Wednesday, December 15, 2010

Grand Jury Subpoenas for Documents of a Public Investigation Enforceable

The Ninth Circuit Court reversed an order in the district court. The Ninth Circuit held that grand jury subpoenas for documents were enforceable where they came within subpoena power through litigation initiated after the grand jury investigation became public.

The government conducted an anti-trust investigation into alleged criminal conduct that became public. Private lawsuits were filed against the companies under investigation. These lawsuits were consolidated in district court into one case. During that litigation discovery produced defendants' documents that originated from outside of the United States. Several domestic law firms representing the defendant companies possessed the documents and were subpoenaed by the grand jury in the government investigation. The law firms moved to quash the subpoenas. The district court agreed, finding novel issues with the implications for grand-jury power and for the relationship between grand-jury proceedings and civil discovery of foreign defendants that were not indicted.

The court of appeals reversed, holding that grand jury subpoenas could be enforced. The court noted that the law firms did not establish or suggest any collusion between their clients and the government. The law firms also did not claim that the documents were privileged. The court applied its per se rule that a grand jury subpoena takes precedence over a civil protective order pursuant to (I) In re Grand Jury Subpoenas Served on Meserve, Mumper & Hughes (I), 62 F.3d 1222 (9th Cir. 1995).

This case is: In re Grand Jury Subpoenas; 9th Cir. December 7, 2010; 10-15758.

Monday, December 6, 2010

Ninth Circuit rules that "Honest Services" Mail Fraud Does Not Require Proof of Fiduciary Relationship

The Ninth Circuit Court reversed a district court order on Friday, December 3rd, that dismissed an indictment, remanding the action for further proceedings. The Court held that "honest services" mail fraud did not require proof of a fiduciary relationship nor did it require damages to the money or property of the victim. 

Brano Milovanovic and three others, (collectively Milovanovic), were indicted for "honest services" mail fraud for, according to the indictment, participating in a corrupt scheme to obtain commercial drivers' licenses in the State of Washington by cheating on the associated tests and falsifying residency in exchange for bribes. Milovanovic, a certified Bosnian translator, bribed a co-defendant who worked for a firm the state department employed to administer driving tests. Milovanovic and his co-defendant were not employees of the state and the state was not deprived of any fees associated with the commercial drivers' license testing process or any other funds. Therefore, the district court dismissed the indictment because the federal mail fraud statute required a fiduciary relationship.

The court of appeals reversed, holding that it remained an open question in the circuit whether "honest services" fraud under the mail fraud statute could be committed only by a "fiduciary." The Court determined that court authority on this question was inconclusive and that the inconclusiveness itself made it clear that there was no sense in determining fiduciary status as a step in evaluating a mail fraud indictment. The Court referred to 18 U.S.C. § 1341 and § 1346. The latter states that a "scheme or artifice to defraud" includes those which intend to deprive another of the intangible right of honest services. By combining the statutes, "whoever having devised or intending to devise a scheme or artifice to defraud" by "depriv[ing] another of the intangible right of honest services," using the mails, commits mail fraud. The court determined that the category "whoever" literally meant anyone, whether fiduciary or not. 

Judge Fernandez dissented, writing that he could not say that the indictment sufficiently pled the crime of "honest services" mail fraud because it failed to allege the kind of heightened duty to the government that would suffice to raise Milovanovic from the status of miscreant to the status of federal defendant. 

This case is: United States v. Milovanovic; 9th Cir.; December 3, 2010; 08-30381.