Crime in the Suites: An Analyis of Current Issues in White Collar Defense
Archive for the ‘Federal Criminal Procedure’ Category
Aug 11
2017

Supreme Court to Decide Whether Prosecutors Can Use Pleas to Skirt Constitution

While the endless portrayal of jury trials in media might indicate otherwise, trials are actually quite rare in the U.S. criminal justice system. With 97% of federal cases ending in pleas, the Atticus Finch conception of American justice has been largely confined to books.

Ordinarily, when an accused enters into a plea agreement, he waives his right to appeal his conviction—otherwise, future appeals could require as much effort as the trial that prosecutors had hoped to avoid.  But it is not clear what happens when there is a challenge to the constitutionality of the statute of conviction itself. The Supreme Court will be answering this question next fall because Rodney Class chose the wrong parking spot.

On a visit to the U.S. Capitol, Class found uncharacteristically great parking in a gateless lot close to his destination.  Class didn’t see any signs restricting parking, so he drove straight into the lot to claim a space. When Class returned to his car, he found it surrounded by Capitol Police officers who had noticed a knife and holster in his car and suspected him of bringing a firearm onto Capitol grounds, which is prohibited by federal law. Class was surprised to learn that the unmarked lot was on the Capitol grounds, but freely admitted that he had lawfully owned firearms stored in his locked car.

Class was arrested and charged with possessing firearms on Capitol grounds—the same law that prohibits an individual from carrying even a licensed firearm on a Capitol tour or into her Congressman’s office.

Believing that his arrest violated his Second Amendment and Due Process rights, Class filed numerous motions to dismiss the case, arguing that he never had notice that he was on Capitol grounds and that prohibiting him from possessing properly stored weapons in his car was unconstitutional.   The trial court rejected these arguments and set Class’s case for trial.

Class did not appear for his trial but, instead, entered into a last-minute plea acknowledging the facts claimed by the government.  He continued to maintain that he had lawfully possessed firearms in his parked car on what he only later discovered to be Capitol grounds.

Immediately after the plea, Class appealed his conviction to the D.C. Circuit, arguing that the prohibition against firearms on Capitol grounds was unconstitutional both on its face and as applied to him even under the facts admitted in his plea. The D.C. Circuit affirmed his conviction without considering the merits of his argument, holding that Class waived any constitutional challenges the moment he struck a deal with the prosecutor and pled guilty. Although the case was simple and the D.C. Circuit’s opinion extremely short, the Supreme Court has agreed to weigh in and decide whether entering a plea can deprive a defendant in Class’s position to argue that the statute underlying that plea is, itself, unconstitutional.

Class has some support for his position.  The Supreme Court has previously ruled that a defendant who pleads guilty can still appeal his conviction on jurisdictional or double-jeopardy grounds.  But it is not clear whether there is a broader right to contest the constitutionality of a conviction based on a plea.

Even if the Court does rule in Class’s favor, there could still be a potential loophole if prosecutors can still insert an express waiver of rights into future plea agreements. The existence of this loophole will depend on whether the Court rules that a right to challenge a statute of conviction is a non-waivable right. In Menna v. New York (1975), the Supreme Court appeared to hold that the right to raise a double-jeopardy challenge to a plea cannot be waived because it goes to the very heart of whether that defendant could be brought before the court in the first place. We are hopeful that the Court will rely on cases like Menna—and be clearer than it was then—to find that a right to appeal a statute’s constitutionality cannot be waived.

Because nearly all federal criminal cases end in guilty pleas—and because a defendant like Class who does not dispute any facts is unlikely to prevail at trial—this case raises fundamental questions about how the Constitution will protect criminal defendants.  Closing the door to appeals on constitutional grounds could leave overbroad laws—and overzealous prosecutors—almost entirely unchecked. But the fact that the Supreme Court has agreed to hear the case at all is promising, suggesting that it may preserve the ability of defendants to challenge unconstitutional laws even after entering a plea.

 *Alex Grayson is a Summer Intern at Ifrah Law and is a student at Clark University in Massachusetts.

Jul 19
2017

You Can’t Run From Justice

Just last week, a Kentucky lawyer by the name of Eric Conn was sentenced to twelve years in prison by a federal judge for bribery and theft of government money.  Though similar sentences are doled out around the country on a daily basis, this was unique because the defendant was not even in the courtroom.  The notion that a judge could sentence a defendant in absentia is unusual, but it need not give rise to fears that any one of us may be judged guilty in a secret proceeding without warning.

In fact, sentencing Conn without him in the courtroom was so unusual that the judge issued a written opinion explaining why he did so.  The case started out typically enough.  Eric Conn had pleaded guilty to Social Security fraud and bribing a Social Security judge, and was set to be sentenced July 14.  As part of his plea deal, he agreed to testify against one of his co-defendants, and was allowed to remain out on bail subject to GPS monitoring while awaiting sentence.

But after entering his plea, things began to get complicated.  Conn simply disappeared, and his GPS monitor was found in a backpack by the side of a Kentucky highway.  Somebody claiming to be Conn made several calls to his lawyer and the press attempting to negotiate his return while trying to avoid the need to testify against his co-defendant.  But Conn simply could not be found.

When July 14 came and Conn still hadn’t turned up, the judge was in a difficult position.  The Federal Rules of Criminal Procedure require that a defendant be present for his own arraignment, trial, and sentencing.  This requirement comes from over a century of Supreme Court cases finding that it is “contrary to the dictates of humanity” to allow a criminal proceeding to go forward without the person whose conduct is being judged in the courtroom.  Those same procedural Rules also give a defendant a right to speak directly to the judge before he is sentenced, a right called “allocution” that has existed in the common law for hundreds of years.  Federal law also gives a defendant the right to see and respond to the information the court will use when sentencing him.

All of these rights combine to ensure that a defendant is treated fairly as an individual when he comes before the court.  He gets the chance to set the factual record straight.  He gets to look the sentencing judge in the eye, so that a judge cannot simply ignore the fact that a sentence will fall upon a real person.  And he gets to explain himself, apologize, or provide reasons why a harsh sentence is unnecessary or unfair.

Judges take these rights seriously.  When a defendant jumps bail and does not appear for sentencing, courts will usually delay the sentencing until the defendant’s appearance can be secured.  (Usually, an arrest warrant is issued and the defendant will eventually be brought back before the court in custody.)

Here, however, the court found that by fleeing and going into hiding, Conn had waived his important procedural rights and simply proceeded without him.  This is unusual, but it is actually permitted by the Federal Rules of Criminal Procedure: a defendant who enters a plea in a non-capital case and then “is voluntarily absent during sentencing” waives his right to appear before the court and to address the court at sentencing.  The judge also relied on cases from other courts that found that fleeing deprived Conn of his right to review the information the court would use at sentencing.

On the one hand, it makes logical sense that a defendant who jumps bail after being ordered to appear has given up his right to be present for further proceedings.  And federal procedural rules—as well as several courts—recognize that logic.

On the other, there is always some concern when a court proceeds without the parties present.  That is particularly the case where, as here, the court is dealing with a defendant who has fled his supervision.  That is because the Supreme Court has held that a defendant who is a fugitive cannot appeal his sentence under a doctrine called the “fugitive disentitlement doctrine.”  So even if Conn’s sentence was improper or illegal, there is no way for him to get relief for that error.

With all that in mind, Eric Conn’s case should not raise fears in the minds of most people that they could be sentenced to over a decade of prison without even being in the room.  Rather, it demonstrates the ways in which a defendant—even one with legal training—can do things that end up forfeiting crucial rights important procedural protections.

May 15
2017

DOJ’s New Charging and Sentencing Policy Will Disproportionately Impact Vulnerable Populations

On May 10, 2017, Attorney General Jeff Sessions issued a memorandum that expressly rescinds previous Department of Justice (DOJ) policy and directs federal prosecutors to “charge and pursue the most serious, readily provable offense” against federal defendants.

The likely result of this harsher approach to the enforcement of federal drug laws is a return to mass incarceration, with disparate impacts on communities of color and victims of the opioid epidemic.

In addition to this express directive to charge the most serious offense, the policy also requires prosecutors to disclose to sentencing judges “all facts that impact the sentencing guidelines or mandatory minimum sentences” in a given case. For drug-related crimes, such facts include drug quantity and prior convictions, both of which can trigger minimum sentences that judges must impose.

Sessions’ memorandum does allow for exceptions in limited cases. If prosecutors conclude that strict application of the charging policy is not warranted in a particular case, the prosecutor should consider whether an exception is justified. Any decision to depart from the policy must be approved at the highest levels of the Justice Department and documented in the defendant’s case file.

With respect to sentencing, prosecutors are expected to recommend a guidelines sentence in most cases. Prosecutors may recommend a guidelines departure or variance in certain cases, but the recommendation must be approved and documented in the case file.

During the last election cycle, then-Senator Jeff Sessions campaigned on behalf of the self-described “law and order” candidate, Donald Trump. Therefore, it should come as no surprise that, as Attorney General, Sessions implemented this harsher policy for the charging and sentencing of federal crimes, or that he repudiated the previous administration’s approach.

In expressly rescinding “any inconsistent previous policy” of the DOJ related to charging and sentencing, Sessions’ memo targets the policies of his predecessor, former-Attorney General Eric Holder, concerning mandatory minimum sentences and recidivist enhancements against non-violent drug offenders.

In contrast to Sessions’ approach, the Justice Department under the Obama Administration pursued a “Smart on Crime” initiative that sought to promote fairer enforcement of federal laws and, importantly, alleviate disparate impacts of the criminal justice system—particularly on vulnerable populations.

Federal prosecutors were directed to make charging decisions in drug cases based on case-specific factors, such as the defendant’s conduct and criminal history, circumstances related to the offense, the needs of the community, and federal resources and priorities. They were also directed to avoid charging decisions that would trigger mandatory minimum sentences in the cases of low-level, nonviolent drug offenders. Prosecutors had discretion at sentencing and discouraged recidivist enhancements for low-level, non-violent drug offenders.

The Obama Administration’s clemency initiative applied these same standards, and resulted in the granting of clemency to hundreds of federal inmates serving lengthy sentences for low-level drug crimes.

Holder wanted the Department to be smart on crime, Sessions wants it to be tough. Under the current new policy, federal prosecutors must take a harsher approach to enforcement of federal drug laws. The likely result will be a return to mass incarceration with high costs to the tax payer and disproportionate impacts on communities of color and victims of the opioid epidemic—populations that candidate Trump promised to help.

The Justice Department’s new charging and sentencing policy shifts leverage back to prosecutors. Defendants in drug cases are more likely to negotiate a plea deal than contest federal charges and risk being sentenced to a mandatory minimum. Defendants not subject to a mandatory minimum may be just as likely to contest their charges. If they do, their best hope for leniency will be the sentencing courts; prosecutors now have limited discretion to cut any slack.

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.

Jan 17
2017

Alexa: Play Confession

It sits in your house, passively recording everything you say.  It knows what you like.  It knows what you listen to.  It knows what you buy.  It knows who’s in the room with you.  And now, it might tell the police all about it.

“It” is the Amazon Echo, a revolution in the “internet of things.”  The Echo is a smart speaker that connects directly to Amazon’s cloud-based personal assistant service, Alexa.  It can play music; give you the traffic, weather, and news; handle your shopping; put things on your calendar; play games; and even respond appropriately to a wide array of cultural references, all in response to voice commands.  If you have the right add-ons, Alexa can even control your entire home, dimming your lights, adjusting the thermostat, and locking the doors.

It does this by passively listening for a given activation phrase—the default is “Alexa.”  Generally, Alexa does not record anything else (although it may store up to sixty seconds at a time in a buffer).  Once it hears its name, Alexa will begin recording and will send what follows to Amazon for processing—both to respond to a given request, and to store to improve responsiveness later.  On one hand, this means that Amazon is not actually recording everything you say, but only those specific commands directed to Alexa.  On the other hand, it means that Alexa is always listening.

This became relevant in a recent murder case in Bentonville Arkansas, in which police obtained a warrant for recordings from Amazon of commands given to the suspect’s Echo.  It is far from clear what police hope to gain from these recordings; they have a large amount of traditional evidence and, unless the murderer specifically asked Alexa for help, the recordings are unlikely to be incriminating.  Nevertheless, an attempt by police to seek recordings from a device that is virtually always listening to us in our homes is extremely disturbing.

These efforts are made even more concerning by recent court rulings on cell phone location data.  According to two federal appellate courts, because cell phones send this information to a third party (that is, to cell phone and app providers), it is not considered sufficiently private for protection from searches and seizures.  That means that police can access this data—which often allows an individual to be physically tracked from moment-to-moment—without even requesting a warrant.

If this principle is upheld by the Supreme Court (which, so far, has refused to consider the issue), it would mean that police could access daily recordings from the privacy of your own home on little more than a hunch and an informal request.  Though many may say they have nothing to hide, I doubt most of us would be comfortable knowing a police officer was looking over our shoulder twenty-four hours a day.

There is one barrier to that terrifying outcome, which is that Amazon has refused to comply with the Bentonville warrant and officers there have decided not to press the issue.  Like Apple, Amazon has taken it upon itself to protect its customers’ privacy.  But a private company cannot be expected to be the defender of its customers’ civil rights forever.

But until the law catches up to the state of technology, every one of our devices is capable of being turned into an informant against us.  And though Alexa can do a lot, it has yet to learn how to invoke its Fifth Amendment right to remain silent. Until it does, you might want to think twice before inviting Alexa–and potentially the police–into your home.

Jun 08
2016

This Man Is Dodging Wall St.

Rather than confront accusations of baseless zeal and prosecutorial overreach, New York federal prosecutor Preet Bharara would rather spend his energy dodging accountability.

In 2010, Bharara launched a crusade against Wall Street, prosecuting several hedge funds he suspected of insider trading. Highly publicized raids followed. In the wake of the financial meltdown, Bharara was hailed as a hero. A Time cover story proclaimed, “This Man Is Busting Wall St.”

But many of those prosecutions went nowhere. A federal appellate court rejected the legal theory that the prosecutions were built on, and many cases were simply dropped. The SEC even agreed to return some of the money it had seized from several hedge funds.

This was cold comfort to people like David Ganek, the manager of Level Global—one of several hedge funds shut down by Bharara’s inquisition. Even while the case was pending, Bharara all but acknowledged that he meant to shutter Level Global, without regard for the presumption of innocence.

Sadly, even when defendants are harmed by prosecutorial overreach, broad immunity doctrines make it nearly impossible for the wrongly prosecuted to get justice.

But Ganek’s case involved more than just excessive zeal: the warrant used to raid Level Global depended on a false statement. A former employee of Level Global had told federal agents that Ganek did not know he was using information from corporate insiders, but the warrant application falsely said that Ganek did know. That gave Ganek a rare opportunity: federal agents can be shielded for overreaching, but there is no protection for lying.

Ganek sued officials from both the U.S. Attorney’s Office and the FBI (Ganek v. Leibowitz), claiming that the use of the false statement to prosecute him had violated his constitutional right against unreasonable searches and his due process rights. In March, a federal judge ruled that Ganek’s claim could go forward, rejecting claims of governmental immunity.

In most civil cases, overcoming this initial step is a big deal. It would allow Ganek to conduct discovery—that is, to investigate the facts behind his case by methods that can include obtaining documents from prosecutors and the FBI and depositions of federal officials under oath. This process can be extremely onerous—the cost of document production and the risks of laying bare a defendant’s inner workings to a hostile adversary have forced many defendants into settling dubious lawsuits. In addition to uncovering misrepresentations tied to his own case, Ganek also could investigate the conduct of federal officials more generally and, perhaps, even the supervisory practices of prosecutors and the FBI.

In a typical case, there would be no way to avoid this except by an expensive settlement—likely including a premium for avoiding discovery. But this is no typical case, and Preet Bharara is no typical litigant. Although most of us in Bharara’s position would have to wait until the end of a federal case before filing a single, final appeal, Bharara has relied on a narrow legal doctrine that allows him to appeal the court’s decision immediately, based on his claims of immunity. As a result, the court has delayed discovery and other proceedings indefinitely. Instead of accepting the need for transparency and letting Ganek be made whole for his wrongful prosecution, Bharara’s office will get a second bite at the apple by rearguing the issue of immunity in front of the U.S. Court of Appeals for the Second Circuit.

It is hard to imagine that Bharara will prevail on appeal—immunity does not cover outright lies by federal agents. Yet by belaboring a weak immunity argument, Bharara can postpone having to answer for the actions of his office for months, if not longer, while creating additional costs and burdens for Ganek.

This case goes beyond Ganek’s personal quest for justice. Civil suits like this are important for holding public officials accountable and can provide a window into how they operate. Bharara’s resistance sends a discomforting message: however merciless he may be towards his suspects, he should bear no consequences for his actions.

We’ll see if Ganek can prove him wrong.

Apr 28
2016

Feds Open The Gates and Seize the Domain Names

 

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Does the federal government have the right to seize a domain name without notice? With growing frequency, the feds have seized the domain names of thousands of websites for alleged criminal wrongdoing. The latest example is the seizure earlier this week of 67 website domain names for the alleged illegal sale and distribution of counterfeit and prescription drugs.

There still is little information publicly available on the recent seizure. The Justice Department issued a short new release with a statement from U.S. Attorney Bill Nettles, in which he noted,

It’s important for consumers to understand the significant risks involved in purchasing pharmaceutical drugs from these websites.  The generic versions of these prescription drugs are not approved by the Food and Drug Administration and cannot be distributed in the United States legally.  To be safe and effective, prescription drugs must be taken under the care and supervision of appropriate health care professionals; not purchased off the internet from unknown and unregulated foreign sources.

Whether or not the sites facilitated the alleged criminal behavior remains to be decided by a judicial proceeding (if the case ever gets to that point). Federal agents can obtain a seizure order based merely upon probable cause set forth in an affidavit. That’s a relatively low bar considering the consequences of domain name seizures.

The only recourse for the sites at this point is to file a petition with a federal court to contest the forfeiture. Contesting a forfeiture is an uphill—and oftentimes protracted—battle. In the meantime the businesses operating through those domain names are effectively shut down, if the seized websites were their main channel of business. Once the feds carry out a domain name seizure, the “offending” sites will show a seizure banner notifying any visitors that the domain name has been seized by federal authorities for violations of federal laws. No business can be done on the site and the chances of visitors returning are slim.

So how is it okay for a domain name to be seized based on the allegation of a crime, before proper notice and hearing? The feds are taking advantage of a process known as an in rem proceeding, whereby they can file suit against the offending property itself for its alleged role in facilitating criminal conduct. Typically in rem proceedings are filed against tangible assets like a car involved in a drug deal or a bank account used to funnel illegal funds. But in recent years, in rem proceedings have been used by both state and federal agencies against domain names in order to crack down on alleged criminal behavior carried out through the websites. Examples include (1) the Justice Department’s “In Our Sites” operation in which it seized the domain names of thousands of sites accused of violating U.S. copyright laws and (2) the state of Kentucky’s attempt to seize 141 domain names of online poker sites.

Despite the increasing use of pretrial domain name seizures, the legality is still hotly debated by civil liberties groups, free market advocates, and international organizations. These groups raise constitutional concerns, such as due process and restraint on free speech, as well as jurisdictional concerns, such as federal or state authority to reach domain names owned by foreign individuals or entities. The biggest issue is that an in rem proceeding is inappropriate against domain names because a domain name is not property – it is a contractual right that, as such, should not be subject to seizure. We will discuss these concerns in more detail in a coming post once we learn more about the Justice Department’s recent actions against the 67 pharmaceutical domain names.

Apr 15
2016

Good News: The Feds Can’t Freeze Your Assets to Stop You from Hiring a Lawyer

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Republished with permission from FEE.org, originally published April 12, 2016

There are limits to what the government can take from you. The Supreme Court recently ruled that the Constitution forbids the government from freezing a defendant’s “untainted” assets in advance of prosecution. The ruling is a significant victory for those caught in the government’s crosshairs. It is also a significant victory for a traditional concept of justice, which prefers to err on the side of the accused over government agents.

In its decision in Luis v. U.S., the high court agreed with a criminal defendant who argued that her Sixth Amendment right to counsel was violated when the government froze assets unrelated to allegedly criminal behavior. Without access to those funds, the defendant would be unable to retain the attorney of her choice.

The Court considered the government’s interest in preserving funds to pay restitution and criminal penalties, but concluded that a defendant’s right to counsel is “fundamental,” outweighing any interest the government mightultimately have: “[The government’s] interests are important, but — compared to the right to counsel — they seem to lie somewhat further from the heart of a fair, effective criminal justice system.”

In a 5-3 ruling, the Court based its decision on this balancing test, as well as on traditional understandings of common law, which distinguish between assets directly related to alleged criminal behavior and assets considered “innocent” or untainted. The Court found no legal precedent to authorize “unfettered, pretrial forfeiture of the defendant’s own ‘innocent’ property.” Moreover, the Court highlighted concerns that the government’s position has no obvious stopping point and could erode defendants’ right to counsel considerably.

Encroaching on the Sixth Amendment is but one of the several concerns posed by the government’s growing love of forfeiture — it has become too handy of a tool in prosecutors’ pockets — but it is perhaps the gravest concern, as it threatens an individual’s ability to effectively defend him or herself. It puts defendants at a significant disadvantage: they want to obtain the best representation they can afford in order to defend themselves, but they may not be able to afford any if the government freezes all their assets in the hope of confiscating them after a conviction. They may be left begging friends and family to help fund their defense or relying upon overburdened public defenders to represent them. The government’s tactic is the courtroom equivalent of inviting an opponent to a boxing match and then tying one hand behind his back.

The criminal defense bar has decried government’s overuse of asset forfeiture for years. While the government has argued that pre-trial asset seizure is justified in order to preserve its ability to recover funds and penalties, the process has been used to try to deter behavior by making an example of people. Moreover, pre-trial asset seizure looks a lot like presumed guilt, as opposed to presumed innocence. The occasional constitutionally minded congressional representative has tried to curb forfeiture overuse through legislative initiatives, but these bills keep getting left to die in committees and subcommittees. It is nice to see some effective limits placed on the practice by the Court.

Justice Thomas, in a concurring opinion, took issue with Justice Breyer’s opinion “balancing” the state’s interest against individuals’ constitutional rights. He argued the Sixth Amendment prevents the government from seizing untainted assets, period; there is no need to consider a balancing approach. But at least the plurality of the Court recognized that, when balancing the government’s interests in the outcome of a case against the individual’s right to adequately defend him or herself, you should err on the side of the individual.

If that means the state sometimes loses out on full satisfaction of a monetary judgment, that is preferable to defendants being prevented from mounting an effective defense. More wrongful convictions would result from that policy, and the seizure of a few more dollars from the truly guilty would be no consolation. If there is any question whether historically we have favored individual rights over the state’s interests in criminal prosecutions, look only to the Bill of Rights. Justice demands that if anyone’s hand is to be tied in the courtroom, it should be the hand of the government.

Mar 07
2016

Even Bad Guys Have Rights

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This article first appeared February 29, 2016, on FEE.org – you can access this version here.

Remember Martin Shkreli, the “pharma bro” notorious for raising the price of his company’s life-saving drug by some 5,000 percent? Did you know he was recently arrested for securities fraud (completely unrelated to the drug hike)? It didn’t take long for the Justice Department to go after the universally unpopular rapscallion.

Big government gets a bad rap for being inefficient, but it can cut to the chase rather swiftly when it wants to. In order to stop, or at least dramatically curb, behavior that goes against law or policy — or perhaps just opinion — government enforcement agents know how to employ a show of force and to make an example of someone they deem a wrongdoer. The punishment is public and can be severe.

Setting an Example

A recent show of force can be seen in federal actions against the dietary supplement industry. The industry has exploded in recent years, thanks in large part to the public’s growing love for health and homeopathy. The popularity has, predictably, attracted moneymakers of both the scrupulous and unscrupulous kind.

The government wants to rein in the industry, so to set an example it has come down hard on one company. USPlabs was one of more than 100 makers and marketers of dietary supplements against whom the Justice Department announced it was pursuing civil and criminal cases. But the company had the unfortunate luck to become the government’s example of what it can do to wrongdoers. Not only did the DOJ charge the company; it also indicted several of its executives and froze their assets — from investment accounts to homes to automobiles.

Do the Ends Justify the Meanness?

The government’s heavy hand on USPlabs is the kind of crackdown you expect against organized crime or large drug rings. What were the criminal defendants at USPlabs alleged to have done? Not exactly Sopranos-level stuff: importing ingredients with false certificates of analysis and false labeling, misrepresenting the source and nature of product ingredients, selling products without determining safety, and continuing to sell products after they told agents they would stop.

If the allegations are true, the defendants’ actions were wrong. But public arrests and asset seizure are extreme. How often do people accused of false labeling get perp walked? The DOJ’s tactics look like shock-and-awe theater for the benefit of others.

If there is any doubt whether the government wanted to use its hard-line approach against USPlabs as an example for other companies, look no further than this statement by FDA Deputy Commissioner Howard Sklamberg: “The criminal charges against USPlabs should serve as notice to industry that if products are a threat to public health, the FDA will exercise its full authority under the law to bring justice.”

In other words, makers and marketers of dietary supplements: beware!

So What?

You may think the Justice Department performed a public service by coming down so hard on Shkreli and USPlabs. Why should we care if the government crushes some scalawags and discourages others in the process?

What if the government’s show of force comes at the cost of a defendant’s due process rights? Shkreli has said that the feds targeted him because of the drug price hike, looking for anything to stop him. Now he’s been fired and his company has filed for bankruptcy. That’s a pretty high price to pay for being obnoxious.

While deterrence may be an acceptable basis for punishment, it doesn’t justify punishment that exceeds the crime. Arresting executives and seizing their personal bank accounts, homes, and cars in an instance like this is excessive. More commonly in cases like USPlabs, prosecutors will settle with the company, levy a fine against it, require it to institute controls to avoid further wrongdoing, and perhaps require it to be monitored for a while to ensure controls are being observed.

Going after the individual executives as if they were Mafia kingpins goes beyond the pale. Freezing or seizing assets is something that prosecutors more commonly do when those assets are being used to carry out criminal behavior, or when there is a great risk those assets will be disposed of before judicial proceedings. Chances are slim that the executives in the USPlabs matter were planning on liquidating their family homes or cars.

Yet Another Slippery Slope

For those who think the government is on the right side in its show of force, ask yourselves whether the government isn’t pursuing its initiatives (even reasonable initiatives like reining in fraud) a bit brutishly. Making an example of an alleged wrongdoer even before the wrongdoer’s day in court harkens back to techniques used by conquerors in days of old who put heads on pikes to show the subjugated just who was in charge.

And what if the government decides to crack down on behavior not so clearly reprehensible? Say the government decides to put speeding in check by jailing a few folks going modestly over the limit. How many of us would feel safer?

Even when we dislike the targets of prosecutorial zeal, supporting justice is in our self-interest. When the government sets aside due process and proportionality to set an example of other would-be wrongdoers, they are sacrificing justice for the sake of regulatory expediency.

 

Feb 26
2016

Police Make iPhone Public Enemy No. 1

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FBI Director James Comey took a rare break from the posturing typical of investigators and prosecutors in the current showdown between Apple and the FBI.  While prosecutors argue that Apple’s privacy concerns are a smokescreen to avoid “assist[ing] the effort to fully investigate a deadly terrorist attack,” Comey posted a statement over the weekend in which he took the position that the tension between security and privacy “should not be resolved by corporations that sell stuff for a living.  It also should not be resolved by the FBI, which investigates for a living.  It should be resolved by the American people deciding how we want to govern ourselves in a world we have never seen before.”

Comey’s statement highlights a crucial problem with the development of privacy law: it often is developed in the context of important criminal cases.  This comes at a real cost.  We all know that Syed Farook committed a horrific crime, and any rights he once had against government searches are now forfeit.  But though Apple may have chosen to serve as a limited proxy for its consumers in the San Bernardino case, often the interests of private citizens are wholly absent from the courtroom (or, often, judge’s chambers) when issues of fundamental privacy are debated.

This leads to a serious imbalance: Apple is talking about the diffuse privacy rights of its consumers and the risks of potential incursions by more restrictive, less democratic governments such as China.  On the other hand, Manhattan District Attorney Cyrus Vance can point to 175 Apple devices that he cannot physically access even though those devices may contain evidence helpful to the government.

New York Police Commissioner Bill Bratton and one of his deputies put an even finer point on it in an Op-Ed in The New York Times, citing a specific case of a murder victim in Louisiana (more than one thousand miles outside of Mr. Bratton’s jurisdiction) whose murder is unsolved because officers cannot unlock her iPhone, which is believed to contain her killer’s identity. “How is not solving a murder, or not finding the message that might stop the next terrorist attack, protecting anyone?” asks Bratton.

But in assuming that private citizens have no greater fear than whether the police can investigate and prevent crimes, Bratton begs the question.  In reality, citizens may see law enforcement as a threat of itself.  Learning that the NSA was engaging in comprehensive warrantless surveillance likely has given many law-abiding Americans a greater incentive to protect their data from being accessed by the government.  Indeed, in light of the NYPD’s record over the last few years—including a finding by a federal judge that they were systematically violating the rights of black New Yorkers and a lawsuit over religion-based spying on Muslims—it is not hard to see why citizens might want protection against Bratton’s police force.

But even if the police were the angels they purport to be, opening a door for a white hat can easily allow access to a black one.  Less than a year ago, hackers used a “brute force” approach to exploit a flaw in iCloud’s security, and dozens of celebrities had their private photos shared with the world.  These sex crimes are all but forgotten in the context of the San Bernardino shootings, even though the security weakness the FBI wants installed in Farook’s iPhone is markedly similar to that exploited with respect to iCloud.

Nor do those who wish for privacy need to invoke hackers or criminals.  A private, intimate moment with a spouse or loved one; a half-finished poem, story, or work of art; or even a professional relationship with a doctor or mental health professional cannot exist unless they can remain private.  Once these interactions took place in spoken, unrecorded conversations or on easily discarded paper; now many of our daily activities are carried out on our mobile devices.  Even if one has nothing to hide, many citizens might balk at the prospect of having to preserve their private conversations in a format readily accessible by the police.

But if Mr. Comey has shown unusual insight, Mr. Bratton’s one-sided, myopic question illustrates the importance of Apple’s position and the inability of law enforcement officials to be objective about the interests at stake.  Police and prosecutors are not always your friends or your defenders.  Their goals are—and always will be—investigating and solving crimes and convicting suspected criminals.  The less an officer knows, the harder it will be to investigate a case.  As a result, privacy rights—even when asserted by innocent, law-abiding citizens—make their job more difficult, and many officers see those rights as simply standing in their way.

This is hardly news.  Nearly sixty years ago the Supreme Court observed that officers, “engaged in the often competitive enterprise of ferreting out crime,” are simply not capable of being neutral in criminal investigations.  For precisely that reason, the Fourth Amendment requires them to seek approval from a “neutral and detached magistrate” before a search warrant may issue.

That is why Mr. Comey’s acknowledgement that the FBI is not a disinterested party is so refreshing.  Pro-law-enforcement voices have been clamoring to require Apple to compromise the security it built into the iPhone, invoking their role as public servants to buttress their credibility.  But when it comes to privacy, the police do not—and cannot—represent the public interest.  As Comey acknowledged, they are “investigators,” and privacy rights will always stand as an obstacle to investigation.

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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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