Wednesday, June 30, 2010

United States v. Batson: Restitution Orders in Tax Fraud Cases Permitted by 9th Circuit

Alma Batson plead guilty to one count of IRS Code §7206 for willfully aiding and assisting in the preparation of fraudulent tax returns. She conceded that at least $965, 673 in refunds were given to taxpayers that they were not entitled to. Batson was sentenced to prison followed by supervised release and ordered to pay $176,854 in restitution.

In an appeal Batson argued that only the Victim and Witness Protection Act (VWPA) and the Mandatory Victims Restitution Act (MVRA) authorized restitution as a condition of supervised release.


The Ninth Circuit held that 18 U.S.C. § 3563(b)(2), which grants federal courts broad discretion to order restitution as a condition of probation, and 18 U.S.C. § 3583(d), which extends that grant to supervised release, authorizes federal courts to order restitution as a condition of supervised release for any criminal offense, including those set forth in Title 26 (the IRS code), for which supervised release is properly imposed.

However, the Court concluded that Batson’s restitution had to be limited to the loss sustained by the government caused by the crimes she was convicted for. Because her crime did not involve a scheme, conspiracy, or pattern of criminal activity, as she plead to one count of preparing fraudulent returns, the restitution imposed as a condition of probation was limited to the loss pertaining to that count.

The case is: United States v. Batson, 9th Cir; June 21, 2010; 09-50238

Wednesday, June 23, 2010

Criminal Liability of Stock Brokers: Full Disclosure of Material Information

The 9th circuit court of appeals ruled on June 16th that securities brokers must disclose material information regarding a stock purchase if the broker has a fiduciary relationship with a client.

Hampton Porter Investment Bankers, LLC, became involved in a “pump and dump” scheme that resulted in “bonus commissions” for sales of “house stocks.” “House stocks” are those that were granted to Hampton Porter for either extremely discounted prices or for free and then driven up in price when clients were pressured into purchasing them, strongly discouraged from selling them, or simply ignored when clients made sales orders.

According to Section 10(b) of the Securities Exchange Act of 1934, it is illegal to use any manipulative or deceptive device in connection with a purchase. Rule 10b-5 states that it is illegal to “defraud, to make any untrue statement of, or omit to state, a material fact, or to engage in any course of business which operates as a fraud or deceit upon another in connection with the purchase or sale of a security.”

The court found that the overall “pump and dump” scheme was a separate violation of Rule 10b-5 from failure to disclose bonus commissions. Additionally, the Brokers’ failure to disclose was circumstantial evidence of their agreement to be part of this conspiracy.


The case is United States v. Laurienti, 07-50240

Wednesday, June 16, 2010

United States v. Bonds: Hearsay Evidence Affirmed as Inadmissible

Evidence provided by Greg Anderson, a trainer to Barry Bonds, was affirmed as inadmissible hearsay by the 9th Circuit on Friday, June 11th.

In order to successfully convict Bonds on multiple counts of perjury and one count of obstruction of justice, the government needed to prove that blood and urine samples were Bonds’s. Anderson refused to testify and subsequently the testimony of BALCO Director of Operations James Valente was also excluded by the district court. The government filed an interlocutory appeal in response to these rulings.

The district court first considered the admissibility of Anderson’s statement under the hearsay rule’s exception: F.R.Ev.807, which is restricted to exceptional circumstances. This case was identified as unexceptional by the court because it involved statements made by an unavailable witness. In addition, both the district court and court of appeals found that Anderson’s statements were not trustworthy, another requirement of F.R.Ev. 807

The court next considered whether Anderson’s statements were admissible under F.R.Ev.801 (d)(2)(C) and F.R.Ev.801(d)(2)(D). Rule 801 (d)(2)(C) states that a statement is a non-hearsay party admission if it is offered against a party and is a statement concerning the subject and Rule 801 (d)(2)(D) states that a statement is not hearsay if it is offered against a party and is a statement by the party’s agent or servant concerning a matter within the scope of the agency or employment, made during the existence of the relationship. Under both rules the court of appeals upheld the rulings of the district court that Anderson’s evidence is inadmissible hearsay.

Judge Bea disagreed with the court’s rulings that Anderson’s statements were not hearsay. Judge Bea argued that for purposes of F.R.Ev.801(d)(2)(D), Anderson was an agent of Bonds and the statements he made to Valente were within his agency; and, those statements were made during the term of his agency. Additionally Judge Bea argued that Anderson was authorized to identify the samples as those of Bonds under Rule 801(d)(2)(C).

The case is United States v. Bonds, 09-10079.

Thursday, June 10, 2010

California Supreme Court Grants Review on Penal Code Section 4019 (custody credits) and the Issue of Retroactivity

Yesterday, the California Supreme Court granted review on two cases involving the retroactivity of revised Penal Code section 4019.

The lead case on the issue is People v. Brown (2010) 182 Cal.App.4th 1354 (S181963), in which the Third District had held that the amendment must be applied retroactively to qualifying appellants whose cases were not final on appeal on the date of the statute's enactment.

People v. Rodriguez (2010) 182 Cal.App.4th 535, the first case to hold the amendment applies prospectively only, was also granted review. (See S181808.) But briefing in that case is being deferred pending consideration and disposition of Brown.

Although neither of these two cases can be cited as authority any longer because of the grant of review, there remain eight more published cases discussing the issue. Stay tuned.

Wednesday, June 2, 2010

U.S. Supreme Court Miranda Ruling: Suspects Must Speak Up

On Tuesday, the Supreme Court ruled that a suspect's silence can be used against them in court—unless they speak up and explicitly say otherwise. In a 5-4 decision, the court determined that in order for people to invoke their Miranda rights—the right to a lawyer, to remain silent, etc.—they have to tell the arresting police officer that they're doing so. The case in question involved a Michigan man, Van Thompkins, who was arrested for murder in 2000. Thompkins kept quiet during a nearly three-hour police interrogation, then answered "yes" to the question "do you pray to God to forgive you for shooting that boy down?" Thompkins argued that he had invoked his Miranda rights to remain silent by actually remaining silent, but he was eventually convicted of murder in 2001.The conviction was overturned after the 6th Circuit appeals court agreed with him, but today's ruling reinstates his conviction and forces suspect to inform police if they want to invoke their Miranda rights. Writing for the opposition, Justice Sonia Sotomayor argued that the ruling "turns Miranda upside down." "Criminal suspects must now unambiguously invoke their right to remain silent— which counterintuitively, requires them to speak," Sotomayor wrote. ''At the same time, suspects will be legally presumed to have waived their rights even if they have given no clear expression of their intent to do so."

The case is Berghuis v. Thompkins, 08-1470.