Monday, October 1, 2012

Aegis Convictions Affirmed Installment #4 - the Conspiracy Conviction (10/1/12)

The Aegis defendants were convicted of conspiracy which, as Judge Easterbrook has lamented, are “inevitable because prosecutors seem to have conspiracy on their word processors as Count I; rare is the case omitting such a charge.”   United States v. Reynolds, 919 F.2d 435, 439 (7th Cir. 1990).  At the end of this blog, I address the role of the conspiracy charge in white collar crime, of which tax crimes are a subset.  First, I want to deal with the Seventh Circuit's affirmance of conspiracy in the Aegis case, Vallone.

Sure enough, as Judge Easterbrook presciently noted, Count one of the indictment alleged conspiracy, specifically that the defendants violated 18 U.S.C. § 371 by conspiring to:
(a) defraud the United States by impeding, impairing, obstructing and defeating the lawful government functions of the IRS of the Department of the Treasury, an agency of the United States, in the ascertainment,  [*94] computation, assessment, and collection of revenues, namely income taxes; and (b) commit offenses against the United States, namely: to willfully aid and assist in, and procure, counsel, and advise the preparation and presentation, to the IRS, of returns and claims on behalf of others which were fraudulent and false as to various matters, in violation of Title 26, United States Code, Section 7206(2).
Tax and white collar crimes afficionados will recognize that, as framed, there is a single conspiracy with two objects.  The first object is what is called an offense conspiracy.  The second object is a defraud conspiracy, in a tax setting commonly referred to as a Klein conspiracy to impair or impeded the lawful functioning of the IRS.  (Note, the word defraud in the conspiracy statute is broader than the normal definition of defraud and reaches mere attempts to impair or impeded.)  A conspiracy can have a single object to violate one or more specific statutes (that is more technically an offense conspiracy) or to defraud (that is more technically a defraud conspiracy).  But the conspiracy can be to do both -- both to violate one or more statutes and to defraud.  The latter is the type involved in Vallone.

The defendants objected that Count One was "duplicitious " -- a term of art in the criminal context -- because it alleged two separate conspiracies -- i.e., (i) an offense conspiracy and (ii) a defraud conspiracy.  The court easily reject the argument.  "Count One does not allege two different crimes. Instead, it alleges a conspiracy with two goals—(1) to defraud the United States by impeding the IRS's efforts to collect income taxes, and (2) to commit tax offenses, namely the preparation of fraudulent tax returns."
The Seventh Circuit noted that there may be some conflict among the circuits:
We acknowledge that there is some division of authority on this point, as summarized by the Third Circuit's decision in United States v. Rigas, 605 F.3d 194, 210-12 (3d Cir. 2010) (en banc). However, we believe the better reasoned view is the one adopted by the Rigas majority, which viewed a charge akin to the one in this case as setting forth one conspiracy with multiple goals rather than two distinct crimes. Id. (Rigas addressed the issue in the context of a double jeopardy claim rather than one of duplicity, but that distinction is immaterial in terms of whether the charge alleges one or two crimes.)  The Rigas majority opinion is consistent with our own reasoning in Hughes.
For my earlier blog on Rigas see En Banc Rehearing in Rigas - Scope of Conspiracy, Totality, and Double Jeopardy (5/14/10), here.

The Seventh Circuit then concluded:
Finally, the principal vice of duplicity, as we noted in Hughes, is that it presents the possibility that jury members, although agreeing that there was a conspiracy, might not be unanimous as to what the object of the conspiracy was. 310 F.3d at 561; see also Cephus, 684 F.3d at 706; Starks, 472 F.3d at 471. But the district court instructed the jury in this case that it must unanimously agree on at least one of the alleged objectives of the conspiracy. R. 925 at 7375. That takes care of the jury unanimity concern, as Hughes and Starks acknowledge. Hughes, 310 F.3d at 561; Starks, 472 F.3d at 471. There are other concerns potentially implicated by duplicity, including notice to the defendants. Cephus, 684 F.3d at 706. But no such concerns are raised here.
Finally, I would just pull out a couple of snippets from Cephus (United States v. Cephus, 684 F.3d 703 (7th Cir. 2012)), here, cited in the immediately preceding quote, which was penned by Judge Posner in his usual pungent fashion.  The case involved:

The defendants were tried together for conspiring to entice underage girls, often runaways, to engage in prostitution, to transport them (along with adult women who also worked for the ring) in interstate commerce to engage in prostitution, to use force and fraud to coerce adult women to engage in prostitution, and to commit related offenses. The defendants were also charged with the underlying offenses. See 18 U.S.C. §§ 1591, 2421, 2423. The jury convicted all three defendants on all counts.

In Cephus, the defendants argued that the charges were irrevocably and illegally duplicitous.  Said Judge Posner:
The defendants argue that the indictment was "duplicitous." In ordinary English the word means "intentionally deceptive." But it is used in the law to characterize an indictment that charges two or more different offenses in a single count. E.g., United States v. Hassebrock, 663 F.3d 906, 916 (7th Cir. 2011); United States v. Pungitore, 910 F.2d 1084, 1135 (3d Cir. 1990). And why is that bad? Because a "jury cannot in a general verdict render its finding on each offense, making it difficult to determine whether a conviction rests on only one of the offenses or both. Adverse affects [sic] on a defendant may include improper notice of the charges against him, prejudice in the shaping of evidentiary rulings, in sentencing, in limiting review on appeal, in exposure to double jeopardy, and of course the danger that a conviction will result from a less than unanimous verdict as to each separate offense." United States v. Marshall, 75 F.3d 1097, 1111 (7th Cir. 1996), quoting United States v. Blandford, 33 F.3d 685, 699 n. 17 (6th Cir. 1994). 
* * * * [N]one of the counts was likely to be thought duplicitous by the jurors. The first alleged the conspiracy and described as acts in furtherance of it the acts charged as substantive violations in the 20 subsequent counts. Each of those counts first "incorporated by reference" the allegations in the first count and then alleged a substantive violation of the federal criminal code. Only if read literally would each count be alleging two offenses: conspiracy and a substantive offense. No reasonable person would read them literally. None of them mentions conspiracy. A normal reader would understand each subsequent count's invocation of the first count to mean that the substantive offense alleged (identified in the count by the section of the federal criminal code that created the offense) in the subsequent count was one of the offenses the defendants had conspired to commit. The jury was instructed that a "verdict of guilty or not guilty of an offense charged in one count should not control your decision as to that defendant in any other count." A reasonable juror would not understand this to mean that having decided that the defendants were guilty of count one he would have to decide they were guilty of the other 20 counts as well because each of those counts mentioned the charge of conspiracy.
Off topic, Judge Posner also had something to say in Cephus about leading questions (a good summary):
A leading question is a question phrased in such a way as to hint at the answer the witness should give. Jas Brar, Note, "Friend or Foe? Responsible Third Parties and Leading Questions," 60 Baylor L. Rev. 261, 264-67 (2008). The question is calculated to "lead" the witness to the answer desired by the lawyer. There is no blanket prohibition of such questions. They are permissible when used against adverse witnesses, usually in cross-examination, or when used with friendly witnesses to move direct examination along rather than to elicit testimony damaging to the opposing party that the witness might not have given in response to a neutral question. Fed. R. Evid. 611(c) 
* * * * 
To one of the witnesses the prosecutor said: "You mentioned that he [Cephus] had a cord. Was he whipping her with the cord?" She answered "yes." Since whipping a person is unusual, the question would be unlikely to be asked unless an affirmative answer was expected. The question may also have been loaded (a loaded question is a question that contains an assertion, the classic example being "When did you stop beating your grandmother?"), as it might have been understood to mean: "Was he whipping her with a cord or something else?" Instead of mentioning whipping the prosecutor should just have asked her what she had seen Cephus doing with the cord. 
Finally, just to return to Judge Easterbrook's lament above that the conspiracy count is ubiquitous.  Here is a cut and paste from my Federal Tax Crimes book explaining the prosecutors' benefits from charging conspiracy (footnotes omitted):

Conspiracy charges are frequent “add-ons” in charging traditional tax crimes to permit the Government to increase its chances of obtaining a conviction.  Even beyond the considerable elasticity of the conspiracy concept from a substantive perspective, the conspiracy charge offers the Government great advantages.  The mere charge of “conspiracy” connotes something sinister, and the law treats a conspiracy as a serious criminal act independent of any offense which might be the object of the conspiracy.  Moreover, herding a gaggle of defendants into a single case with an overarching conspiracy charge may make it difficult for the jury to assess independently the guilt or innocence of each defendant and invite a finding of guilt by association.  Conspiracy cases tend to be more complex as the Government mounts extensive evidence to connect the dots – real or imagined – among the alleged conspirators, particularly in allegedly large conspiracies such as involved in Stein.  Furthermore, the Government gets vicarious Pinkerton liability for offenses committed by others in furtherance of the conspiracy, ability to admit statements that would otherwise be inadmissible hearsay, relaxed standard of proof and relevancy, tolling or refreshing of the statute of limitations by remote participants, and venue in remote judicial forums of the Government’s choosing.  With all of these benefits and more, Judge Learned Hand long ago noted, correctly, that conspiracy is “the darling of the modern prosecutor's nursery.”  
Not surprisingly, therefore, the Government trots out the conspiracy charge whenever it can imagine more than one bad guy behind the tree – it is so easy to do.   The conspiracy count allegations are framed as a cascade of allegations telling a damning story (if true and, although literally true, not misleading), but sometimes producing more heat than light.  This contrasts with counts for the tax offenses which are dry, sparse, boring, and usually not even flowered up for dramatic effect. The benefits for the Government are great, and the downsides are few; after all, the prosecutors’ life and liberty are not at stake.  This means, of course, that the Government’s power to tack on conspiracy charges can be abused, particularly with a weapon as potent and elastic as conspiracy.  The Supreme Court has noted that: 
We agree that indictments under the broad language of the general conspiracy statute must be scrutinized carefully as to each of the charged defendants because of the possibility, inherent in a criminal conspiracy charge, that its wide net may ensnare the innocent as well as the culpable.

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