have registered through the FATCA registration system.
IRS Commissioner John Koskinen called the portal “the start of a secure system of automated, standardized information exchanges.” According to the IRS, IDES will allow senders to encrypt data and it will also encrypt the data pathway. IDES reportedly works through most major web browsers.
It may sound efficient and it may even be secure; but IDES also serves as a reminder of the contradiction between FATCA and data privacy laws of many of the FATCA signatory countries. The conflict is part of why FATCA has earned the billing by many as an extra-ordinary extra-territorial law and an example of American overreach.
Countries like the United Kingdom, France, Italy, and Germany have data protection laws that restrict disclosure or transfer of individual’s personal information. To accommodate their own laws, these countries have entered agreements with the U.S. whereby FFIs report to their national tax authorities and the tax authorities then share data with the IRS. (The agreements highlight the questionable value to countries of their data protection laws—at least insofar of U.S. account holders are concerned—as they willingly sidestep their policies to avoid U.S. withholding penalties.)
Meanwhile, as FATCA-compliant countries prepare to push data overseas to the U.S., the E.U. is publishing factsheets directed to its citizens indicating that data protection standards will not be part of agreements to improve trade relations with the U.S. The E.U. is also working on more stringent data protection rules for member countries to strengthen online privacy rights. Are the E.U. member countries speaking out of both sides of their mouths? Or are they trying an impossible juggling act? Between the implementation of FATCA reporting and the growing concern of data privacy among FATCA signatory countries, these countries are bound either for intractable conflict or the continued subrogation of the rights of those citizens also designated U.S. taxpayers (an unfortunate result for dual citizens with minimal U.S. ties).
Regardless of ultimate upshot of this conflict, U.S. taxpayers—including those living abroad—should take heed that FATCA reporting is underway. You should consider how to disclose any unreported global income before your bank does it for you.
Photo Credit: Steve Helber, AP
This afternoon, the long-running saga of Robert McDonnell came to what may be the end (not counting appeals) when the former Virginia Governor was sentenced to serve two years in prison after a jury convicted him of bribery while in office. As with many cases, this one has lessons to teach for those of us who carefully follow sentencing advocacy in federal criminal cases.
One lesson that we have observed before – but is worth repeating – is how powerful it can be to present a sentencing judge with written or spoken testimonials about the otherwise good character of the defendant. In the presentence report, the Probation Department had recommended an advisory sentencing range under the U.S. Sentencing Guidelines of more than ten years, though the judge concluded that the proper advisory range was 6-1/2 to 8 years. But the defense presented some 440 letters in support of the former Governor, as well as live testimony from a number of witnesses. Even the Assistant United States Attorney, who asked for a harsh sentence to be imposed on Mr. McDonnell, conceded that the letters and testimony were moving.
That, of course, is the point: When a criminal defendant – especially one convicted by a jury that rejected his testimony – comes before a judge for sentencing, all that the judge knows about him is that he has committed a crime. Letters and testimony help the defense to present the judge with a three dimensional human being, and facilitate the judge’s fuller consideration of the imposition of a fair and just sentence. In the case of Rajat Gupta, Judge Jed Rakoff was moved by the letters of hundreds of supporters to sentence him to a two-year sentence despite prosecutors’ calls for a sentence of ten years in prison. Here, Judge James Spencer was likewise motivated by evidence of Mr. McDonnell’s character to find that a sentence of eight years “would be unfair, it would be ridiculous, under these facts.”
But there is also a second lesson to be learned from Mr. McDonnell’s sentencing, and it is also one that is often repeated: No one is above the law, and indeed, we may hold our public officials to a higher moral standard in their conduct. Judge Spencer’s comments at sentencing reflected this view: “A price must be paid,” he said. “Unlike Pontius Pilate, I can’t wash my hands of it all. A meaningful sentence must be imposed.” For that reason, among others, Judge Spencer rejected defense lawyers’ calls for a non-incarceration sentence that they had suggested, which could have included thousands of hours of community service.
What were you doing Wednesday, November 5, 2014? If you are a staunch Republican, you might have been toasting the election results from the day before, dreamy-eyed and dancing. If you are a staunch Democrat, you might have been scratching your head profusely, thunderstruck and quiet. People across the country were talking politics and policy in a very public way that day. How would the results impact executive actions and legislative initiatives on immigration and healthcare? It seemed as though the democratic process was chugging along. Meanwhile, at the Thurgood Marshall Federal Judiciary Building in D.C., a little-publicized hearing with potentially far-reaching consequences to your privacy rights was taking place.
The hearing was before the Judicial Conference Advisory Committee on Criminal Rules. The topic for discussion was proposed rule changes to the Federal Rules of Criminal Procedure. The Justice Department had requested the regulatory body modify slightly Rule 41(b), which outlines the terms for obtaining a search warrant. So far so boring, right? And what does any of this have to do with you, a law-abiding citizen? No wonder that the hearing captured little attention. But the slight modification that the DoJ requested is nothing to yawn at. It is a rule change that would give federal investigators sweeping powers to access computers and electronic devices not only of their targets but also of anyone else whose online path crosses investigator initiatives. As civil liberties advocates have pointed out: the rule change could pose a serious threat to Fourth Amendment protections and privacy rights.
Last year, the DoJ requested Rule 41(b) be amended to permit courts to issue search warrants allowing remote access searches of computers and other electronic storage media when the location is concealed. The provision would further allow investigators to seize electronically stored information regardless of whether that information is stored within or outside the court’s jurisdiction. The request, especially when you consider how it would be carried out in practice, is a big leap from current procedure. As it currently stands, Rule 41(b) only allows (with limited exceptions) a court to issue a warrant for people or property within the court’s district. In order to keep a check on investigators and investigations, the rules impose this location limitation, among other limitations. The point is to not give investigators free reign to look in on whomever, wherever and whenever they choose; the point is to limit the impact their investigations could have on people’s right to privacy.
Courts and Congress have made it clear that to comply with the Fourth Amendment, a search warrant that involves surreptitious and invasive tactics must meet a number of rigorous safeguards. These safeguards were outlined in the 1960s when wiretapping and bugging developed as the investigative tools of choice. In 1967, the U.S. Supreme Court struck down New York state’s wiretapping law, holding that because electronic eavesdropping “by its very nature…involves an intrusion on privacy that is broad in scope,” it should be allowed only “under the most precise and discriminate circumstances.” Berger v. New York, 388 U.S. 41 (1967). The following year, Congress followed the Court’s cue and outlined those “precise and discriminate circumstances” in the Wiretap Act (a.k.a. Title III of the Omnibus Crime Control and Safe Streets Act of 1968). For a search warrant to be valid, the issuing judge must work through a number of questions to ensure the warrant will be sufficiently circumscribed to meet the Fourth Amendment’s particularity requirement and that it is based upon probable cause. These constraints help to ensure, among other things, that investigators don’t go on fishing expeditions in pursuit of a crime as well as a criminal or that investigators don’t otherwise misuse their ability to peer into the lives of individuals (say to badger someone with a different political affiliation).
Remote access searches of electronic devices are no less invasive than the forms of electronic eavesdropping envisaged in the Wiretap Act. As the Supreme Court recently pronounced in Riley v. California, the search of a modern electronic device such as a smartphone or computer is more intrusive to privacy than even “the most exhaustive search of a house.” 134 S. Ct. 2473, 2491 (2014). The proposed change to Rule 41 could short circuit the procedural safeguards in place and demand we carry out a fiction that somehow remote access searches are not a form of electronic eavesdropping demanding heightened standards (this would be a particularly challenging fiction if you consider that remote access searching could allow investigators to activate a device’s camera or microphone).
While the DoJ’s requested changes would not necessarily override requirements of the Wiretap Act, the Rule 41 amendments could facilitate statutory and constitutional violations. This concern, among a host of others, was well articulated by the American Civil Liberties Union in its comments on the rule change. (If you have the time, it is a worthwhile exercise to review the comments submitted by the ACLU and the Center for Democracy & Technology, among others that outlined the anticipated negative consequences of the proposed rule change.) Chief among the concerns are the risk that investigators’ techniques to gain remote access—such as hyperlinks on public pages (“watering holes”), where users with common interests tend to gather—could subject thousands of non-suspect individuals’ electronic devices to the government’s malware.
It remains to be seen what the Judicial Conference Advisory Committee will decide, whether they choose to rubberstamp the DoJ’s proposed amendments or whether they will stand down and submit the question to public and legislative debate. Considering the DoJ’s request raises significant constitutional questions, we can only hope the Committee recognizes the value of airing the matter before a more public forum where the system of checks and balances remains in place.
At the very core of judicial independence is the notion that courts and judges decide matters in accordance with the evidence and legal precedent, independent from political power or outside controls. The question of whether a bipartisan and independent judiciary is still alive and well in New Jersey has been called into question recently, as Governor Christie has been accused of packing the state supreme court with only those judges with whom he asserts his influence and will rule his way.
Since the New Jersey state constitution was ratified in 1947, every sitting state supreme court justice has been re-nominated for tenure by the governor after his or her initial seven-year term, regardless of whether the governor agreed with the justice’s rulings. . . until now. The seat of Justice John Wallace has been vacant since May 2010, after Christie failed to grant him tenure following his initial seven-year term. There is fear that Christie has created a climate in which fair and impartial justices fear for their futures if he doesn’t like a ruling. Some criminal defense lawyers believe that a signal is being unfairly sent to judges that they have to align their decisions with those of Governor Christie in order to seek reappointment, which may be detrimental to their clients’ interests, given that Christie has promised to make New Jersey courts more conservative.
The New Jersey State Bar Association created a task force earlier this year to study this issue of New Jersey judicial independence with a goal of producing a report that will contain recommendations for preserving the independence of the New Jersey judiciary. The task force held four hearings over the past several months and also accepted written comments during the same time period, all on the subject of judicial independence in New Jersey. It is anticipated that the Task Force will submit its report in the near future.
In the meantime, as a result of this standoff between Governor Christie, a Republican governor looking to nominate judges who will decide his way, and a democratic state Senate, which must confirm all of the Governor’s picks for the bench, a political stalemate has been created. Individual state senators also have the power to block appointments in their home counties – for any reason and without the need to give a reason, although several experts believe that this unwritten custom of “senatorial courtesy” should be abolished. Many blame this practice in part for holding up reasonable negotiations and preventing entire packages of judges from getting through to fill vacancies in the courts. Over the past six decades, senatorial courtesy has become a tool that can and has been used as a bargaining chip in bitter partisan battles.
This fall, the number of sitting judges in New Jersey hit the lowest point in almost 15 years, with rising case backlogs. Several counties in New Jersey face judicial vacancy rates greater than 20%. As a result, parties can sit for months in legal logjam, due to longer wait times and judges who are stretched beyond their capabilities. This can be particularly difficult for people seeking divorce or custody settlements or business disputes or criminal complaints. In August, Governor Christie and the state Senate reached a deal to fill eight such vacancies, which left a whopping 44 judicial vacancies or roughly 10% of the judicial seats in the state.
To help reduce the number of open seats and to keep the case calendar moving, court officials have called back retired judges, as it is a much easier process to call back retirees than the lengthy and cumbersome process of appointing new judges. As of November 6, there were 77 judges in Superior courts who reside on the bench past the mandatory retirement age of 70, alongside 392 active Superior Court judges. However, this practice of calling back retired judges is being challenged before the Supreme Court of New Jersey in State v. Buckner.
The Appellant Buckner was convicted of armed robbery and assault in 2012 and is currently serving a nine-year sentence. He argues that he is entitled to a new trial because the judge who convicted him retired in 2008 at the age of 70 but was recalled the same year. If he is successful in his challenge to judicial recall of judges past mandatory retirement age, the vacancy problem could become much, much worse. On the flip side, a constitutional amendment has been introduced in the New Jersey legislature to raise the mandatory retirement age from 70 to 75, which would help to alleviate some of the need to recall judges.
Some would say that New Jersey courts are at a crisis point. Partisan bickering and stubbornness must give way to action for the benefit of the millions of New Jerseyans who use the New Jersey court system each year.
Fact: the United States incarcerates its citizens at the highest rate in the developed world. Indeed—save one small chain of islands, whose entire population is just a fraction of our prison population—the United States’ incarceration rate is the highest on the planet. And nearly half of our approximately 1.75 million inmates are serving time for nonviolent and/or drug-related offenses.
That is not OK. It is especially disgraceful in instances where poverty is the only factor standing between incarceration and freedom; nowhere is that connection more salient than in the realm of pretrial detention. It seems, however, there may be a light at the end of the tunnel: bail reform—federal and state.
The federal corrections policies—those that prevailed since the birth of the Nixon era’s War on Drugs—are beginning to be dismantled. Of course, that’s hardly surprising, given Attorney General Holder’s unabashed stance on over-incarceration: “It’s clear – as we come together today – that too many Americans go to too many prisons for far too long, and for no truly good law enforcement reason. It’s clear, at a basic level, that 20th-century criminal justice solutions are not adequate to overcome our 21st-century challenges. And it is well past time to implement common sense changes that will foster safer communities from coast to coast.” But Holder is on his way out, and we cannot know whether his successor(s) will carry his torch forward.
As for the states, this election season a number of them put their approaches to victimless and/or nonviolent crime on the ballot. For example, voters in three states and 56 municipalities (including Washington, D.C.) had an opportunity to weigh in on how/where marijuana use fits into our society. The result: the majority of voters, across party lines, think it’s time for a change. Eight more states have proposed legalization ballot initiatives for 2016.
The decriminalization of low-level drug offences will, undoubtedly, have tangible effects on incarceration rates. But what of those arrested for the plethora of nonviolent—often victimless— crimes that remain on the books? At least one state is taking action…
In New Jersey—a state where just over 5,000 inmates (or 38.5% of the total jail population) are there simply because they are too poor to afford bail—the state legislature set out to address that problem with a companion bill aimed at reducing the prevalence of pre-trial detention. With its first step, the NJ legislature passed a bill requiring that each defendant be evaluated to determine his/her propensity for recidivism during release, witness intimidation, and flight: low-risk, non-violent defendants shall be released on their own recognizance; those posing a higher-risk will be released subject to certain conditions (i.e., curfews, travel restrictions, and/or electronic monitoring); those posing the greatest risk may be denied bail; and all detained defendants will be entitled to a speedy trial protection. For its second, the legislature voted unanimously to poll the people—via ballot measure—on a constitutional amendment to allow judicial discretion in the pretrial detention of those most dangerous defendants. The Question: “Do you approve amending the Constitution to allow a court to order pretrial detention of a person in a criminal case?” The Answer: Yes. Now, with this tandem effort by lawmakers and voters, the bail reform package is in full effect.
For those whose concern for just policy overcomes the allure of partisan politics, state and local ballot initiatives can offer a keen lens into the hearts and minds of the populace. Although we are reluctant to read too much into the tealeaves (that has pitfalls all its own…), it seems—underneath the partisan gridlock—a sea change may be brewing. Whether this burgeoning trend will bear sustainable fruit—that remains to be seen. In the meantime, we will continue to be encouraged by small wins in the fight for an equitable justice system where socioeconomic status is not fate determinative. Stay tuned.
Several news publications have been making much ado about a tactic the FBI used in 2007 to locate an individual suspected in a series of bomb-threats to Washington state high schools. The FBI created a fake news article, falsely representing it as an Associated Press publication, and sent a link to the suspect’s MySpace account. The article headline, which was directed at the suspect, was meant to entice him to go to the link. It worked. The suspect clicked on the link, which enabled the FBI to download malware on his computer and identify his location and Internet Protocol address. The suspect was subsequently arrested, charged and prosecuted in state court.
Newspapers and other media outlets have recently decried the FBI’s use of the AP’s name and brand recognition to further its purposes. The AP’s director of media relations noted in an October 2014 statement: “This ploy violated AP’s name and undermined AP’s credibility.” The Seattle Times complained that such action not only crosses the line, but erases it (the statement was made when the paper believed its publication was involved). The controversy is somewhat understandable: journalists want to ensure their perceived independence; they don’t want to be seen as a tool of the powers that be.
But media concern over the FBI’s use of the AP name may be slightly overstated. The FBI did not publish the fake news article for broad dissemination. It directed the article to one suspect only. Nor is it exactly unprecedented for investigators to hold themselves out as something they are not in order to gain the trust of and nab wrongdoers. Should all cool teens (however they self-describe these days) complain that Narcs are undermining their reputation and street cred? Without these undercover operations, a major tool to FBI investigations would be lost, not to mention fodder for the popular television series that made Johnny Depp famous. FBI and other enforcement agencies regularly use deception to catch criminals. Everyone knows this, including the wrongdoers at whom deceptive practices are targeted.
Some argue that there is a colorable difference between impersonating a fake individual or persona and impersonating the press. If the impersonation were on a large scale and were relatively public, the deception would be problematic. People wouldn’t know what journalism was credible and what journalism wasn’t (not that this isn’t already a subject a some debate…). But narrowly-focused operations directed exclusively at suspects who are the subject of a search warrant is a different scenario, and that’s the scenario that appears to be in play here. Where the FBI employs such tactics well enough into an investigation to support a search warrant, including having probable cause that the suspect is involved in criminal activity, using deception, which is an efficient way to locate the individual, doesn’t seem too alarming.
Of course, it is important to emphasize that legal process is everything. If the FBI were to disseminate fake news articles to gain computer access at the launch of an investigation, before it had a target, before it had probable cause, and before it had its actions approved judicially by a search warrant, such tactics would risk impacting innocent individuals and undermining news sources.
Recently, the Tenth Circuit Court of Appeals considered the dividing line between free speech guarantees and the state’s authority to criminalize threat speech. In United States v. Heineman, the court held that the government must prove specific intent in true-threat cases: to obtain a conviction, prosecutors must prove not just that the defendant intended to communicate a threat, but that he intended for the recipient to feel threatened.
The underlying case was brought against Aaron Heineman, a white supremacist from Utah. Several years ago, he composed a “poem” and e-mailed it to a professor at the University of Utah. The writing addressed the professor by name and opened with the statement, “Come the time of the revolution[,] we will convene to detain you [a]nd slay you . . . .” Fearing for his safety, the professor notified authorities, who traced the e-mail back to Heineman. Heineman was charged with one count of sending an interstate threat in violation of 18 U.S.C. § 875(c).
At trial, Heineman claimed that he suffered from Asperger’s Disorder and, therefore, could not foresee that the professor would feel threatened by the poem. But the trial judge signaled that Heineman could be convicted on proof that he meant to send the communication, regardless of whether he intended a particular result.
After a bench trial, Heineman was convicted based on findings that he knowingly transmitted a communication containing a threat and that his poem was a “true threat” because it would cause a reasonable person to conclude that he intended to cause bodily injury.
On appeal, the Tenth Circuit reversed. Speaking for the court, Circuit Judge Harris Hartz explained that the district court’s “reasonable person” standard was not sufficiently protective of free-speech rights, especially given the Supreme Court’s 2003 decision in Black v. Virginia. In Black, the Court upheld Virginia’s authority to ban cross burnings carried out with the intent to intimidate, but prohibited the state from treating cross burning itself as prima facie evidence of that intent. The Court explained, “‘[T]rue threats’ encompass statements where the speaker means to communicate a serious expression of intent to commit an act of unlawful violence to a particular individual or group of individuals.” The Court continued, “Intimidation . . . is a specific type of ‘true threat’ where a speaker directs a threat to a person or group of persons with the intent of placing the victim in fear of bodily harm or death.”
The Tenth Circuit applied these definitions in Heineman’s case and concluded that, under the First Amendment, he could only be convicted of making a true threat if he intended the professor to feel threatened. In Judge Hartz’s view, when the Black Court said the speaker must “mean[ ] to communicate,” the Court was saying that the speaker must intend to communicate threatening words and to instill fear. Indeed, the plurality in Black criticized the prima facie rule precisely because it failed to distinguish between cross burning for purposes of stoking anger and resentment, on one hand, from cross burning for purposes of threatening or intimidating a victim, on the other. The former was considered protected speech, whereas the latter was proscribable as a “true threat.”
The Tenth Circuit is one of two federal appellate courts to interpret Black as requiring subjective intent. Six others have rejected that approach. One such decision has already made its way to the Supreme Court. By next summer, we should know whether the Tenth Circuit got it right.