Wednesday, December 16, 2009

Prosecutorial Misconduct Leads to Yet Other Dismissals

I picked this item up from the White Collar Crime Prof Blog here. The item is not not a federal tax crimes item but I include it because federal tax crimes is a subset of white collar crime generally and the genre of conduct in this item is seen in tax cases (most notably the United States v. Stein case which I have discussed previously here).

In this option backdating case, a district judge has dismissed the indictments for what appears to be the same genre of abuse, although perhaps worse, than encountered in Stein. I will let the court and the facts speak for themselves. The full opinion is here, but the following is the guts of the order as it was read into the record:

* * * *

Based on the complete record now before me, I find that the government has intimidated and improperly influenced the three witnesses critical to Mr. Ruehle's defense. The cumulative effect of that misconduct has distorted the truth-finding process and compromised the integrity of the trial.

To submit this case to the jury would make a mockery of Mr. Ruehle's constitutional right to compulsory process and a fair trial. The sixth amendment to the united states constitution guarantees the accused the right to compulsory process for witnesses in its defense. For this constitutional right to have true meaning, the government must not do anything to intimidate or improperly influence witnesses. Sadly, government did so in this case.

Mr. Ruehle's primary defense here has been that he had no criminal intent to violate the securities laws. To succeed, it was imperative for Mr. Ruehle to call the three available witnesses who had knowledge of Broadcom's stock-option granting practices. Those three witnesses were Nancy Tullos, the vice president of human resources; David Dull, the general counsel; and Dr. Henry Samueli, cofounder and chief technical officer. For [*5196] whatever reason, the government intimidated and improperly influenced each of them.

Let me first focus on Ms. Tullos. After Ms. Tullos declined to cooperate with the government, the lead prosecutor called the general counsel of ms. Tullos' new employer and made inappropriate statements to him that caused Ms. Tullos to lose her job.

After those events in a reverse proffer session that left her understandably scared, Ms. Tullos entered into an unusual cooperation plea agreement containing a questionable factual basis, that seven years before any government investigation commenced into Broadcom, Ms. Tullos obstructed justice by asking an employee to delete an e-mail that Ms. Tullos herself never deleted and, in fact, copied to another person.

The government also told Ms. Tullos that she would have to plead to a felony because it looked more convincing to a jury. And, most troubling, the government met with Ms. Tullos on 26 separate occasions and subjected her to grueling interrogation during which the government interjected its views of the evidence and, at least on one occasion, told her that she would not receive the benefits of cooperation unless she testified differently than she had initially in an earlier session.

Not surprisingly, Ms. Tullos' testimony at trial came off scripted and not consistent with the extensive e-mail trail brought out during cross-examination.


I have absolutely no confidence that any portion of Ms. Tullos's testimony was based on her own independent recollection of events as opposed to what the government thought her recollection should be on those events.

Let me next focus on Mr. Dull. The government believed that Mr. Dull was a coconspirator yet it decided not to seek charges against him for securities fraud. In effect, the government left Mr. Dull hanging in the wind and uncertain of his fate for almost two years. During trial, I granted Mr. Dull immunity so he could testify for the defense.

After I had done so, the lead prosecutor contacted counsel for Mr. Dull and threatened to prosecute Mr. Dull if he testified consistently with his prior testimony before the SEC. Compounding his misconduct, the lead prosecutor attempted to negotiate the testimony of Mr. Dull by, among other things, promising a soft cross if Mr. Dull incriminated or disparaged Mr. Ruehle. The lead prosecutor somehow forgot that truth is never negotiable.

Finally, let me focus on Dr. Samueli. The uncontroverted evidence at trial established that Dr. Samueli was a brilliant engineer and a man of incredible integrity. There was no evidence at trial to suggest that Dr. Samueli did anything wrong, let alone criminal. Yet, the government embarked on a campaign of intimidation and other misconduct to embarrass him and bring him down.


Among other wrongful acts the government, one, unreasonably demanded that Dr. Samueli submit to as many as 30 grueling interrogations by the lead prosecutor.

Two, falsely stated and improperly leaked to the media that Dr. Samueli was not cooperating in the government's investigation.

Three, improperly pressured Broadcom to terminate Dr. Samueli's employment and remove him from the board.

Four, misled Dr. Samueli into believing that the lead prosecutor would be replaced because of misconduct.

Five, obtained an inflammatory indictment that referred to Dr. Samueli 72 times and accused him of being an unindicted coconspirator when the government new, or should have known, that he did nothing wrong.

[jat note: six is missing, although perhaps the preceding paragraph was intended to be 5 and 6]

And seven, crafted an unconscionable plea agreement pursuant to which Dr. Samueli would plead guilty to a crime he did not commit and pay a ridiculous sum of $12 million to the united states treasury.

One must conclude that the government engaged in this misconduct to pressure Dr. Samueli to falsely admit guilt and incriminate Mr. Ruehle or, if he was unwilling to make such a false admission and incrimination, to destroy Dr. Samueli's credibility as a witness for Mr. Ruehle.

Needless to say, the government's treatment of Dr. Samueli was shameful and contrary to American values of decency [*5199] and justice.

In light of my finding of government misconduct and denial of Mr. Ruehle's constitutional right to compulsory process, I must now exercise my supervisory authority and issue the following order:

Number one, I'm going to dismiss, with prejudice, the stock-option backdating indictment against Mr. Ruehle and enter a judgment of acquittal. This dismissal and judgment are based on two separate, but related grounds.

First, as I previously stated, the government misconduct has deprived Mr. Ruehle of the right to compulsory process and a fair trial. And second, there is insufficient evidence to sustain a conviction against Mr. Ruehle. Because the government improperly influenced Ms. Tullos, her trial testimony is unreliable and must be stricken. Without Ms. Tullos' tainted testimony there is insufficient evidence that Mr. Ruehle had the criminal intent necessary to violate any of the laws alleged in the indictment.

I should note that this latter ground prohibits the government from prosecuting Mr. Ruehle again for any crime related to the stock option practices at Broadcom. To do so would violate the double jeopardy clause of the fifth amendment.

Number two, I'm going to dismiss, with prejudice, the stock-option backdating indictment against Dr. Nicholas. The three witnesses that Mr. Ruehle needed to prove his innocence are [*5200] the same three witnesses that Dr. Nicholas needs to prove his innocence. Consequently, Dr. Nicholas is denied his right to compulsory process and he cannot receive a fair trial.

Number three, I'm going to order government to show cause, on february 2, 2010, at 9:00 a.m. why the drug direction indictment against Dr. Nicholas should not be dismissed. The three material witnesses in the stock-option backdating case will undoubtedly be witnesses in the drug distribution case, but I'm not sure whether the different nature of the drug charges reduces the prejudice to Dr. Nicholas so he can still exercise his right to compulsory process and receive a fair trial.

I do ask that the government keep in mind two issues in its decision whether to go forward with the drug distribution case against Dr. Nicholas. First, there will be other evidence of government misconduct introduced at that trial, such as the government's threat to issue a grand jury subpoena to Dr. Nicholas' 13-year-old-son and force the boy to testify against his father.

And second, Dr. Nicholas's e-mail to his former wife entitled "Brett's home run" will not be admitted at trial under any circumstance. The e-mail is very private and personal and will not be publicly aired in this court again. [JAT Note: I wonder what this is about.]

Four, I'm going to lift the stay imposed in the sec civil stock-option backdating case and dismiss that complaint without prejudice. The sec has 30 days to file an amended [*5201] Complaint. I do, however, discourage the SEC from proceeding 2 further with the case.

The government's misconduct has compromised the integrity and legitimacy of the case and the evidence at Mr. Ruehle's trial established the SEC will have great difficulty proving that the defendants acted with the reckless scienter. the accounting standards and guidelines up were not clear, and there was considerable debate in the high-tech industry as to the proper accounting treatment for stock option grants.

Indeed, Apple and Microsoft were engaging in the exact same practices as those of Broadcom. now, I'm sure there are going to be many people who are going to be critical of my decision in this case and argue that I'm being too hard on the government. I strongly disagree. I have a solemn obligation to hold the government to the Constitution. I'm doing nothing more and nothing less. And I ask my critics to put themselves in the shoes of the accused.

You are charged with serious crimes and, if convicted on 19 them, you will spend the rest of your life in prison. You only have three witnesses to prove your innocence and government has intimidated and improperly influenced each one of them. Is that fair? Is that justice? I say absolutely not.

I'd like to conclude with the powerful and insightful passage from the u.s. supreme court in the case of Berger v. United States.

“The United States Attorney is the representative, not of an ordinary party to a controversy, but of a sovereignty whose obligation to govern impartially is as compelling as its obligation to govern at all, and whose interest, therefore, in a criminal prosecution is not that it shall win a case, but that justice shall be done. As such, he is in a peculiar and a very definite sense the servant of the law, the twofold aim of which is that guilt shall not escape or innocent suffer.

He may prosecute with earnestness and vigor. Indeed, he should do so. But while he may strike hard blows, he is not at liberty to strike foul ones. It is much his duty to refrain from improper methods calculated to produce a wrongful conviction as it is to use every legitimate means to bring about a just one.”
I sincerely regret that the government did not heed the righteous words of the supreme court.
The Government, not surprisingly, disagrees with the dismissals.

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