Wednesday, December 27, 2017

Article on Points in the Indictment of Manafort and Gates Obtained by the Special Counsel (12/27/17)

This article offers some good information that white collar crimes (including tax crimes) lawyers should know.  Betsy Woodruff, Robert Mueller May Indict Paul Manafort Again (Daily Beast 12/26/17), here.  The background is the Paul Manafort indictment obtained by the Special Counsel's office.  Key excerpts and comments:

1.  "[T]here’s a broad expectation that Mueller will file what’s called a superseding indictment of Manafort and Rick Gate."  I offer at the bottom of this blog excerpts from my now discontinued Federal Tax Crimes Book.  I think the discussion is still good.  On the effect of superseding indictments, the article quotes Jonathan Turley, the frequent pundit (at least in his own mind), as saying that there is a tactical reason for superseding indictments in that they "tend to grind defendants a bit more over time."  While superseding indictments may have that effect, I don't think the federal prosecutors stage superseding indictments for that purpose.  In my experience and observation, there is some need for the timing of the original indictment and the state of the investigation does not make the additional matters in the superseding indictments ready for indictment at the time of the original indictment.  The article later describes use of superseding indictments as:
“Superseding indictments are frequently brought in financial investigations due to defendant recalcitrance to cooperate and also because they take so long to be put together,” said Martin Sheil, a retired supervisory special agent for the IRS’ criminal investigations unit.
The article speculates that the superseding indictment may charge tax crimes.  There has been speculation that the Special Counsel's team had not yet obtained the required Tax Division approval to charge tax crimes and that, when and if that approval is obtained, tax crimes counts would be included in a superseding indictment.  The article says that obtaining Tax Division approval "can be time-consuming, and the would-be defendant’s attorneys often can petition Tax Division lawyers against authorizing the charges."  I assume that all readers of this blog are familiar with the process for a putative defendant to invoke a conference with Tax Division Criminal Enforcement Section attorneys to attempt to dissuade CES from obtaining an indictment.

2.  The article quotes an unnamed former Tax Division prosecutor as describing the original indictment as a
“speaking indictment"—in other words, an indictment that contains more information than necessary. 
“It’s a way of dirtying up a defendant without having to actually prove the conduct,” he said. “I think, in fairness to them, they probably rushed it because they didn’t want to wait for the tax division approval on those tax counts. That, I assume, would be working its way through the system.”
I found a good discussion of speaking indictments.  Ronald Levine, Talk Is Cheap: The Misuse of ‘Speaking’ Indictments (Law Journal Newsletters Nov. 1916), here.

I would note that speaking indictments, like briefs, are intended to state the prosecutors' view that its audience will find persuasive.  The audience is often the audience of public opinion.  Levine says:
In other words, by design, the government’s speaking indictments advocate a story — one usually reserved for opening and closing jury arguments, but now intended for the news media, the jury pool and the trial jury. See Crafting Helpful Indictments, United States Attorneys’ USA Bulletin at 9, 18 (July 1998)  (“An indictment … is an advocacy tool … ‘Speaking indictments’ are more effective because they help notify the defense, court and jury of the Government’s theory.”).
Levine notes another benefit:
At the back-end of prosecutions that go to trial, “advocacy” speaking indictments may afford the government a second, and this time ex parte, closing argument to the jury. This occurs if and when the trial court reads from the indictment or sends it back with the jury during its deliberations.
Levine then offers guidance as to responses.

3.  The article speculates that financial crimes may be deployed against Flynn if the Special Counsel finds the cooperation he agreed to give in is plea agreement deficient.

4.  The article discusses generally the white collar crime technique of "following the money" in the context of the Special counsel's investigation.

On Superseding Indictments (from Federal Tax Crimes ed. 2014 (now discontinued):

3. Superseding Indictments.

The Government often files an indictment and thereafter files a superseding indictment.  The superseding indictment will have factual allegations, even additional counts or additional defendants not previously contained in the original indictment.  Statute of limitations issues may be presented in such superseding indictments.  A succinct statement of the law in the context of an offense conspiracy is:
It is black letter law that once an indictment is brought, the statute of limitations is tolled as to the charges contained in that indictment. Further, a superseding indictment that supplants a pending timely indictment relates back to the original pleading and inherits its timeliness as long as the later indictment does not materially broaden or substantially amend the original charges. In determining whether a superseding indictment materially broadens or amends the original charges, we will consider whether the additional pleadings allege violations of a different statute, contain different elements, rely on different evidence, or expose the defendant to a potentially greater sentence. No single factor is determinative; rather, the “touchstone” of our analysis is notice, i.e, whether the original indictment fairly alerted the defendant to the subsequent charges against him and the time period at issue.  
To the extent Indictment S5 alleges a different time frame for the conspiracy (October 1995 through June 1996) than Indictment S2 (October 1995 through August 1996), the law is clear that there is no obstacle to relation back when a superseding pleading narrows, rather than broadens, the original charges. Accordingly, we reject this part of Benussi's challenge without further discussion. 
This court has not yet ruled on whether the addition of new overt acts to a superseding indictment constitutes a substantial alteration in the original charge so as to preclude relation back. A number of our sister circuits have upheld relation back where additional overt acts simply flesh out or provide more detail about the originally charged crime without materially broadening or amending it. We adopt this approach and hold that the same standard of review applies to overt acts as to any other aspect of a superseding pleading, i.e., whether the new acts materially broaden or substantially amend the original pleading. fn 1230
   fn1230 United States v. Salmonese, 352 F.3d 608, 622-3 (2d Cir. 2003) (securities case; case citations and quotations omitted),; see also United States v. Daniels, 387 F.3d 636, 642-643 (7th Cir. 2004), cert. denied, 544 U.S. 911 (2005); and United States v. McMillan, 600 F.3d 434 (5th Cir. 2010) (“A superseding indictment that is filed while the original indictment is pending will relate back to the original indictment, and therefore also be timely, unless it broadens or substantially amends the charges.” (Citing Salmonese).  In United States v. Hickey, 580 F.3d 922, 929 (9th Cir. 2009), the Court said that the “central question” is whether the defendant was fairly on notice of the charges that are added by the superseding indictment.
The Hickey court also addressed a potential trap for the unwary with respect to superseding indictments.  Any charge in the prior indictment that the superseding indictment supposedly supersedes remains live and capable of prosecution even if not contained in the superseding indictment, or, alternatively, the Government can then choose which of the two indictments to pursue.  At least to me, this seems counterintuitive (as the dissenting judge in Hickey notes powerfully), but it seems to be the mainstream holding.  In the only case that I recall handling involving a superseding indictment, the only key difference was to add defendants and related counts so the issue of which indictment would be the operative one was never in issue. 
Thus, if the superseding indictment merely adds more particularity to counts already charged, the superseding indictment will not fail unless the original indictment was so deficient that it did not fairly inform the defendant of the charge. fn 1231
   fn 1231 See, for an application of this rule, United States v. Laspina, 299 F.3d 165, 178-180 (2d Cir. 2002).
Thus, if the superseding indictment merely adds more particularity to counts already charged, the superseding indictment will not fail unless the original indictment was so deficient that it did not fairly inform the defendant of the charge.

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