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April 1999 RICO Report By Barry Tarlow
The author wishes to thank Blair Berk and ShereenCharlick, members of his firm, for their invaluable assistance in the preparation of this column. A Small Victory in the Battle Against ‘Federalizing Crime In a rather remarkable decision from the District of Massachusetts, United States District Judge Nancy Gertner dismissed federal bribery charges against Kevin McCormack, an individual accused of paying a Malden police officer $4000 in exchange for turning a blind eye to his cocaine trafficking. Judge Gertner found that the prosecution’s allegations, even if true, failed to satisfy the federal bribery statute’s prerequisites. As an alternative basis for her ruling, she found the federal bribery statute unconstitutional, as applied, in this case. The resulting dismissal of an indictment is not the only remarkable thing about the decision — the judge dismissed the indictment pre-trial, basing her decision solely upon the pleadings, notwithstanding the prosecution’s arguments that she lacked the authority to do so. Her insightful opinion queried just “how far Congress has gone, and, under the Constitution, may go, to federalize crime. Her answer, in this case was, whether it be Congress or the prosecution, someone had gone too far. United States v. McCormack, 31 F. Supp. 2d 176 (D. Mass. 1998). The United States Attorney’s Office for the District of Massachusetts indicted Kevin McCormack for making payments totaling $4000 to a Malden police officer. See McCormack, 31 F. Supp. 2d at 177. He was charged with violating 18 U.S.C. §666(a)(2) entitled: “Theft or bribery concerning programs receiving Federal funds” which makes it a crime for someone to: corruptly give[], offer[] or agree[] to give anything of value to any person with intent to influence or reward an agent of an organization or of a state, local . . . government or any agency thereof, in connection with any business, transaction, or series of transactions of such organization, government or agency involving anything of value of $5000 or more; In McCormack, it was undisputed that the Malden Police Department, like scores of police departments nationwide, receives greater than $10,000 in some form of federal funds. It was equally undisputed that McCormack had paid a Malden police officer a total of $4000 in cash. Judge Gertner also accepted as true that these payments constituted some form of bribe though the quid pro quo was unclear. The real battle was over the significant legal issues involving the interpretation of § 666(a)(2) and the meaning to be attributed to the statutory language requiring that the bribe be given “in connection with any business, transaction, or series of transactions of [the police] involving anything of value of $5000 or more.” See McCormack, 31 F. Supp. 2d at 178. 18 U.S.C. § 666(a)(2). Judge Gertner aptly identified and addressed the two core issues as: (1) How is the $5000 threshold amount measured: by the dollar value of the bribe offered or by the value of the “services” bargained for and does “an intangible quid pro quo suffice?[]” (2) What does the “in connection with” language mean: must the bribe be linked to the federal funds or federal program, or was the statute, (as the prosecution contended,) “a general federal anti-corruption” statute? See McCormack, 31 F. Supp. 2d at 178. The judge held a hearing on the defense motion to dismiss and even ordered the United States Attorney’s Office to supplement the record with the prosecution’s theory of how it planned to satisfy the $5000 threshold amount in light of the uncontested fact that the defendant had only given the police officer $4000. McCormack, 31 F. Supp. 2d, at 178 n. 3. The facts as alleged by the prosecution, and accepted by the court, were as follows: Kevin McCormack had been charged in state court with attempted murder resulting from a stabbing incident in Malden and an arrest warrant was issued. Over the years, one Detective Jordan had investigated McCormack for various and sundry state crimes, and he was assigned to find McCormack and arrest him pursuant to the attempted murder charge. McCormack, 31 F. Supp. 2d at 178-79. When finally located and arrested, McCormack was released on bail. Id. at 179. Shortly thereafter, he made payments to Detective Jordan by handing him an envelope with $1000 cash on four separate occasions, telling the Officer that he had “found the envelope in the street.” McCormack never requested anything in return for the payments nor did he discuss them with the officer. However, in opposition to the motion to dismiss, an Assistant United States Attorney (AUSA) set forth, in an affidavit, that the officer “believ[ed] that McCormack was a cocaine dealer and appears to think that the payments were intended to prevent Jordan from ‘casing’ McCormack and observing him dealing cocaine.” The affidavit also contained the claim of another Malden police officer who reported overhearing McCormack bragging about how the police used to “always watch[] me, now they just stay away from me. . . .” Id. The prosecution, unaccustomed to losing under any circumstances, did not take kindly to Judge Gertner’s considering the sufficiency of its indictment prior to trial. Clearly recognizing the general rule which limits her ability to review a duly constituted indictment, Judge Gertner predicated her authority to do so upon one of the several exceptions to this rule, specifically, where there is a question regarding federal jurisdiction. Id. at 180. She noted that several other district courts had also addressed, as preliminary matters, questions of federal jurisdiction over §666 cases. See United States v. LaHue, 998 F. Supp. 1182, 1184 (D. Kan. 1998) (dismissing case because program did not meet $10,000 standard); United States v. Frega, 998 F. Supp. 1536 (S.D. Cal. 1996) (dismissing case because bribery of California court judges and an attorney lacked federal connection; United States v. Stewart, 727 F. Supp. 1068, 1072 (N.D. Tex. 1989) (dismissing case because government supplier from which goods had alleged been stolen not organization receiving benefits in one year). Because the prosecution’s ability to satisfy the jurisdictional prerequisites set forth in § 666 did not involve any factual disputes — as Judge Gertner had accepted the government’s facts as alleged and supplemented by affidavit — only a legal interpretation was at issue. By deciding the issue at the motion to dismiss stage, Judge Gertner permitted the prosecution to appeal her decision — she could have waited until the before-the-verdict motion for judgment of acquittal was made, pursuant to Federal Rule of Criminal Procedure 29, when the prosecution would have had no ability to appeal. It is interesting to note, however, that as phrased, the defendant’s motion did not raise constitutional issues; the court and the prosecution raised those for him. Nor did the defendant, as is prudent at the motion to dismiss stage, distance himself from factual issues, as he “argue[d] that there will be no evidence on an element of the offense which is essential to §666’s definition of the offense as well as to the requirement of federal jurisdiction.” McCormack, 31 F. Supp. 2d at 181. Clearly, his position left room for a less courageous judge to deny the motion based solely upon the prosecution’s allegation that it would indeed produce sufficient evidence at trial to satisfy all elements of the statute. First, addressing the “anything of value” language and how such value is to be measured under the statute, Judge Gertner recognized that this language “embrace[s] intangible as well as tangible items.” Id. at 182 (citing United States v. Marmolejo, 89 F.3d 1185, 1191-92 (5th Cir. 1996, aff’d on other grounds, sub.nom., Salinas v. United States, 522 U.S. 52 (1997)). Thus, the quid pro quo can be an exchange for intangible items, for example, conjugal visits, special access to licenses and avoiding criminal fines. See Marmolejo, 89 F.3d at 1191-92 (conjugal visits); United States v. Mongelli, 794 F. Supp. 529, 530 (S.D.N.Y. 1992) (access to licenses); United States v. Apple, 927 F. Supp. 1119, 1121 (N.D. Ind. 1996) (avoiding fines). Thus, the judge correctly concluded, “seeking favors from the police, as McCormack is alleged to have done here, would also qualify.” McCormack, 31 F. Supp. 2d at 182. Yet then the court was faced with the question of from what and whose perspective is the value of these “favors” to be measured? Id. In the cases addressing these “intangible” things of value, those courts either looked at the benefit from the perspective of the briber or from a free market perspective: how much would a person in the market be willing to pay? See Marmolejo, 89 F.3d at 1194; Mongelli, 794 F. Supp. at 531. In those cases, however, the defendants paid greater than $5000, making it much easier to argue that the bargained-for favor was worth at least that much. See id.; see also Frega, 933 F. Supp. at 1541 (court listed 3 ways to measure value: amount in controversy, ultimate settlement value or verdict and value of case to lawyer/defendant). What Judge Gertner referred to as “the best measure” — what the defendant was willing to pay for these “favors” certainly could not be the prosecution’s “best measure” since McCormack only paid $4000. See McCormack, 31 F. Supp. 2d at 183. The prosecutor, clearly unable to meet the $5000 threshold by any of the above measures, resorted to the arena best left to defense lawyers — creative thinking. The prosecution argued that the dollar amount should be measured by McCormack’s “lost []wages if his bail were revoked, combined with the value of being able to live with his fiancee and daughter during the months before his trial.” Id. Judge Gertner rejected this approach as unduly speculative – she also noted that while McCormack listed on his pre-trial services report that he earned $2000 per month as an “assistant manager of a baseball card shop,” he was actually employed “cleaning hoods and ducts in restaurants and bars,” undercutting any value the government attributed to his livelihood. Id. The prosecution next proposed measuring the value “from the perspective of the police department, since Jordan and the other officers were paid salaries of over $5000 . . . the financial interests of the police department were somehow substantially affected by the bribe.” Id. Judge Gertner gently reminded the prosecutor that “all police officers are paid more than $5000, “thus, every effort to bribe a police officer would necessarily be a violation of § 666, regardless of how small the bribe. Id. Under this theory, it would be a federal crime to offer $20 to a traffic cop (even he earns more than $5000 per year) in order to avoid a $50 ticket. See id. In the prosecution’s last-ditch effort at trying to make something out of nothing, they argued that the measure of the “value to the public of insuring that police functions were not corrupted — that McCormack meets his bail conditions and stays out of bars drinking alcohol when a charge of brutally attempting to kill a patron of a bar was pending against him,” was worth in excess of $5000. Id. While Judge Gertner charitably called this theory “particularly novel,” she properly rejected, again, “speculative.” Id. Next, addressing whether or not there need be a connection between the benefit and the government’s federal business, the judge documented the existing split in the circuits regarding this issue with the Second Circuit taking the position that there must be some connection between the bribe and the risk to the integrity of the federally funded program, see United States v. Foley, 73 F.3d 484 (2nd Cir. 1996); see also United States v. Santopietro, 166 F.3d 99 (2d Cir. 1999) (modifying Foley post-Salinas), while the Fifth Circuit’s decision in Marmolejo, (affirmed in Salinas), held that § 666 does not require that the bribe involve federal funds or jeopardize the financial integrity of a federal program. See Salinas, 118 S. Ct. at 473. Significantly, Judge Gertner noted that Salinas stated that it “need not consider whether the statute requires some other kind of connection between a bribe and the expenditure of federal funds” because there, the bribe related to prison privileges in a federally funded facility. Id. at 474. Judge Gertner went on to find that unless the statute is read to contain some nexus between the bribe of the state official and some federal monies or program, the statute is unconstitutional because it “would result in a drastic change in the balance of power between federal and state governments.” McCormack, 31 F. Supp. 2d at 186. Since every state receives at least $10,000 in federal monies — this was an insufficient watermark by which to confer federal jurisdiction — any act of corruption by any state agent or against any state agency which meets the $5000 requirement would now be a federal crime. Id. However, because Salinas had declared that the “in connection with” language was “not ambiguous,” the judge was hard-pressed to look to the legislative history to effectuate the drafters’ intent. In fact, the legislative history “reveals the intent to deal with corruption that is tied to federal programs or monies.” See id. Thus, her solution was to conclude that, as applied to cases such as McCormack, where “there is little or no relationship between the bribery and the federal program,” § 666(a) exceeded Congress’s powers pursuant to the tax and spending powers under which the law was passed. Id. at 186-87. The judge reached this conclusion because, at least, in great part, “the Supreme Court has expressed concerns whenever an interpretation of a federal criminal statute would upset the balance of power between federal and state governments” and because the Supreme Court itself imposed limitations upon its spending clause powers, one of which requires that federal statutes “conditions must be related to the federal interest in particular national projects or programs.” Id. at *38 (citing South Dakota v. Dole, 483 U.S. 203, 207-08 (1987)). The McCormack decision provides a thoughtful, incisive overview of the few remaining limits on the federal government’s avid appetite for usurping formerly and properly state-only crime. Reading this case also provides some comic relief — the United States Attorney’s Office made a major production of asserting federal dominion and control over a simple act of state bribery, but surprisingly could not even find a state criminal in Massachusetts wealthy enough to offer the requisite $5000 bribe. Instead they settled for poor McCormack, who thanks to Judge Gertner, is now “free” to return to the arena where his case really belongs — the state court. Incredible Shrinking ‘Willfulness’ Requirement Many years ago, the Supreme Court observed that “willfulness” as a criminal mens rea element was a “word of many meanings” differing depending upon its context. Spies v. United States, 317 U.S. 492, 497 (1943). In spite of this principle, the “meanings” attributed to “willful” have been rather limited with the exception of certain types of statutes where courts reasoned, “willful” required that the prosecutor prove more than just an “evil mind” — he must demonstrate knowledge of the specific law violated and the intent to violate it. Recently, even where these several types of statutes are involved, courts have simply paid lip service to the “many meanings” rubric while rendering the “willfulness” mens rea requirement virtually meaningless. “Willful,” as a mens rea requirement in the criminal context, generally means acting with knowledge that one’s conduct is unlawful, see Ratzlaf v. United States, 510 U.S. 135, 137 (1994). In other words, a “willful” criminal action, is one undertaken with a “bad purpose.” Bryan v. United States, __ U.S. ___, 118 S.Ct. 1939, 1945 (1998). However, there arose a certain classes of offenses deemed to require a “heightened” mens rea — meaning the prosecution had to prove not only knowledge of the acts taken but also knowledge of the existence of the statute violated. See, e.g., Ratzlaf, 510 U.S. 135; Cheek v. United States, 498 U.S. 192 (1991). The two enumerated categories of offenses entitled to this heightened mens rea were first, those involving complicated areas of the law, for example, the taxation statutes, see Cheek, 498 U.S., 492, and second, regulatory-type statutes governing conduct not inherently or obviously criminal. See Ratzlaf, 510 U.S. 135, involving currency structuring. In Cheek, the Supreme Court reversed a conviction for failure to pay taxes because the “willfulness requirement in the criminal provisions of the Internal Revenue Code [] require[s] proof of knowledge of the law.” Id. at 204. While Cheek is best known for setting forth this principle, it relied upon previous cases which recognized that “‘in our complex tax system, uncertainty often arises even among taxpayers who earnestly wish to follow the law’ and ‘[i]t is not the purpose of the law to penalize frank difference of opinion or innocent errors . . . .’” Id. Cheek, who believed that the income tax system was unconstitutional, attended seminars and relied upon written opinions stating that he did not have to pay income taxes. Cheek, 498 U.S. at 196. During deliberations, the jurors, who had asked several times for clarification regarding the good faith defense about which they had been instructed, indicated additional difficulty in deciding if Cheek “honestly and reasonably believed that he was not required to pay income tax.” Id. at 197. The judge, who had previously instructed the jury that “a person’s opinion that the tax laws violate his constitutional rights does not constitute a good faith misunderstanding of the law” and “disagreement with the government’s tax collection systems and policies does not constitute a good faith misunderstanding of the law,” decided that deliberations had gone on long enough. He short-circuited any further inquiry by instructing the jury that “[a]n honest but unreasonable belief is not a defense and does not negate willfulness . . . [a]dvice or research resulting in the conclusion that wages of a privately employed person are not income or that the tax laws are unconstitutional is not objectively reasonable and cannot serve as the basis for a good faith misunderstanding of the law defense.” Id. at 197. After essentially directing this verdict for the prosecution, the jury’s finding of guilt was foreordained. The Supreme Court reversed, not because of the district judge’s instruction regarding one’s belief in the constitutionality, or the lack thereof, of a statute, see id. at 206 (“in a case like this, a defendant’s views about the validity of the tax statutes are irrelevant to the issue of willfulness and need not be heard by the jury”), but the problem was the supplemental jury instruction that followed. It was error to instruct the jury that: “petitioner’s asserted beliefs that wages are not income and that he was not a taxpayer within the meaning of the Internal Revenue Code should not be considered in determining whether Cheek had acted willfully.” Id. at 206-07. The Court noted that: “[t]he proliferation of statutes and regulations has sometimes made it difficult for the average citizen to know and comprehend the extent of the duties and obligations imposed by the tax laws.” Id. at 199, and it also disagreed that one’s good faith belief must be “objectively reasonable” in order to be considered for purposes of negating intent, id. at 203. Thus, instructing the jury to disregard evidence of Cheek’s understandings as to his legal obligations, was error. Id. The Court dismissed any concerns that Cheek’s beliefs were too “incredible” for the jury to consider by a display of faith in the jury system — upon hearing beliefs or misunderstandings which are so unreasonable, “the more likely the jury will consider them to be nothing more than simple disagreement with known legal duties . . . and will find that the Government has carried its burden of proving knowledge.” Cheek, 498 U.S. at 204. Similarly, in Ratzlaf v. United States, 510 U.S. 135 (1994), the Supreme Court again reversed a conviction for violating the currency reporting laws because the “willfulness” requirement of 31 U.S.C. §5324 (subjecting to criminal liability those who “structure” or break up a single transaction into two or more in order to avoid the bank’s $10,000 reporting threshold), required that Ratzlaf believe that he was doing more than merely circumventing the bank’s reporting obligations— he had to know that the structuring he had engaged in, was itself illegal. According to the Ratzlaf Court “willfulness” in this context, requires “both knowledge of the reporting requirement and a specific intent to commit the crime.” Id. at 142 (emphasis in original). The decision went on to define the parameters of “this context” but it did not refer to the currency reporting requirements as “complex” nor did it condition the result upon any such complexity; rather, Ratzlaf noted that there are many “legitimate” reasons why people would structure transactions to avoid reporting requirements, for example to prevent ex-spouses from learning of one’s assets, or to minimize the risk of an IRS audit, while not intending to violate the law. In recent years, we have seen a great increase in both complicated statutes and “criminal regulatory” statutes applied to “borderline” or even formerly lawful business practices in the health-care, environmental and banking arenas as well as statutes expanding the reach of money laundering and racketeering to encompass additional conduct. Since most of these are both complicated as well as regulatory laws penalizing not obviously criminal conduct, logic dictates that these offenses should qualify for the heightened mens rea requirement — willfulness should mean an awareness of the law which you are accused of violating. At the very least, if the Supreme Court meant what it said years ago, the meaning attributed to “willful” should change with respect to the differing contexts in which it is used. However, the contrary result has occurred — instead of expanding the application of the heightened willfulness requirement, it has been strictly limited to the facts of the two cases where it originated. This stringent limitation is in no way dictated by any language in either the Cheek or the Ratzlaf cases. In fact, according to the principles enunciated in those two cases, where a complex, confusing “proliferation of statutes and regulations . . . ma[kes] it difficult for the average citizen to know and comprehend the extent of the duties and obligations imposed by the [] law,” see Cheek, 498 U.S. at 199, or where the acts alleged are not “inherently nefarious,” and could be taken with an “innocent purpose,” under those two circumstances, the prosecution must prove that the defendant acted intentionally to violate “a known legal duty.” See Ratzlaf, 510 U.S. at 148. The language used in both decisions clearly encompasses other types of conduct and other statutes which share the attributes referenced, i.e., legal complexity and/or actions which could be taken for “legitimate” purposes. Neither the Cheek nor the Ratzlaf decisions limited their holdings to the specific statutes at issue in those cases, and indeed, the principles they set forth, should be applicable to other offenses which meet their specified criteria: complicated statutes and statutes regulating apparently “benign” conduct. However, recent attempts to expand this heightened mens rea requirement to similar statutes have been rebuffed. In an effort to distinguish Ratzlaf and Cheek from what appears to be perfect candidates for the heightened mens rea requirement, subsequent cases have labeled them just two “exceptions” to the general rule that willfully means “consciousness of the act but not [] consciousness that the act is unlawful.” See United States v. Starks, 157 F.3d 833, 838 (11th Cir. 1998) (distinguishing Cheek and Ratzlaf because they “‘involved highly technical statutes that presented the danger of ensnaring individuals engaged in apparently innocent conduct’” from the Anti-Kickback statute). This trend is not surprising since the Supreme Court has given the green light to dismiss Cheek and Ratzlaf as aberrational exceptions in Bryan v. United States, 118 S. Ct. at 1947. In Bryan,118 S. Ct. 1939, the Court decided that the heightened mens rea was inappropriate in the context of the Firearms Owners’ Protection Act, 18 U.S.C. § 921, et. seq. For purposes of firearms licensing laws, “willfully” did not require proof that the defendant actually knew of the licensing requirements; rather, for that statute, willfulness only required that he acted with a “bad purpose,” “with knowledge that his conduct was unlawful.” Bryan, 118 S. Ct. at 1944-45. The Cheek/Ratzlaf principles were inapplicable, according to Bryan, because both the tax and the anti-structuring statutes at issue in those cases were “highly technical” laws “that presented the danger of ensnaring individuals engaged in apparently innocent conduct.” In Bryan, even though the district court had erroneously instructed the jury that the prosecution need not prove “that [Bryan] knew that he was breaking the law,” the Court refused to reverse, primarily because the defendant (or his counsel, most likely) failed to object to that instruction and failed to raise the issue in the court of appeals. Bryan, 118 S. Ct. at 1949. According to the court, had the district court instead instructed the jury that the prosecution need not prove that Bryan knew that he was breaking the law “that required a license” the instruction would have been accurate. Id. In a bizarre twist, Justice Scalia dissented (joined, remarkably, by Chief Justice Rehnquist, and not-so-remarkably, Justice Ginsberg), contending that the statute was actually ambiguous as to the mens rea required and thus, “this case calls for the application of . . . the familiar rule that ‘where there is ambiguity in a criminal statute, doubts are resolved in favor of the defendant.’” Id. at 1950 (Scalia, J., dissenting). Justice Scalia also pointed out that by requiring only that the defendant “know” that his conduct is unlawful “in a general way,” results in “a mens rea [] entirely divorced from the actus reus this statute was enacted to punish.” Id. at 1950 (Scalia, J., dissenting). Bryan could be guilty of “willfully” dealing in firearms if, “for example, he had never heard of the licensing requirement but was aware that he had violated the law by using straw purchasers or filing the serial numbers off the pistols,” or, according to the majority, “it ought to suffice if Bryan knew that the car out of which he sold the guns was illegally double-parked . . . . “ Id. at 1950-1951 (Scalia, J., dissenting). With regard to the majority’s peremptory dismissal of Cheek and Ratzslaf on the grounds that they involved “highly technical statutes that presented the danger of ensnaring individuals engaged in apparently innocent conduct,” Justice Scalia noted that this non-explanation “in no way justifies the distinction the Court seeks to draw today between knowledge of the law the defendant is actually charged with violating and knowledge of any law the defendant could conceivably be charged with violating.” Id. at 1951 (Scalia, J., dissenting) (emphasis in original). This alarming trend towards strictly limiting Cheek and Ratzlaf to those two specific statutes is most readily apparent from the decisions involving a complicated, regulatory law, the anti-kickback statute, 42 U.S.C. § 1320a-7b(b). It is designed to proscribe receipt of “any remuneration,” including kickback, bribe or rebate, in return for referring a patient to a provider of Medicare services. This statute was amended in 1977 to include a “heightened” mens rea requiring that the prosecutor prove that the defendant “knowingly and willfully” accept remuneration in return for referrals. See 42 U.S.C. § 1320a-7b(b). This amendment was the direct result of concern that “criminal penalties might be imposed under current law upon an individual whose conduct, while improper, was inadvertent” — only those who “knowingly and willfully” violate this law were intended for punishment. H.R. Rep. No. 96-1167 at 59, reprinted in U.S.C.C.A.N. 5526, 5572. Notwith-standing the obvious intent of the amendment and the clear difference between the Firearms Owners Protection Act and the far more complicated anti-kickback statute, most of the courts of appeals considering the anti-kickback statute’s mens rea requirement simply adopted the Bryan analysis (or the lack thereof). In United States v. Starks, 157 F.3d 833, 838 (11th Cir. 1998), the Eleventh Circuit addressed the issue of what “willfulness,” as a mens rea requirement, meant for the anti-kickback statute. In Starks, the president of a drug treatment provider company and a state employee working in a federal program were convicted of violating the anti-kickback statute by engaging in a scheme where the government employee received referral fees from the drug treatment provider for referring people from the federal program for drug treatment. Starks, 157 F.3d at 836-37. Both challenged the district court’s decision to give the pattern jury instruction defining willfulness as committing the act “voluntarily and purposefully, with the specific intent to do something the law forbids, that is with a bad purpose, either to disobey or disregard the law,” contending that “‘knowledge of the general illegality of one’s conduct is not the same as knowledge that one is violating a specific rule.’” See id. at 838 (quoting United States v. Sanchez-Corcino, 85 F.3d 549 (11th Cir. 1996). Disregarding without discussion both the purpose behind the 1977 amendment, and the complexity of the law itself, Starks simply pronounced that one need not have more than a general “knowledge that his conduct was unlawful” for criminal conviction under the “anti-kickback” statute. A defendant need not know that he or she is violating a specific statute or that it is, in fact, illegal to “‘knowingly and willfully solicit[] or receive[] any remuneration’ for referrals for services covered by the federal government.” See Starks, 157 F.3d at 837. The Starks court reached this result by blind reliance upon the Supreme Court’s decision in Bryan. To the extent that Starks even addressed Cheek or Ratzlaf, it simply noted, as Bryan did, that the statutes at issue in Cheek and Ratzlaf constituted “special exceptions” to the general rule that ignorance of the law is no excuse. Starks, 157 F.3d at 838. While Starks characterizes its decision as “compelled” by Bryan, it takes very little sophistication or imagination to see that the statute at issue in Bryan, regulating the possession and sale of dangerous weapons, i.e., firearms, could and should be readily distinguished from a statute which dictates when, and under what circumstances, medical professionals can receive anything of value for referring business. As courts note, the anti-kickback statute is complicated, it contains “safe-harbor” provisions which actually permit the taking of money for referrals under certain circumstances, see U.S. v. Neufeld, 908 F. Supp.491, 498 (S.D.Ohio. 1995), and, like Ratzlaf, there is a risk of convicting the innocent. See United States v. Jain, 93 F.3d 436, 440 (8th Cir. 1996). However, Starks contains no more analysis than Bryan — Starks concludes, without discussion, that the anti-kickback statute “is not a highly technical tax or financial regulation,” and “the giving or taking of kickbacks for medical referrals is hardly the sort of activity a person might expect to be legal.” Id. at 838. In fact, without even acknowledging the “safe-harbor provisions,” Starks labeled monetary remuneration for referrals as “malum in se.” Id. at 838. In United States v. Jain, 93 F.3d 436 (8th Cir. 1996), the court found the anti-kickback statute was complicated, contained “elaborate” safe harbor provisions, similar “to the statute at issue in Ratzlaf, and potentially includes conduct not ‘inevitably nefarious.” Id. at 440-441. Additionally, the court found that neither Dr. Jain’s patients nor the government insurance program were harmed in any manner by this particular referral scheme – instead patients were “appropriately hospitalized,” and the government insurance program suffered no financial loss. Id. at 439. Notwithstanding all of the above, which should makes the anti-kickback statute the perfect candidate for the Cheek/Ratzlaf mens rea requirement, the Eighth Circuit found that “willful” in the anti-kickback context means only that the defendant “knew his conduct was wrongful, rather than . . . that he knew it violated a ‘known legal duty.’” Id. at 441. The Eighth Circuit upheld the district court’s instruction that “willfully means unjustifiably and wrongfully known to be such by the defendant.” Id. at 440. Inexplicably, Jain referred to this ordinary definition of “willfulness” as some sort of a “heightened” mens rea requirement. Id. In clear contrast to Jain and Starks is the Ninth Circuit’s position is that “knowingly and willfully” in the anti-kickback statute context means that one “must know that [the statute] prohibits offering or paying remuneration to induce referrals” and that one must “engage in the prohibited conduct with the specific intent to disobey the law.” Hanlester v. Shalala, 51 F.3d 1390, 1400 (9th Cir. 1995). Unfortunately, subsequent cases have either refused to follow Hanlester which was decided prior to the Supreme Court’s pronouncements in Bryan, see Jain, 93 F.3d at 441; see United States v. Neufeld, 908 F. Supp. 491, 496-97 (S.D. Ohio 1995), or they have misinterpreted it. See United States v. Davis, 132 F.3d 1092, 1094 (5th Cir. 1998) (in spite of Hanlester’s clear statement regarding knowledge of what the statute proscribes, the Davis court found that Hanlester “requires only knowledge only that the conduct in question was unlawful, and not necessarily knowledge of which particular statute makes the conduct unlawful.”) In light of the Supreme Court’s decision in Bryan and the recent appeals courts’ pronouncements regarding “willfulness” and the anti-kickback statute, it appears that the Cheek and Ratzlaf definitions of “willful” will not move much beyond these specific tax and anti-structuring statutes. However, with respect to the anti-kickback statute, there exists a split in the circuits, possibly leading to Supreme Court resolution of the issue. Based upon Bryan, in a rare instance, a Scalia dissent should prevail as the majority position. When the time comes, the Court may accept the Bryan dissenters’ disagreement with the position that willfulness need only mean an intent to disobey any law. As properly noted in Cheek, 498 U.S. at 204, and Ratzlaf, 510 U.S. at 144, “willfulness,” in the context of complicated, criminal regulatory statutes must mean more – only by preserving and expanding “willfulness” as a mens rea requirement can we prevent “penaliz[ing] frank difference of opinion,” conduct which is not “inevitably nefarious” or “innocent errors.” Bogus Prosecution Ethics Complaint — New Tactic in War on Defense Bar A new record for hypocrisy was reached last fall in Massachusetts when U.S. Attorney David Stern took time from his busy schedule to personally file a grievance with the Massachusetts Board of Bar Overseers against noted Boston criminal defense lawyer Steven Hrones. The complaint alleged that Hrones had violated the Massachusetts Rules of Professional Conduct by arguing during the trial of United States v. Robert J. Rowe, Case No. 96-10150-REK, that an Assistant U.S. Attorney had knowingly permitted false testimony and information to be presented to a grand jury through an FBI agent. U.S. Attorney Stern attempted to utilize the Massachusetts Rules of Professional Responsibility and its state bar disciplinary organization “as a sword against a defense lawyer in the midst of representing his client.” Correspondence of Peter B. Crupp in defense of Steven Hrones, September 16, 1998. The hypocrisy stems in part from the fact that the very same U.S. Attorney, along with his colleagues from the U.S. Department of Justice, have consistently refused to recognize the authority of state disciplinary boards to sanction federal prosecutors who violate those same rules of professional responsibility. See, The Champion, RICO Report (May 1998, Dec. 1995, Jan. 1993, June 1987). In 1996, Steven Hrones was appointed by the United States District Court to represent Robert J. Rowe, charged with three counts of bankruptcy fraud, 18 U.S.C. §152. The government began its investigation in 1995, although an indictment was not returned until mid-May of 1996, on the same day the government called its one and only witness before a grand jury. FBI Agent Richard Egan testified that Rowe had willfully failed to identify his ownership interest in a Nahant, Massachusetts property in his bankruptcy filing. Agent Egan also told the grand jury what was later revealed to be a false statement: that the criminal investigation of Rowe actually began a year before in 1994 when it had not (inferring that Rowe took steps upon learning of an investigation reflecting consciousness of guilt). The agent also testified that Rowe had transferred ownership of the house suspiciously out of his own name and into his ex-wife’s name during the pendency of the bankruptcy proceedings (when, in fact, ownership had not been transferred in any manner). The grand jury indicted Rowe on three counts of bankruptcy fraud, specifically alleging that he had willfully failed to disclose his interest in the Nahant property. One of the few undisputed matters in the case was that agents had physically reviewed title documents recorded with the Massachusetts Registry of Deeds to establish the ownership history of the property, and that the agents would have necessarily had to share that information with the prosecutor either as part of a referral package recommending prosecution or in connection with the prosecutor’s ongoing supervision of the investigation. Under either scenario, it would be highly improbable that the prosecutor in his preparation of the indictment would not have satisfied himself about the state of the title of the property based on the title documents. Yet at no time did the Assistant U.S. Attorney (AUSA) on the case, Mark Balthazard, make any effort before the grand jury to correct the false testimony of the agent. Directly contradicting his testimony to the grand jury, Agent Egan later testified at trial that the investigation began in 1995, not the summer of 1994 as he told the grand jury. He also testified that he had verified the ownership records by going to the registry of deeds in connection with the investigation, which would have clearly confirmed that the property had not been sold; the agent even apologized during cross-examination because he may have been “incorrect at the grand jury.” Trial T.R. at 18-19. The agent knew or should have known that the title of the property had not been transferred by Rowe, and the prosecutor should have also known this at the time the agent testified before the grand jury. Although the jury acquitted Rowe on the most serious bankruptcy fraud count, it convicted him on the remaining counts relating to the Nahant property. In his motion for a new trial, Hrones argued that AUSA Balthazard had knowingly permitted Agent Egan to testify falsely to the grand jury. Although Hrones had requested the transcript of Egan’s testimony in support of his motion, Judge Robert Keeton (1) refused to order the transcript, and (2) denied the motion based on a finding that the defense had not provided sufficient factual support to meet its burden in the hearing on the new trial motion. While Judge Keeton explicitly refused the prosecutor’s request for a finding that there was no evidence to suggest that the agent had knowingly presented false and slanted testimony to the grand jury, he did find that there was simply not enough evidence to sustain the allegation. Interestingly, the judge had permitted Hrones to argue earlier to the jury that the agent had knowingly made false statements to the grand jury with respect to the property and other matters. In an astounding display of prosecutorial arrogance, U.S. Attorney Donald Stern over a year later filed a formal grievance to the Massachusetts Board of Bar Overseers alleging that Hrones had violated D.R. 7-106 (C)(1), which prohibits a lawyer from making an argument that he no reasonable basis to believe will be supported by permissible evidence. Additionally, the prosecutor complained that Hrones violated DR 7-102(A)(1) by bringing the claim in the motion for new trial itself, which he knew “would serve merely to harass or maliciously injure another.” In yet another assault on the defense bar, Hrones, who was appointed in the underlying case, was forced into the unenviable position of both having to defend himself in the bar matter and at the same time continue to represent his client before the U.S. District Court. Hrones sought and obtained a continuance of the re-sentencing during the pendency of the complaint. Unfortunately, his client was later denied a downward departure at re-sentencing, which is now on appeal. Fortunately, within one week of Peter Krupp’s filing of his response to the grievance, the Massachusetts Board of Bar Overseers summarily dismissed the complaint. With a distinguished and previously untainted 30-year career as a criminal defense lawyer in Massachusetts tarnished by the spectre of this unfounded allegation, suffice it to say that Steven Hrones did not go quietly into the night. Having peaked the interest of the local press, Hrones cooperated with the Boston Globe, which ran a series of investigative articles questioning both the timing and motivation of the prosecutor’s complaint to the bar. See, Boston Globe, Sept. 18, 1998 and Oct. 1, 1998. Less than fully satisfied by the overseers’ outright dismissal of the complaint against him, Hrones also gave as good as he got. He reported U.S. Attorney Donald Stern to the bar, based on what seems to be the clearly intended timing of Stern’s complaint to the bar which itself failed to include relevant and crucial parts of the transcript of the hearing on the motion for new trial, as well as the pertinent grand jury transcripts of Agent Egan’s original testimony. Rule 8.4 of the Massachusetts Rules of Professional Conduct prohibits “misrepresentation” and “conduct prejudicial to the administration of justice.” Although the Office of Bar Counsel had by that time clearly had enough of the rancor between the defense lawyer and prosecutor (Hrones’ complaint against U.S. Attorney Sterns was also dismissed), Hrones reports that his vigilance in representing his client by exposing the original prosecutorial misconduct by the agent and the AUSA in the case was well worth the price he has personally paid. This attorney’s willingness in an appointed case to expose perjured testimony by law enforcement and face the inevitable retaliation from agents and prosecutors is indeed admirable. Requiring agents who commit perjury and those prosecutors who encourage or ignore it to account for their misconduct, will be a meaningful incentive to the cleansing of our criminal justice system.
RICO Report Barry Tarlow 9119 Sunset Boulevard Los Angeles CA 90069 Phone (310) 278-2111 Fax (310) 550-7055 | |||||||||
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National Association of Criminal Defense Lawyers (NACDL) 1660 L St., NW, 12th Floor, Washington, DC 20036 (202) 872-8600 • Fax (202) 872-8690 • assist@nacdl.org | |||||||||
