United States v. Bond ( 2009 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA,  No. 06-50628
Plaintiff-Appellee,
v.  D.C. No.
CR-05-00660-PA
ILLYA BOND, aka Frank Akbery,
OPINION
Defendant-Appellant.

Appeal from the United States District Court
for the Central District of California
Percy Anderson, District Judge, Presiding
Argued and Submitted
June 5, 2008—Pasadena, California
Filed January 20, 2009
Before: David R. Thompson, Diarmuid F. O’Scannlain, and
Richard C. Tallman, Circuit Judges.
Opinion by Judge O’Scannlain
705
708 UNITED STATES v. BOND
COUNSEL
Roger S. Hanson, Santa Anna, California, argued the cause
for the defendant-appellant and submitted briefs.
Patrick Jasperse, Office of Consumer Litigation, U.S. Dept. of
Justice, Washington, DC, argued the cause for the plaintiff-
respondent and submitted a brief. Kenneth L. Jost, Office of
Consumer Litigation, U.S. Dept. of Justice and Thomas P.
O’Brien, United States Attorney for the Central District of
California were on the brief.
OPINION
O’SCANNLAIN, Circuit Judge:
We must decide whether the government withheld Brady
information from a defendant in a wire fraud prosecution aris-
ing out of an electric power sales scheme in the deregulated
California market.1
I
In 1998, California deregulated its electricity industry,
which, at the time, consisted of three major companies:
Pacific Gas & Electric, Southern California Edison, and San
1
In a concurrently filed memorandum disposition, we address Bond’s
additional challenges to the district court’s decision. See United States v.
Bond, No. 06-50628 (9th Cir. Jan. 20, 2009).
UNITED STATES v. BOND 709
Diego Gas & Electric. Although these utilities continued to
transmit and to distribute electricity, after deregulation Cali-
fornia customers could choose to buy their power from the
regional supplier, or they could select a different electric ser-
vice provider (“ESP”).
A
Attracted by the business opportunity presented by
deregulation, Defendant-Appellant Bond bought an inactive
shell company in 1998 that had previously been involved in
providing electricity and formed PowerSource Corporation
(“PowerSource”). Bond was its chief executive officer, and
marketed the company as an ESP that would provide residen-
tial and commercial electricity throughout the state. Power-
Source did not operate its own power stations. Rather, the
company purchased electricity from other sources and then
sold it to its customers at a slight mark-up.
PowerSource divided California into 39 districts in which
it would sell power. It planned to have each district financed
by a partnership that would contribute capital in return for a
percentage of PowerSource’s profits from that district. Power-
Source hired Power Capital Funding Group
(“PowerCapFunding”) to sell the partnerships. PowerCap-
Funding was run by Ronald Johnson and James Miles.
PowerCapFunding, in turn, hired various telemarketing
“boiler rooms” to sell units in the partnerships to investors.
The boiler rooms (euphemistically called “independent selling
organizations”) then called individuals, in hope that they
would be interested in buying into one of the partnerships.
Interested individuals were sent further information by mail.
The telemarketing entities sold partnership units from late
1998 through summer 2001. Each partnership unit cost
$10,000, and the investment plan anticipated that each part-
nership would encompass 60 partnership units. Once sixty
710 UNITED STATES v. BOND
units had been sold, the partnership was closed and another
partnership was opened.
The financing scheme was a scam. Numerous material mis-
representations and omissions were made to the potential
investors by the telemarketers and in the printed marketing
materials. PowerCapFunding, with input from Bond, created
Partnership Memoranda that detailed the purpose and terms of
the partnership offering. These memoranda stated that sales
commissions on each investment unit would be between 15
and 45 percent. In fact, however, PowerCapFunding retained
a 61 percent sales commission. The memoranda also con-
tained misleading biographical information on Bond and other
significant PowerSource figures. The memoranda further
identified several individuals as serving in consulting or exec-
utive capacities who had never done so and had not given per-
mission for their personal information to be included in the
partnership marketing materials.
Also significant, the Partnership Memoranda included part-
nership income forecasts based on the number of customers
PowerSource projected gaining in each particular district.
These, too, relied on information Bond had provided. The first
partnership memorandum, dated October 1, 1998, projected a
$1.6 million profit in one of the districts. And even though
PowerSource was not meeting its market penetration targets,
the projections increased with each new partnership marketed
to the investors.
PowerSource and PowerCapFunding also conducted con-
ference calls with investors in each partnership. The purpose
of these calls was to solicit additional investments and to reas-
sure investors. Bond told the investors that after a year, they
could convert their partnership units into PowerSource stock
worth $12,500. In reality, the units were converted into worth-
less PowerSource Class B preferred stock. The investors were
also erroneously told that PowerSource was successfully
acquiring customers, that it had a state-of-the-art computer
UNITED STATES v. BOND 711
system that could handle up to two million customers, and
that its financial situation remained viable.
In the end, PowerSource never had more than 6,885 cus-
tomers, and it struggled to perform the most basic business
functions, like customer billing. In March 2001, PowerSource
decided to return all of its customers to the three major elec-
tricity companies, and after July 2001, it had zero customers.
Ultimately, the investors lost nearly $2.5 million, recouping at
most $80 on each $10,000 investment.
B
In November 2002, FBI agents interviewed Bond, who
stated that he had worked for PowerSource only from 1997-
1999 and only as a consultant. He identified E. Douglas
Mitchell as the CEO of PowerSource. Apparently, Bond’s
attempt to minimize his involvement with PowerSource was
initially successful. In 2003, seven individuals connected to
PowerSource, including Mitchell and Johnson, were indicted
in the Southern District of Florida. Bond, however, was not
among them. Six of these individuals pled guilty.2 Mitchell,
however, went to trial and was convicted of conspiracy to
commit wire fraud and mail fraud in violation of 18 U.S.C.
§ 371. Several of the individuals who pled guilty, including
Johnson, testified at Mitchell’s trial. Bond was, of course,
aware of the Florida proceedings and that various individuals
with whom he had worked were testifying. In early 2005, the
government specifically gave Bond’s attorney the contact
information for the court reporter transcribing the Florida
trial.
2
Three defendants pleaded guilty to one count of conspiracy to commit
wire fraud and mail fraud in violation of 18 U.S.C. § 371. Two defendants
pleaded guilty to both a § 371 violation and substantive wire fraud counts.
The final defendant pleaded guilty to conspiracy to defraud the United
States.
712 UNITED STATES v. BOND
C
In July 2005, Bond himself was indicted in the Central Dis-
trict of California for his role in the PowerSource/ PowerCap-
Fund investment scheme. Specifically, he was charged with
one count of conspiracy to commit mail and wire fraud under
18 U.S.C. § 371, seven counts of mail fraud under 18 U.S.C.
§ 1341, three counts of wire fraud under 18 U.S.C. § 1343,
and one count of making a false statement under 18 U.S.C.
§ 1001. Shortly thereafter, the government again gave Bond’s
counsel the contact information for the Florida court reporter.
During the pre-trial proceedings in Bond’s case, one of
Bond’s trial counsel also represented that he had, in fact, been
in contact with the Florida court reporter and he had obtained
at least some transcripts from the Florida proceedings.
In conversations with defense counsel, the government
repeatedly referred to Johnson and some of the other individu-
als indicted in Florida as possible witnesses against Bond and
specifically listed Johnson on the witness list it filed with the
district court. Additionally, the government provided Bond’s
counsel with two agent interview summaries from when they
had questioned Johnson, as well as agents’ notes from several
other meetings involving Johnson. However, the government
ultimately decided not to call Johnson as a witness, and Bond
failed to make any effort to subpoena him as a witness for the
defense. Thus, Johnson never testified at Bond’s trial.
The jury convicted Bond on all charges. The Pre-
Sentencing Report (“PSR”) submitted to the court concluded
that Bond had a category three criminal history and that his
base offense level was six. Among other sentencing enhance-
ments, the report recommended a 16-level enhancement under
U.S.S.G. § 2B1.1 for amount of loss between $1.0 and $2.5
million.
At the sentencing hearing, Bond raised numerous objec-
tions to the PSR, but he did not challenge the amount-of-loss
UNITED STATES v. BOND 713
enhancement. In fact, Bond’s counsel agreed that the “proba-
tion officer correctly analyzed and applied the guidelines.”
The district court, considering the relevant sentencing factors,
sentenced Bond to the statutory maximum of 60 months’
imprisonment on each of the 12 counts of conviction to be
served partially concurrently and partially consecutively, for
a total of 96 months’ imprisonment. The district court further
ordered Bond to pay $2,435,441 in restitution. Bond timely
appealed.
II
On appeal, Bond argues that Johnson’s testimony would
have been favorable to him and that the government “sup-
pressed” such evidence in violation of Brady v. Maryland,
373 U.S. 83 (1963), by failing to call Johnson as a govern-
ment witness after indicating that it would do so.
[1] Relying on United States v. Aichele, the government
responds that where the “defendant has enough information to
be able to ascertain the supposed Brady material on his own,
there is no suppression.” 941 F.2d 761, 764 (9th Cir. 1991)
(citing United States v. Dupuy, 760 F.2d 1492, 1502 n.5 (9th
Cir. 1985)). The government contends that Johnson’s testi-
mony was not suppressed for Brady purposes because Bond
was fully aware of Johnson’s existence and the substance of
his likely testimony, as Bond had received transcripts of John-
son’s testimony in the Florida trial. See Wright v. Hopper, 169
F.3d 695, 702 (11th Cir. 1999) (holding government did not
suppress witness’ preliminary hearing testimony where the
defense was aware of her and could have obtained a transcript
of the prior proceeding or interviewed her). As such, the gov-
ernment contends that Bond could have secured Johnson’s
testimony by subpoenaing Johnson as a witness for the
defense.
714 UNITED STATES v. BOND
A
[2] The passage in Aichele relied on by the government is
dictum. Benn v. Lambert, 283 F.3d 1040, 1061 (9th Cir.
2002). However, sitting en banc, we have held that a discus-
sion in a published opinion from this court is binding circuit
law “regardless of whether it was in some technical sense
‘necessary’ to [the] disposition of the case.” Barapind v. Eno-
moto, 400 F.3d 744, 750-51 (9th Cir. 2005) (en banc) (per
curiam). Accordingly, we are bound by this passage, at least
in cases like Aichele where there was no government action
to throw the defendant off the path of the alleged Brady informa-
tion.3
Our conclusion is buttressed by the Court’s decision in
United States v. Dupuy, which also involved a witness state-
ment for a trial of a multi-defendant drug conspiracy. 760
F.2d at 1495. The prosecutor ultimately entered into plea
agreements with two of the co-defendants. She took notes
during the plea negotiations which she agreed would remain
confidential except for impeachment purposes. Id. at 1501.
Just before trial began, however, the prosecutor determined
that the notes contained Brady materials, and given her prom-
ise to keep such confidential, she approached the trial judge
for instruction on what she should do. Id. The judge disclosed
the identity of the two co-defendants to the defendant, and
3
The case at bar is readily distinguishable from our recent decision in
Tennison v. City and County of San Francisco, No. 06-15426, slip. op at
16083 (9th Cir. Dec 8, 2008). In Tennison, the police had conducted
extensive and detailed interviews with a witness who possessed exculpa-
tory information. We found a Brady violation because of the police offi-
cers’ failure to share the information with the defense. While the
defendants may have known to some limited degree that the witness “had
information about the murder, [such] knowledge is not the same as [the
witness’] extensive statements to the police.” Id. at 16101. Here, both
sides had access to Johnson’s public testimony. Cf. id. (noting that the
defendants did not even know the witness’ name or “the extent of the
information” provided by the witness, which included many specific
details about the crime).
UNITED STATES v. BOND 715
then, concluding that the defendant could “independently pro-
ceed to ascertain the Brady material,” the judge placed the
prosecutor’s notes under seal without conducting an in camera
review. Id. at 1501-02.
On appeal, we held that such action would have been
appropriate had the defendant sought the co-defendants’ state-
ments, because “where a witness is involved ‘[t]he govern-
ment is not required to make a [his] statement known to a
defendant who is on notice of the essential facts which would
enable him to call the witness and thus take advantage of any
exculpatory testimony that he might furnish.’ ”4 Id. at 1502
(alteration in original) (quoting United States v. Brown, 582
F.2d 197, 200 (2nd Cir. 1978)); see also United States v.
Lockhart, 956 F.2d 1418, 1425-26 (7th Cir. 1992) (holding
there was no Brady violation where government decided not
to call one of its witnesses who had recanted but failed to pro-
vide precise details of such recantation because the defendant
had an opportunity to subpoena the witness). However,
because the defendant was seeking access to the prosecutor’s
notes rather than to the witnesses’ statements, the court
remanded the case back to the district court for consideration
of “whether disclosure of the notes might have affected the
outcome of the trial.” Dupuy, 760 F.2d at 1502-03.
B
Nor is Bond’s position aided by our decision in Benn.
There, the government created a report concluding that arson
had been committed, but did not disclose the opinions of cer-
tain of its experts that the fire was accidental. While the gov-
ernment produced the names of the experts, it “not only failed
to disclose the crucial information about the accidental nature
4
In a footnote, the Dupuy court further stated: “Since suppression by the
Government is a necessary element of a Brady claim, if the means of
obtaining the exculpatory evidence has been provided to the defense, the
Brady claim fails.” 760 F.2d at 1502 n.5 (internal citation omitted).
716 UNITED STATES v. BOND
of the fire, but . . . actually misled the defense by disclosing
a part of the experts’ findings that, read alone, would lead to
a conclusion directly opposite to the one they reached.” Benn,
283 F.3d at 1062 (emphases added). “A defendant furnished
with such inculpatory evidence by the state is not required to
assume that the state has concealed material information and
has thereby obligated him to ascertain the Brady material on
his own.” Id.C
[3] Here, there was no concealment of information at all.
There was no material favorable to Bond that the government
failed to produce. Nor did the government selectively disclose
items to mislead the defense. Instead, it provided Bond with
the information needed to acquire all trial testimony, and pro-
vided him with the essential factual data to determine whether
the witness’ testimony might be helpful. See Dupuy, 760 F.2d
at 1502 (noting that it is enough if the defendant is “on notice
of the essential facts which would enable him to call the wit-
ness”). We decline to extend Benn beyond cases in which the
government has affirmatively misled the defendant by a selec-
tive disclosure of information.5
[4] Here, Bond essentially argues that Johnson’s testimony
would have been favorable to him and that the government
“suppressed” such evidence in violation of Brady by failing
5
Nor is Bond aided by our decision in Paradis v. Arave, 130 F.3d 385(9th Cir. 1997). In Paradis, the government failed to turn over notes indi-
cating that a prosecution expert had originally stated that the victim did
not die in the creek where her body was found, even though that same
expert later testified to the contrary. Again, the government had in its pos-
session specific exculpatory evidence, but did not disclose it. Id. at 392.
Instead, it presented evidence that was inconsistent with the exculpatory
evidence, leaving the defendant no reason to believe that exculpatory evi-
dence could be obtained. See id. at 395. In contrast, the government turned
over to Bond the existence of the trial transcript, as well as notes from
interviews of and other meetings with Johnson.
UNITED STATES v. BOND 717
to call Johnson as a witness after indicating that it would.
However, it is elementary that litigants are not required to call
every witness identified on their witness lists. The witness list
simply provides notice to the court and to opposing counsel
of the witnesses who may be presented at trial. See generally
United States v. Schwartz, 857 F.2d 655, 659 (9th Cir. 1988).
Whether a litigant actually calls all, or any, of the witnesses
on its witness list is purely a matter of trial strategy. Brady
does not, as a general matter, supplant the prosecutor’s ability
to make strategic choices during litigation. Cf. Morris v. Ylst,
447 F.3d 735, 742 (9th Cir. 2006). Rather, as this court stated
in Morris, “[t]he animating purpose of Brady is to preserve
the fairness of criminal trials . . . . The Brady rule is not meant
to displace the adversary system . . . .” Id. (internal quotation
marks omitted). Bond merely could have subpoenaed Johnson
on his own had he thought that the witness had anything
exculpatory to say.
AFFIRMED.