Update on Brockman Indictment (11/11/20)

I previously posted on the Brockman indictment in ND CA.  One Big Fish Indicted and Lesser Big Fish Achieves NPA for Cooperation (Federal Tax Crimes Blog10/16/20), here. There have been some developments via pre-trial motion practice that I note in this blog.  (Readers may follow these and future developments either on PACER (requiring fees) or on CourtListener, here, which, once a CourtListener user has first accessed via PACER, makes the docket entries and documents available for free.)

1. Brockman has moved to transfer the venue for the tax counts (tax evasion, Counts Two through Eight) to the Southern District of Texas, the district of Brockman’s residence or “in the alternative, for a bill of particulars necessary to fully litigate this motion.”  (Dkt. 21, here) This would, if granted, have the effect of severing the tax counts from the other counts, generally considered more serious counts.  But, it appears that Brockman may be up to something broader than just transfer of those tax counts to SD TX, for he advises in p. 3 n. 1 that he intends to file a motion to transfer the entire case to SD TX “for several reasons, including Mr. Brockman’s serious health issues.”  If the entire case is transferred to SD TX, there may then be a motion to sever some of the counts for separate trials.

The motion for transfer of the tax counts is based on venue requirement that criminal cases be brought in the district where the crime occurred.  The particular motion is filed now rather than as part of the larger motion because 18 USC § 3732(b) requires the motion be file 20 days after arraignment.  That is why Brockman advised the court that he will file the broader motion later.

The Government opposes the motion (both the primary and the alternative).  Dkt. 24 here.

2.  The Government has moved for an order permitting it to disclose third party tax return information pursuant to 26 U.S.C. § 6103(h)(4)(D), in order for the government to comply with its obligations pursuant to 18 U.S.C. § 3500, Rule 16 of the Federal Rules of Criminal Procedure, and Brady v. Maryland and its progeny.”  (Dkt. 25, here.)  The Government identifies a range of potentially sensitive information that the IRS has gathered in the investigation and thus is subject to § 6103’s confidentiality requirements.

JAT Comments:

These are fairly mundane are relatively short filings, so I don’t discuss them further.  Students of tax crimes might want to follow the development of the case through the docket entries because, given the stakes and the resources available to both sides, the case should be well litigated, with a raft of pretrial motions from which the student can learn.

Excellent Decision for D.C. District Court on Brady Disclosures in Mass Document Dumps (1/24/20)

Some of the more high profile tax crimes cases, like the broader category of white collar crime, have large document sets that the Government must produce to the defense team.  This has led to mass document disclosures (sometimes open file discovery) which, the Government claims, includes all Brady and Giglio material, but the Government insists the defense team must ferret that out to make it useful.  Defense lawyers believe that mass disclosures in large data set cases violates the intent of Brady and Giglio.  I have written on this subject before, and include links in the Comments below.

In United States v. Saffarinia, 2020 U.S. Dist. LEXIS 6735 (D. D.C. 2020), CL here, the court dealt with that issue in a general white collar crime context (not a tax crime context).  (See Slip Op. 72-95.)  I include certain excerpts leading to the Court’s conclusion to order the Government to identify the known Brady material and then offer that conclusion (cleaned up):

[*74]
Between June and August 2019, the government made five productions of documents to Mr. Saffarinia, which included, among other things, nearly all of the FBI's investigative case file, interview reports (i.e. FD-302s), agent notes, and witnesses' statements pursuant to the Jencks Act, 18 U.S.C. § 3500. A large portion of the electronic data consists of electronic communications, including 264,800 e-mails and over 223,000 documents from the FBI's case file, that span roughly a four-year period. And the government's production includes hard drives from two different computers allegedly owned by Person B, which contain 394 [*75] gigabytes of data. . The discovery here, consisting of more than one million records and 3.5 million pages of documents, is massive. 

The government produced the documents to Mr. Saffarinia with production logs, Bates-stamping, and metadata in an electronic and searchable format that is accessible through "Relativity," an electronic database.  The government included a cover letter with each production and a basic, one to two page chart summarizing the Bates-stamped [*78]  numbers covered in each production. And the government represents that it explained its theory of the case to Mr. Saffarinia and defense counsel at two reverse proffer sessions. 

* * * *
[*76]

Third Circuit Affirming Conviction Despite Brady Violation (7/8/16)

Some cases and their permutations seem to drag on for a long time.  Back in 2011, I wrote a blog entry titled Third Circuit Opinion for Conviction of Offshore Trust Players (Federal Tax Crimes Blog 11/21/11), here.  As I said then,

Basically, the defendants marketed offshore trust schemes intended to fraudulently evade U.S. tax for the clients entering the schemes. The defendants were charged with several of the various tax crimes that the Government can trot out for such schemes.

Actually the schemes went beyond just offshore trusts, but they were all sham arrangements.  The defendants were connected with a group known as Commonwealth Trust Company ("CTC") which sold variously styled entity arrangements including trusts to evade U.S. tax.  In my earlier posting, some of the promoters were convicted and their convictions were affirmed.  For the tale of one such convicted -- Wayne Rebuck -- see his blog entries titled Rebuck and Commonwealth Trust Company, here, where he recounts his conviction and various penances.

In addition to the promoters of the arrangements, some of the taxpayers buying these arrangements were convicted.  One of the notable taxpayers involved was Wesley Snipes.  See Wesley Snipes Conviction and Sentence Affirmed (Federal Tax Crimes Blog 7/17/10), here.  (For the connection of Snipes to CTC, see Raid led to IRS tax fraud inquiry (The Morning Call 12/7/06), here.)  One more taxpayer's conviction was recently affirmed by the Third Circuit.  United States v. Bitterman, 2016 U.S. App. LEXIS 11875 (3rd Cir. 2016) (nonprecedential), here.  The Third Circuit summarized:

In December 2009, Chester, Craig, C. Grant, and Curtis Bitterman were indicted for conspiracy to defraud the United States in violation of 18 U.S.C. § 371. The Government alleged that the Bittermans conspired to conceal their income and assets from the IRS. Briefly, the conspiracy consisted of moving the family business and personal assets into trust products bought from the Commonwealth Trust Company.1 The Bittermans then acted as "managers" of the trusts but continued to benefit from trust property. Craig Bitterman was separately charged with obstruction of justice in violation of 18 U.S.C. § 1503 in connection with his response to a grand jury subpoena.
   n1 Commonwealth Trust Company was a target of a separate criminal investigation, resulting in the conviction of its founder and several of its employees. 

After a jury trial in October 2010, the Bittermans were convicted on all counts. They filed post-trial motions arguing, among other things, that an evidentiary error at trial and the Government's failure to turn over certain evidence compelled a new trial or dismissal of the indictment. The District Court denied the post-trial motions in April 2015 and sentenced the Bittermans three months later. Only Craig Bitterman has appealed.

The only issue I found particularly interesting was the Brady issue Bitterman raised.  The Court found that there was a Brady violation but found that the violation did not require reversal because not material to his defense or not likely to have produced a different jury verdict.  Here are the excerpts of that discussion (bold-face supplied by JAT, with one footnote omitted):

Bitterman next argues that the Government deprived him of a fair trial by failing to turn over favorable evidence in a timely way. Before trial, the Government produced to Bitterman approximately one million pages of discovery materials. The Government also made available for inspection at the IRS offices in Philadelphia 70 boxes of documents seized pursuant to search warrants executed during the investigation of Commonwealth Trust Company. Neither Bitterman nor his counsel inspected the boxes before trial. After trial, Bitterman discovered that the Government had failed to turn over 13 CDs containing roughly 100,000 pages of discovery materials produced during the prosecution of Commonwealth's founder and key employees. Bitterman filed a post-trial motion alleging a Brady violation based on the Government having failed to turn over discovery from the Commonwealth prosecution and having misled Bitterman about the relevance of the 70 boxes of seized documents. The District Court held an evidentiary hearing in August 2011. 

Under Brady v. Maryland, 373 U.S. 83, 87, 83 S. Ct. 1194, 10 L. Ed. 2d 215 (1963), the Government has an obligation to disclose "evidence favorable to an accused" so long as it is "material either to guilt or to punishment." "To establish a due process violation under Brady . . . 'a defendant must show that: (1) evidence was suppressed; (2) the suppressed evidence was favorable to the defense; and (3) the suppressed evidence was material either to guilt or to punishment.'" United States v. Pelullo, 399 F.3d 197, 209 (3d Cir. 2005) (quoting United States v. Dixon, 132 F.3d 192, 199 (5th Cir. 1997)). 

We agree with the District Court that the Government failed to turn over, and thus suppressed, the 13 CDs from the Commonwealth prosecution. The Government claims that diligent defense counsel would have uncovered the CDs before trial, but the diligence of defense counsel is largely irrelevant to the Government's Brady obligation. See Banks v. Dretke, 540 U.S. 668, 695, 124 S. Ct. 1256, 157 L. Ed. 2d 1166 (2004) (defendants are not required to "scavenge for hints of undisclosed Brady material when the prosecution represents that all such material has been disclosed"). We also agree with the District Court that the Government did not suppress the 70 boxes at the IRS offices because it made the boxes available for inspection and did not mislead Bitterman or his counsel about their potential value to the defense. See Pelullo, 399 F.3d at 212-13. 

A Prosecutor's Ethical Obligations to Disclose Exculpatory Evidence Held Broader than Brady Obligation (4/15/15)

In In re Kline, 2015 D.C. App. LEXIS 141 (D.C. Court of Appeals Apr. 9, 2015), here, the D.C. Court of Appeals upheld a finding that, although a failure to disclose potentially exculpatory evidence might not be a Brady violation, it can violate the disclosure requirement for prosecutors under local bar rules.  The opening paragraph lays out the issue and the resolution:

This matter comes before us upon the Report and Recommendation of the Board on Professional Responsibility ("the Board"). The Board recommended that a 30-day suspension be given to Andrew J. Kline ("Kline") after finding that Kline violated Rule 3.8 (e) of the District of Columbia Rules of Professional Conduct ("Rule 3.8 (e)"). Rule 3.8 (e) prohibits a prosecutor in a criminal case from intentionally failing to disclose to the defense any evidence or information that the prosecutor knows or reasonably should know tends to negate the guilt of the accused. Bar Counsel takes no exception to the Report and Recommendation of the Board. Kline argued, inter alia, that he did not violate Rule 3.8 (e) because his ethical duties are coextensive with the duties imposed under Brady v. Maryland, 373 U.S. 83, 83 S. Ct. 1194, 10 L. Ed. 2d 215 (1963). Specifically, Kline relies on the "material-to-outcome" standard recognized by the United States Supreme Court in Brady's progeny to argue that a prosecutor cannot violate Rule 3.8 (e) unless there is a reasonable probability that the information or evidence withheld made a difference in the outcome of the trial. We hold that Kline's interpretation of Rule 3.8 (e), which incorporates a retrospective materiality analysis, is not the appropriate test for determining whether a prosecutor has violated Rule 3.8 (e). We also hold that Bar Counsel proved by clear and convincing evidence that Kline intentionally failed to disclose information in violation of the rule. However, we conclude that given the confusion regarding the correct interpretation of a prosecutor's obligations under the rule, sanctioning Kline would be unwarranted.

The case contains a good discussion of the restricted scope of Brady -- to an ex post facto evaluation of whether the failure to disclose was material to the outcome.  The bar rule, in contrast, is a forward looking prophylactic rule that necessarily cannot be tested by whether it is material to an outcome that has not even occurred:

In short, although significant overlaps exist in a pretrial versus post-trial ethical analysis, it makes little common sense to premise a violation of an ethical rule on the effect compliance with that rule may have on the outcome of the underlying trial, because there can be "no objective, ad hoc way" for a prosecutor "to evaluate before trial whether [evidence or information] will be material to the outcome." See Lewis, 408 A.2d at 307. For that reason, it is important not to use Brady as a "canon of prosecutorial ethics." Commonwealth v. Tuma, 285 Va. 629, 740 S.E.2d 14, 20 n.2 (Va. 2013).

The Court earlier also made this significant comment analysis:

Further, as the Supreme Court recognized in Kyles, "[t]he rule in Bagley (and, hence, in Brady) requires less of the prosecution than the ABA Standards for Criminal Justice, which call generally for prosecutorial disclosures of any evidence tending to exculpate or mitigate." Kyles v. Whitley, 514 U.S. 419, 437, 115 S. Ct. 1555, 131 L. Ed. 2d 490 (1995). The Supreme Court reiterated that basic tenet in Cone, noting that "[a]lthough the Due Process Clause of the Fourteenth Amendment, as interpreted by Brady, only mandates the disclosure of material evidence, the obligation to disclose evidence favorable to the defense may arise more broadly under a prosecutor's ethical or statutory obligations." Cone v. Bell, 556 U.S. 449, 470 n.15, 129 S. Ct. 1769, 173 L. Ed. 2d 701 (2009) (citations omitted).

This violation occurred while Kline was an AUSA working on local prosecutions.  Other jurisdictions have rules that are similar and similarly interpreted.

It might be worth including some type of forward looking request under the local bar rules in addition to requests for Brady disclosures (which under the analysis above is a bit of a non sequitur before trial).  I would think that most prosecutors would not want to take the risk that a retrospective Brady violation may be found and thus would tend, even apart from a bar rule, to err on the side of caution and disclose possibly exculpatory evidence.

Of course, unlike a Brady violation which can give a convicted defendant relief, a bar violation does not per se give the defendant relief.  It merely punishes the prosecutor.

Thanks to the White Collar Crime Prof Blog article:  Solomon Wisenberg, District of Columbia Court of Appeals Makes It Official: Prosecutor's Duty To Disclose Exculpatory Evidence Is Broader Than Brady (White Collar Crime Prof Blog 4/10/15), here.

District Court Case on Brady Obligations and Uncertain Legal Duty (5/30/14)

The name of this case initially attracted me.  United States v. Townsend, 2014 U.S. Dist. LEXIS 70656 (ED WA 2014), here.  It  turns out the defendant is no relation to me.  But the case proved to have some interesting facets.  The first is just an interesting recitation of the Government's Brady obligations.  The second is a more interesting application of the James holding that uncertain legal obligation cannot form the basis for a criminal prosecution.

The defendant was indicted under Section 7202, here, for failing to withhold and pay over on employee's compensation.

Now the issues I report in this blog:

1.  Brady

Brady v. Maryland held "that the suppression by the prosecution of evidence favorable to an accused upon request violates due process where the evidence is material either to guilt or to punishment, irrespective of the good faith or bad faith of the prosecution." 373 U.S. at 87. In United States v. Bagley, 473 U.S. 667 (1985), the Supreme Court disavowed any difference between exculpatory and impeachment evidence for Brady purposes. Despite the Government's argument to the contrary, Bagley also held that regardless of request, favorable evidence is material, and constitutional error results from its suppression by the government, "if there is a reasonable probability that, had the evidence been disclosed to the defense, the result of the proceeding would have been different." 473 U.S. at 682 (it abandoned the distinction between the "specific-request" and "general — or no-request" situations). 

The Ninth Circuit summarized the obligation of the prosecutor concerning Brady material under Kyles v. Whitley, 514 U.S. 419 (1995): 

Moreover, as we have previously held: 

actual awareness (or lack thereof) of exculpatory evidence in the government's hands, ... is not determinative of the prosecution's disclosure obligations. Rather, the prosecution has a duty to learn of any exculpatory evidence known to others acting on the government's behalf. Because the prosecution is in a unique position to obtain information known to other agents of the government, it may not be excused from disclosing what it does not know but could have learned. 

United States v. Price, 566 F.3d 900, 909 (9th Cir. 2009) (citing Carriger v. Stewart, 132 F.3d 463, 479-80 (9th Cir. 1997) (en banc)). The Government correctly notes that Brady is not a discovery rule, but then incorrectly claims the materiality test of Rule 16 and Brady are interchangeable. ECF No. 46 at 5-9. They are not. Rule 16(a)(1)(E)(i) only requires demonstration that the "item is material to preparing the defense" not that it's materiality rise to the level of a reversible Constitutional violation for the failure to disclose it.

I don't know that any of this is new or bold, but it is useful refresher of the Brady obligation.

2.  The Uncertain Legal Duty Issue

Are Brady Violations Epidemic? (12/11/13)

Judge Alex Kozinski (Wikipedia here), of the Ninth Circuit, has a blistering dissent to the denial of rehearing en banc in an alleged Brady violation case.  Brady v. Maryland, 373 U.S. 83, 83 (1963), here., see also Giglio v. United States, 405 U.S. 150, 153-54 (1972), here. The denial of rehearing en banc, with Judge Kozinski's dissent, is United States v. Olsen, ___ F.3d ___, 2013 U.S. App. LEXIS 24500 (9th Cir. 2013), here  The original panel opinion in the case is United States v. Olsen, 704 F.3d 1172 (9th Cir. 2013), here.

In broad sweep, perhaps the key evidence of guilt were spiked allergy pills that the prosecutor urged were spiked by the defendant.  But, the defendant alleged, the pills had been spiked by the state forensic investigator, one Melnifoff.  Well before the trial, that investigator was under investigation because of possibly intentional errors in other cases.  Although the defense knew of the investigation, the prosecutor down-played its significance and relevance to the case, and apparently did not take the trouble to learn the scope of the investigation which, by trial, had been completed and cast doubt on the investigator's diligence and credibility in other cases.  Judge Kozinski read the record as:

Nearly everything the district judge understood to be true was false. But the prosecutor did not correct the district judge, who then concluded that it would be "unfair to Mr. Melnikoff to allow counsel to delve into this issue" and "under an analysis of [Federal Rule of Evidence] 403, it just would be improper to go into that." As a result, the government introduced the spiked allergy pills and the jury heard Melnikoff's testimony, all without ever being informed of these serious doubts about their reliability.

The original unanimous panel opinion rejected Olsen's claim of a Brady violation, finding that, although perhaps more correct information should have been disclosed, the defendant had not shown the required probability that the correct information would have affected the outcome of the case, given the compelling force of evidence of guilt.  Olsen questioned that holding by petition for rehearing.  The petition was denied because "the matter failed to receive a majority of the votes of the nonrecused active judges in favor of en banc consideration."  Judge Kozinski dissented, with Judges Pregerson, Reinhardt, Thomas and Watford joining the dissent..

Judge Kozinski is good at the opening lines, and he does not disappoint.

There is an epidemic of Brady violations abroad in the land. Only judges can put a stop to it.

The facts of the case eliciting the sweeping statement can be reviewed in  the case.  I focus here on Judge Kozinski's broader claim of an epidemic of Brady violations.  I also incorporate some of his general statements of the state of Brady law.  Here are key excerpts (footnotes omitted):

Brady holds that a prosecutor violates due process when he (1) suppresses evidence (2) that is favorable to the defendant, when that evidence (3) is material to guilt or innocence. Id. at 87. This extends to evidence that bears upon the credibility of a government witness. Giglio v. United States, 405 U.S. 150, 153-54, 92 S. Ct. 763, 31 L. Ed. 2d 104 (1972). The panel expressly recognizes that the report was favorable to Olsen; nevertheless it dismisses Olsen's complaint on the ground that the WSP report wasn't material. Olsen, 704 F.3d at 1183-87.

Evidence is material under Brady if it creates "a 'reasonable probability' of a different result." Kyles v. Whitley, 514 U.S. 419, 434, 115 S. Ct. 1555, 131 L. Ed. 2d 490 (1995). "A reasonable probability does not mean that the defendant 'would more likely than not have received a different verdict with the evidence,' only that the likelihood of a different result is great enough to 'undermine[] confidence in the outcome of the trial." Smith v. Cain, 132 S. Ct. 627, 630, 181 L. Ed. 2d 571 (2012) (quoting Kyles, 514 U.S. at 434). To say that the undisclosed information wasn't material, a court must conclude that the other evidence was so overwhelming that, even if the withheld evidence had been presented to the jury, there would be no "reasonable probability" that it would have acquitted. This standard isn't satisfied if "the State's argument offers a reason that the jury could have disbelieved [the undisclosed evidence], but gives us no confidence that it would have done so." Id.

Usefulness of Government ESI Disclosures in Criminal Cases (6/16/12)

Readers might be interested in this guest blog at the White Collar Crime Prof Blog - Rochelle Reback, New Trial Ordered for ESI Discovery Violation - Electronic Evidence Must be Usable (6/6/2012), here.  She provides a succinct summary of the issue with electronically stored information ("ESI") and a recent decision in United States v. Stirling (SD FL No. 11-20792-CR-Altonaga), here.


I have previously discussed some issues related to mass document dumps, including in electronic format.   See, The Mass Document Dump and the Prosecutors' Brady Obligations (2/11/11), here, and Brady and Third Party Records / Databases (8/20/11), here.

Brady and Third Party Records / Databases (8/20/11)

In United States v. Gray, 648 F.3d 562 (7th Cir. 2011) (opinion here), Judge Posner rejects a defendant's argument that the Government had a Brady obligation to have a third party extract data from its databases that might potentially have helped the defendant. While the third party, EDS (a data service company), had the data in its databases, EDS would have had to create a program to extra the data and then run the program on its databases. Judge Posner held that Brady did not impose the obligation on the Government to extract the data from the third party that might be helpful to the defendant. He reasoned (several case citations and quotation marks omitted for readability):

If a prosecutor possesses exculpatory evidence that had it been disclosed to the defense might have induced a reasonable jury to acquit, failure to provide it to the defense would be a reversible error. Brady v. Maryland, 373 U.S. 83 (1963). The rule has been expanded to take in investigators and other members of the "prosecutorial team" broadly understood. Otherwise investigators assisting in a prosecution could conceal from the prosecutors exculpatory evidence that the investigation had revealed and then the evidence would never be revealed to the defense. But EDS was not a part of the prosecutorial team. It had been hired as we said to process and pay bills submitted to Indiana Medicaid. It was not a private detective agency hired by the state agency to assist state and federal prosecutors in prosecuting Medicaid fraud. Medicaid fraud investigators were part of the prosecutorial team, but EDS was not. Because it does the billing for Indiana Medicaid, the company has records that can be useful as evidence in fraud prosecutions. But the defense had the same access to those records as the prosecutors did, and so there was no suppression of evidence.

The Mass Document Dump and the Prosecutors' Brady Obligations (2/11/11)

In United States v. Ohle, 2011 U.S. Dist. LEXIS 12581 (SD NY 2011), here, aff'd 2011 U.S. App. LEXIS 21275 (2d Cir. 2011), the defendants moved for a new trial, complaining that the prosecutors violated their Brady obligations. Prior to trial, the prosecutors turned over to the defendants a massive quantity of documents that the Government had obtained from Jenkins & Gilchrist (J&G). The format for the turn over of documents was a Concordance database, in which the documents were viewable and searchable. The prosecutors thought that all J&G documents were in the database. After trial, at the Fatico sentencing hearing, the prosecutors admitted that the turn over did not include approximately 110 boxes. The principal question presented was whether the 110 boxes contained Brady material that should have been disclosed contained Brady material that should have been disclosed, but a related question was whether a mass document disclosure without specifically identifying the Brady material was appropriate. The court, Jed Rakoff, rejected the claim, finding no Brady violation.

I address only the larger issue of the ground rules for the prosecutors' obligations when making mass document disclosures, often referred to as an open file policy. In large white collar cases, including large tax crimes cases (such as Ohle and the KPMG related criminal cases), the turnover of massive quantities of documents is common. The Court had an interesting discussion of the ground rules that apply. I quote (footnote omitted):

Federal Prosecutors Feeling the Heat

Persons practicing in the White Collar Crime area, including the federal tax crime area, have viewed with great interest the recent mutiple missteps by federal prosecutors in major criminal prosecutions. In the tax area, we were treated to the KPMG prosecution where the Government forced KPMG to quit paying attorneys fees and suffered the dismissal of 13 defendants when the Judge called foul. It was bad enough that the Government had engaged in that sort of extortion, but worse when the prosecutors dissembled about it in trying to get the judge to avoid looking into the sordid conduct. Happenings of the same genre -- convict at any cost -- seem to keep surfacing. E.g., the whole Senator Stevens prosecution involving the prosecutors' Brady disclosure violations among other footfaults. Today's Wall Street Journal has an interesting article here on the abuses in the disclosure area and how to mitigate them.