United States v. Ford

1997 WL 33547052 (9th Cir.)

United States Court of Appeals, Ninth Circuit.

UNITED STATES OF AMERICA, Plaintiff-Appellee, v. Echols Doyle FORD, David Grigonis, Daniel Hong, Robert Ladum, Ronald Van Vliet, and James Weaver, Defendant-Appellants.

Nos. 97-30027, 97-30030, 97-30022, 97-30018, 97-30019 & 97-30044.

November 12, 1997.

Appeal from the United States District Court for the District of Oregon, Honorable Ancer L. Haggerty, District Court Judge, Trial Court No. CR 94-304-HA

Reply Brief of Appellants

Lawrence Matasar, OSB #74209, Lawrence Matasar, P.C., 621 S.W. Morrison, Suite 1025, Portland, OR 97205, (503) 222-9830, Attorney for Defendant-Appellant Hong

Daniel Feiner, OSB #81221, 715 SW Morrison, Suite 504, Portland, OR 97205, (503) 228-2822, Attorney for Defendant-Appellant Ladum

Robert Reid, OSB #81434, 715 SW Morrison, Suite 504, Portland, OR 97205, (503) 223-7786, Attorney for Defendant-Appellant Van Vliet

John Ransom, OSB #74265, 1001 SW Fifth, Suite 1400, Portland, OR 97204, (503) 228-0487, Attorney for Defendant-Appellant Weaver

Robert Goffredi, OSB #77187, 330 Pacific Building, 520 SW Yamhill Street, Portland, OR 97204, (503) 241-9111, Attorney for Defendant-Appellant Ford

John Storkel, OSB #85087, 1415 Liberty Street SE, Salem, OR 97302, (503) 371-6642, Attorney for Defendant-Appellant Grigonis

Claire M. Fay, Assistant U.S. Attorney, 600 United States Courthouse, 1000 SW Third Avenue, Portland, OR 97204-2902, (503) 727-1000, Attorneys for Plaintiff-Appellee

*i TABLE OF CONTENTS

INTRODUCTION ... 1

¶ Robert Ladum

1. THE OBSTRUCTION OF JUSTICE CONVICTION ... 1

A. 18 U.S.C. § 1512 is the only statute under which witness tampering allegations may be prosecuted ... 1

B. The government did not prove that Mr. Ladum obstructed justice by creating false documents for Mathis to present to the grand jury ... 2

C. 18 U.S.C. § 1503 does not extend to investigations by government agencies ... 3

2. THE MONEY LAUNDERING CONVICTIONS ... 3

A. The government did not prove the jurisdictional element of the money laundering offenses ... 3

3. TAX OFFENSE SENTENCING ... 5

A. No income was derived from the illegal sales of guns ... 5

4. CRIMINAL HISTORY COMPUTATION ... 6

A. The trial court erroneously concluded it did not have the authority to depart downward to a lower criminal history score ... 6

5. THE $15,000 FINE, PAYABLE WITHIN 90 DAYS ... 6

A. Mr. ladum established he was unable to pay a $15,000 fine at the time of sentencing ... 6

¶ Daniel Hong

1. THE TRIAL COURT ERRED IN DENYING DEFENDANT HONG'S MOTION TO DISMISS COUNT 10 (FILING A FALSE RETURN) ... 7

2. THE TRIAL COURT ERRED IN DENYING DEFENDANT HONG'S MOTION TO SUPPRESS HIS STATEMENTS ... 8

*ii ¶ David Grigonis

1. STATEMENT OF THE ISSUE PRESENTED FOR REVIEW ... 11

A. Did the District Court err when it denied David Grigonis's motion to Dismiss Counts 21 through 30 based on the fact that proceeds were derived from unlawful conduct? ... 11

CONCLUSION ... 12

*iii TABLE OF AUTHORITIES

Cases Cited

Stirone v. United States, 361 U.S. 212 (1960) ... 2

United States v. Apfelbaum, 445 US 115, (1979) ... 10

United States v. Aguilar, 21 F.3d 1475 (9th Cir. 1994) ... 1,2,3

United States v. Allen, 88 F.3d 765 (9th Cir. 1995) ... 4,5

United States v. Alzate-Restreppo, 890 F.2d 1061 (9th Cir. 1989) ... 10

United States v. Borman, 992 F.2d 124, (7th Cir. 1993) ... 7,8

United States v. Equihua-Juarez, 851 F.2d 1222 (9th Cir. 1988) ... 10

United States v. Ford, 989 F.2d 347 (9th Cir. 1993) ... 5

United States v. Gates, 616 F.2d 1103, (9th Cir. 1980) ... 1

United States v. Gordon, 974 F.2d 1110 (9th Cir. 1992) ... 9,10,11

United States v. James, 987 F.2d 648 (9th Cir. 1993) ... 4

United States v. Leslie, 103 F.3d 1093 (2nd Cir. 1997) ... 4

United States v. Mandujano, 425 U.S. 564, 96 S.Ct. 1768, 48 L.Ed.2d 212 (1976) ... 9,10,11

United States v. Mitchell, 812 F.2d 1250 (9th Cir. 1987) ... 9,10,11

United States v. Ripinsky, 109 F.3d 1436 (9th Cir. 1997) ... 4

Other Authorities

18 U.S.C. § 922 (a) ... 5

18 U.S.C. § 924(a)(1)(A) ... 5

18 U.S.C. § 1001 ... 9,11

18 U.S.C. § 1503 ... 2,3

*iv 18 U.S. C. § 1512 ... 1

18 U.S.C. § 1956(C)(4)(B) ... 3,4

18 U.S.C. § 1957 ... 4

USSG § 5E1.2 (application note 3) ... 6

26 U.S.C. § 7206(1) ... 8,11

Black's Law Dictionary, 4th Ed. 1968 ... 8

American Heritage Dictionary (1983) ... 8

Webster's Third New International Dictionary (1983) ... 8

Defendants Ladum, Hong, and Grigonis jointly submit this reply brief. The other defendants have decided not to file a reply brief.

¶ Robert Ladum

1. THE OBSTRUCTION OF JUSTICE CONVICTION

A. 18 U.S.C § 1512 is the only statute under which witness tampering allegations may be prosecuted.

The government contends that allegations of witness tampering may be prosecuted under 18 U.S.C. § 1503. It acknowledges that the language in United States v. Aguiiar, 21 F.3d 1475 (9th Cir. 1994) is contrary to its position, but urges this court to abandon it because: i) the comments were not necessary to the decision in Aguiiar and ii) other courts have concluded differently.

Mr. Ladum agrees that the comments in Aguiiar were dicta. They were, however, a clear expression of this court, sitting en banc, on the issue presented here.

"Prior to its 1988 amendment, section 1503 extended to persuading a witness to tell a false story (see United States v. Gates, 616 F.2d 1103, 1105, 1107 (9th Cir. 1980)); the amendment explicitly shifted the prohibition on such 'corrupt persuasion' of a witness to section 1512." Aguiiar, at 1486.

The government cites a number of cases from other circuits in support of its position. All but two of them pre-date the opinion in Aguiiar. This court was undoubtedly aware of the contrary views when Aguiiar was decided. Nothing has *2 transpired since then that would compel a change of position. The logic and language of Aguilar provide that Mr. Ladum was prosecuted under a statute that does not outlaw the allegations against him. His conviction should be reversed.

B. The government did not prove that Mr. Ladum obstructed justice by creating false documents for Mathis to present to the grand jury.

Even if witness tampering can not be prosecuted as charged under 18 U.S.C. § 1503, the government contends that Mr. Ladum violated that statute by "creating phony evidence." It cites three acts as support: (i) Mr. Ladum's approval of Mathis' plan to create phony business records and present them to the grand jury (ii) Mr. Ladum's suggestion that Mathis scramble the records before turning them over to the grand jury and (iii) Mr. Ladum's reported suggestion that Mathis obtain a false lease from James Weaver.

The latter two allegations are irrelevant as they were not in the obstruction count of the indictment. See Stirone v. United States, 361 U.S. 212 (1960). As set forth in Mr. Ladum's opening brief (D.Br. 28) there was no evidence that Mr. Ladum participated in any way in the creation of the false business records. Mathis may not have been willing to act without Mr. Ladum's approval, but there was no indication that Ladum required or was even aware of that. The only act related to the presentation of evidence testified to, Mr. Ladum's alleged approval of Mathis' plan, does not amount to a separate violation of 18 U.S.C. § 1503.

*3 C. 18 U.S.C. § 1503 does not extend to investigations by government agencies.

Appellee seems to have misread Mr. Ladum's position relating to the fact that the business records fabricated by Mathis and John Hunter were never presented to the grand jury. It was never contended that the mere fact that the documents were never presented to the grand jury would prevent liability under 18 U.S.C. § 1503. The point raised was that by the time the documents were fabricated, Mathis was no longer under a subpoena obligation to present them to the grand jury. When he was re-subpoenaed on August 10, 1994 he was given a subpoena only for his personal appearance. He was subsequently asked to bring the documents to the United States Attorney's office, not the grand jury. The fact that they were never provided to the grand jury after he delivered them is significant because it reflects that they were obtained by the government as part of the IRS investigation, not a judicial proceeding as required for conviction under 18 U.S.C. §1503. The obstruction statute does not prohibit interference with an agency's investigation. Aguilar, at 1484.

2. THE MONEY LAUNDERING CONVICTIONS

A. The government did not prove the jurisdictkinal element of the money laundering offenses.

The government does not contest that it offered no direct evidence that the transactions that comprise the money laundering charges involved a financial institution which "is engaged in, or the activities of which affect, interstate or foreign commerce in any way or degree." 18 U.S.C. § 1956(C)(4)(B). Instead it argues *4 that the requisite proof may be gleaned from either the name of the banks involved or inscriptions on checks and other bank documents.

In support of it's position, it cites United States v. Ripinsky, 109 F.3d 1436 (9th Cir. 1997) and United States v. Leslie, 103 F.3d 1093 (2nd Cir. 1997). Neither is persuasive.

Referring to Ripinsky, the government suggests "this court seemed satisfied with proof that 'some of the deposits were made at large, well-known institutions such as Wells Fargo Bank."' (G.Br. 59) It then cites three banks involved in the money laundering counts, apparently suggesting that their size and reputation can satisfy the required jurisdictional element. Ripinsky does not support that conclusion. The issue in that case related to the trial court's failure to instruct the jury on the definition of "monetary transaction" in 18 U.S.C. § 1957. Ripinsky didn't object at trial and this court declined to reverse under the plain error standard. The reference to Wells Fargo came in a paragraph that clarified that the issue was not a failure of proof but a failure to instruct properly.

In Leslie, the Second Circuit did conclude that the jurisdictional element required by section 1956 could be established by reference to the word "federal" in the name of a bank. The government raised the same issue in United States v. Allen. 88 F.3d 765 (9th Cir. 1995). This court, referring to United States v. Tames. 987 F.2d 648 (9th Cir. 1993), took an opposite position, concluding that the names of banks "were not in themselves sufficient to establish federally-insured status..." Allen, at 768.

*5 The government does refer to Allen in support of it's contention that federally-insured status may be found in various inscriptions on checks and other bank documents submitted as evidence in the trial of this case. The checks in Allen bore the notation "member FDIC" This court found they established federally-insured status "if only by a thin margin." The evidence the offered here doesn't rise to the level of that in Allen. There is no basis for further lowering the bar the government needs to clear,

3. TAX OFFENSE SENTENCING

A. No income was derived from the illegal sales of guns.

The government contends that Ladum and Weaver profited by more than $10,000 from fraudulently obtaining a federal firearm license and using it to purchase and sell guns (G. Br. 2-73). It indicates that in his opening brief, Mr. Ladum claimed the enhancement of his sentence under 2Tl.l(b)(l) was inappropriate because the gun sales generated no income. That is not accurate. Mr. Ladum maintained that the only crime arguably committed, Mr. Weaver's violation of 18 U.S.C. 924(a)(l)(A), did not directly result in the production of illegal income. See United States v. Ford, 989 F.2d 347, 350 (9th Cir. 1993). Obviously the sale of guns produced income. But since Mr. Weaver was licensed at the time, no violation of 18 U.S.C. 922(a) occurred. Since the illegal activity did not directly result in the production of income, application of the enhancement was inappropriate.

*6 4. CRIMINAL HISTORY COMPUTATION

A. The trial court erroneously concluded it did not have the authority to depart downward to a lower criminal history score.

The government acknowledges that if the sentencing court didn't realize it had the authority to depart downward, remand would be appropriate (G. Br. 83). It is. The twisted logic offered to counter that conclusion serves only to illustrate the absurdity of the government's position. It well knows the only issue before the sentencing court was Mr. Ladum's request for a downward departure because his criminal history was over-represented. There was no "other argument," (G. Br. 85) and the record does not contain "several references indicating the court's awareness of its ability to depart." (G. Br. 87). The weakness of the government's position is revealed by the length it must stretch the facts for support.

5. THE $15,000 FINE, PAYABLE WITHIN 90 DAYS.

A. Mr. LaduiTLestablished he was unable to pay a $15.000 fine at the time of sentencing.

Through his status as an indigent (USSG § 5E1.2 (application note 3)) and sentencing presentation to the court, Mr. Ladum established that he did not have the ability to pay a fine at the time of sentencing. The government presented no direct evidence to the contrary.

In fact, when it suited the government's purposes, it argued the opposite, declaring that Mr. Ladum had "no further assets." (ER supplemental filing) It now tries to sweep that statement under the rug by characterizing the reference as an attempt by Mr. Ladum "to pick apart the trial record." The *7 government's willingness to mold the "facts" into whatever shape it deems efficacious at the moment should be considered in determining the weight accorded to its position.

In an attempt to diminish the weight accorded to Mr. Ladum's status as an indigent, the government now claims that his application for appointed counsel was fraudulent. At no time during the proceedings, however, did the government offer any evidence that Mr. Ladum's affidavits of indigence were inaccurate or false. One is left to wonder why, if facts supporting that allegation exist, the government has declined to reveal them.

Mr. Ladum asks that this issue be remanded to the trial court for determination of his future ability to pay a fine. If the court feels he can, than he seeks establishment of a reasonable payment schedule so he can meet his obligation without the interest and penalties that will otherwise attach.

¶ Daniel Hong

1. THE TRIAL COURT ERRED IN DENYING DEFENDANT HONG'S MOTION TO DISMISS COUNT 10 (FILING A FALSE RETURN).

Defendant Hong's argument on this issue is contained at pages 61-70 of appellants' opening brief; the Government's response is at pages 30-36 of its brief.

In his opening brief, Mr. Hong suggests that this Circuit adopt the Seventh Circuit's doctrines, "using the wrong form does not violate § 7206(1)," and, "a charge that the taxpayer makes an implicit representation when filing the wrong form adds nothing beyond a charge of filing the wrong form." United States v. Barman, 992 F.2d 124, 126 (7th Cir. 1993). In response, the government attempts to *8 distinguish Borman because here, in the government's view, "defendants did not merely imply they were sole proprietors; they affirmatively represented they were." Govt. Br. 35 (emphasis added)

According to the government, the affirmative representations were that: "On the first line of [Schedule C], each defendant listed himself, alone, as the proprietor. Govt. Br. 35. (emphasis added) But merely filling in the wrong form with truthful information, here the "name of proprietor," is no more criminal than filing the wrong form in the first place, particularly in the instant case where Daniel Hong actually was the proprietor of Columbia Cash, whether or not Mr. Ladum was his partner. [FN1]

FN1. As defendant noted in his opening brief, "proprietor" has been alternatively defined as: (1) "One who has the legal right or exclusive title to anything. In many instances it is synonymous with owner." (Black's Law Dictionary, 4th Ed. 1968); (2) "An owner." (American Heritage Dictionary (1983)); and (3) "One having an interest (as control, present use, or usufruct) less than absolute and exclusive right." (Webster's Third New International Dictionary (1983)). App. Br. 67, n. 19.

Thus, this Court should reject the government's approach, which would allow prosecution under 26 U.S.C. § 7206(1) wherever any taxpayer files the wrong form, and reverse the trial court's denial of Defendant Hong's motion to dismiss.

2. THE TRIAL COURT ERRED IN DENYING DEFENDANT HONG'S MOTION TO SUPPRESS HIS STATEMENTS

Defendant Hong's argument on this issue is contained at pages 70-77 of appellants' opening brief; the Government's response is at pages 36-43 of its brief.

*9 Defendant Hong does not desire to reply to the government's "fruits" argument. Compare, Appellants' Brief, 71-77, to Government Brief, 40-43. However, defendant must reply to the government's two, related initial responses to this assignment of error: (1) the government claims that the exclusionary rule does not apply to statements which are crimes, and (2) the government claims that the exclusionary rule does not apply to falsehoods. [FN2] Defendant submits that to apply these rules to the facts of the instant case would amount to a gross expansion of limited doctrines far beyond their terms.

FN2. Of course, these two principles often amount to the same thing in a federal criminal case because 18 U.S.C § 1001 makes it a crime to make a false statement to a federal agent.

Defendant Hong acknowledges the teaching of United States v. Mitchell, 812 F.2d 1250 (9th Cir. 1987) and United States v. Gordon, 974 F.2d 1110 (9th Cir 1992), that governmental misconduct does not bar prosecution of an offense committed while a suspect is being held in custody following an illegal arrest. Defendant Hong also acknowledges the rule of United States v. Mandujano, 425 U.S. 564, 96 S.Ct. 1768, 48 L.Ed.2d 212 (1976), that perjury prosecutions are permissible for false answers to questions following the grant of immunity. Thus, defendant Hong concedes that he could not have obtained dismissal of his false statement count on the basis of the unconstitutional search of his business, even though the *10 government admitted the search was so "bad" that suppression of all items seized was appropriate. TR 792-793, 806. [FN3]

FN3. This count was dismissed before trial pursuant to the "exculpatory no" doctrine. See, United States v. Alzate-Restreppo, 890 F.2d 1061, 1066 (9th Cir. 1989), citing United States v. Equihua-Juarez, 851 F.2d 1222, 1224 (9th Cir. 1988). CR 630.

But neither Mitchell/Gordon, nor Mandujano create a rule of law that denies standing to any defendant who seeks to suppress a statement that the government can prove is untrue. The government's attempt to transform the dicta in United States v. Apfelbaum, 445 US 115, 127 (1979) that the constitution does not "empower the person who testifies with a license to commit perjury," Govt. Br. 40, into a broad anti-standing rule is without any authority in the government's brief. In fact, all of the cases cited in the government's brief involve the limited situation where a defendant was charged with a crime (threatening the president and perjury) which was completely contained within the defendant's statement itself.

The procedural steps involved in the government's proposed rule would be unmanageable. For example, assume a drug investigation where a suspect, Mr. Smith, is not given Miranda warnings before a DEA custodial interrogation. Further assume that during the interrogation, the suspect denies knowing a Mr. Jones. Under the approach of the government in this case, the suspect Mr. Smith would not be allowed to suppress his unconstitutional interrogation if the government produced a surveillance photograph showing a meeting between the suspect and Mr. Jones. This novel approach to hearings on motions to suppress statements is not required by Mitchell/Gordon or Mandujano. *11 Moreover, the government's approach would be practically impossible to implement in many cases, as was made clear by the instant case where the government used numerous witnesses and more than six weeks of trial to show that Mr. Hong's statements were untrue.

Thus, the trial court erred in denying Mr. Hong's motion to suppress his statements.

¶ David Grigonis

1. STATEMENT OF THE ISSUE PRESENTED FOR REVIEW

A. Did the District Court err when it denied David Grigonis's motion to Dismiss Counts 21 through 30 based on the fact that proceeds were derived from unlawful conduct?

The government fails to recognize that the jury's determination that David Grigonis was not guilty of Counts 5 through 8 which charged violations of 26 USC Section 7206(1), Filing a False Tax Return for the Calendar years 1988 through 1991 and the fact that David Grigonis was found not guilty in Counts 13 and 14 which charged a violation of 18 USC Section 1001, Making False Statements should have indicated to the trial court that David Grigonis was the lawful owner of the property which contained the stores. Therefore any rent paid to David Grigonis was simply money that was required to make payments on the loans that were outstanding on the property. There is no connection between these payments and any proceeds from the bankruptcy fraud. Whoever the owner of the property was would have been required to pay the same amount of rent. This money had no connection to any bankruptcy fraud and was completely legitimate money. It was *12 not proceeds. There was no attempt at concealment. David Grigonis has no knowledge that the money is coming from unlawful activity.

David Grigonis respectfully requests that his conviction on these counts be reversed by this court.

For the reasons stated above and for the reasons stated in the appellants' joint opening brief, the relief sought by each of the appellants should be granted and their convictions should be reversed or remanded for re-sentencing as appropriate.

UNITED STATES OF AMERICA, Plaintiff-Appellee, v. Echols Doyle FORD, David Grigonis, Daniel Hong, Robert Ladum, Ronald Van Vliet, and James Weaver, Defendant-Appellants.

1997 WL 33547052