United States v. Voigt

Opinions of the United
1996 Decisions States Court of Appeals
for the Third Circuit
7-9-1996
United States v. Voigt
Precedential or Non-Precedential:
Docket 95-5092
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_______________
No. 95-5092
_______________
UNITED STATES OF AMERICA
v.
JOHN VOIGT,
Appellant
_______________
On Appeal from the United States District Court
for the District of New Jersey
(D.C. Criminal No. 93-cr-00300-1)
_______________
Argued January 25, 1996
Before: COWEN and SAROKIN, Circuit Judges, and
POLLAK, District Judge
(Filed July 9, 1996)
_______________
Lawrence S. Lustberg (ARGUED)
Crummy, Del Deo, Dolan,
Griffinger & Vecchione
One Riverfront Plaza
Newark, New Jersey 07102-5497
COUNSEL FOR APPELLANT
Kevin McNulty
Allan Tananbaum (ARGUED)
Faith Hochberg
Office of United States Attorney
970 Broad Street, Room 502
Newark, New Jersey 07102
COUNSEL FOR APPELLEE
_______________
OPINION OF THE COURT
_______________
COWEN, Circuit Judge.
John Voigt appeals from a judgment of conviction and
sentence entered by the District Court for the District of New
Jersey. The conviction arises from Voigt's role as the mastermind
of a pernicious "advance fee" scheme whereby Voigt, operating under
the auspices of the Euro-American Money Fund Trust, would obtain
substantial fees in advance from, respectively, unsuspecting loan
applicants and potential investors for various loans and
investments that never materialized. Over a three-year period the
Trust took in a total of 18.5 million dollars.
Of Voigt's eight assignments of error, two significant
constitutional questions are presented for our review. The first
is whether the government's use of acquitted codefendant Mercedes
Travis, who Voigt alleges was counsel to the Trust and to him
personally, as a confidential informant against him constitutes
"outrageous government conduct" in violation of the Fifth
Amendment's Due Process Clause. The second is whether the district
court violated Voigt's Sixth Amendment right to counsel of choice
when, citing potential conflicts, it disqualified a third attorney
Voigt sought to add to his defense team without holding a formal
evidentiary hearing. We also confront several questions of first
impression in this Circuit pertaining to the money laundering
statute, 18 U.S.C. 1956(a)(1), and its forfeiture counterpart.
Id. 982. We must decide whether those statutes require formal
"tracing" where laundered funds have been commingled in a bank
account with untainted funds. We also must determine what is the
proper burden of persuasion for forfeiture proceedings under 18
U.S.C. 982, a question we have addressed previously in two other
contexts. See United States v. Pelullo, 14 F.3d 881 (3d Cir. 1994)
(RICO; reasonable doubt); see also United States v. Sandini, 816
F.2d 869 (3d Cir. 1987) (CCE; preponderance). Finally, Voigt
contests the legal sufficiency of his convictions for tax evasion
under 26 U.S.C. 7201, and challenges the orders of the district
court requiring him to make restitution in the amount of $7,040,000
and refusing to grant his motions for severance.
For the reasons we set forth below, we will affirm
Voigt's conspiracy, money laundering and tax evasion convictions,
along with the order of restitution, in all respects. We will
vacate the judgment insofar as it incorporates an erroneous order
of forfeiture and remand for further proceedings consistent with
this opinion.
I.
THE FACTS
John Voigt was the mastermind of a scheme to defraud loan
applicants and potential investors by inducing them to pay
substantial "advance fees" for nonexistent loans and investments.
To implement this scheme, Voigt created two fraudulent entities:
Euro-American Money Fund Trust, and Meta Trading and Financial
International [hereinafter collectively referred to as "the
Trust"]. Voigt fabricated a fictitious genealogy for the Trust,
claiming that it was a long-established European financial
institution affiliated with the Catholic Church and the Knights of
Malta and that it had access to billions of dollars. Voigt also
falsely claimed that the Trust's headquarters was located in Paris,
France, and that he was the U.S. Director. To facilitate the
scheme Voigt used various aliases and required loan applicants to
fill out bizarre confidentiality agreements that purported to bar
customers from disclosing information about the Trust in this life
and the afterlife.
The scheme operated from early 1990 until mid-1993.
Brokers for the Trust recounted the false genealogy Voigt had
concocted to unsuspecting victims. At first, the Trust marketed
only "loans." These multi-million dollar loans were supposedly
self-liquidating, which meant that, in return for a fee that ranged
into the hundreds of thousands of dollars, customers would receive
a loan that they did not have to repay. As soon as the fees were
received they were distributed among the coconspirators.
Eventually, the Trust began to market "Master Collateral
Commitments" ("MCCs"), bogus financial instruments that were touted
as special promissory notes issued by banks and available only
through the Trust. They were marketed to unsuspecting investors
for 3.5-4.5 million dollars with the representation that they
eventually would yield hundreds of millions of dollars. All told,
Voigt's three-year gain from marketing self-liquidating loans and
MCCs was approximately seven and one-half million dollars.
On December 13, 1993, Voigt and four alleged
coconspirators--Skip Alevy, Mercedes Travis, Ralph Anderskow, and
Donald Anchors--were charged in a twenty-eight-count superseding
indictment. The indictment charged Voigt personally with one count
of conspiracy to commit wire fraud, fifteen counts of wire fraud,
four counts of money laundering, two counts of tax evasion, and
criminal forfeiture allegations arising out of the money laundering
counts. After a three-month trial, a jury convicted Voigt of all
counts except one count of wire fraud. After a nonjury proceeding
at which the district court ordered forfeiture of certain
automobiles and pieces of jewelry, the court sentenced Voigt to a
term of imprisonment of 188 months and ordered him to make
$7,040,000 in restitution. This appeal followed.
Voigt challenges the judgment against him on eight
grounds. He argues that: (1) the government's use of his alleged
attorney, Mercedes Travis, as an informant violated his Fifth
Amendment due process rights and his Sixth Amendment right to
effective assistance of counsel; (2) the district court erred in
disqualifying one of his attorneys due to a potential conflict of
interest without first making sufficient findings of fact, in
violation of his Sixth Amendment right to counsel of choice; (3)
there was insufficient evidence to support his conviction on money-
laundering counts twenty-five and twenty-six; (4) the forfeiture
order should be vacated because the district court failed to
require the government to prove beyond a reasonable doubt that the
forfeited items were "traceable to" laundered money; (5) his
convictions on the tax evasion counts should be vacated because the
government failed to prove an affirmative act of evasion as
required by statute; (6) the district court erred in imposing an
order of restitution without making findings of fact regarding his
ability to pay; (7) the district court should have granted his
motion for a severance because his co-defendants asserted defenses
antagonistic to his own; and (8) the district court erred in
increasing his Guidelines offense level by two points for
obstruction of justice.
II.
JURISDICTION
The district court had original jurisdiction over this
criminal action pursuant to 18 U.S.C. 3231. We exercise
appellate jurisdiction to review a final judgment of conviction
under 28 U.S.C. 1291.
III.
OUTRAGEOUS GOVERNMENT CONDUCT
Voigt argues that the government infringed his Fifth
Amendment right to due process by recruiting his attorney as a
government informant "in deliberate and flagrant disregard for the
attorney-client relationship." Voigt's Br. at 10. The premise of
this claim is that codefendant Mercedes Travis, with whom the
government had extensive investigative contacts, was his personal
attorney during the time of the investigation. The precise nature
of Travis' relationship with Voigt and with the government,
however, is in dispute.
A.
The relevant facts are as follows. Mercedes Travis began
working for the Trust in August, 1990. Voigt contends that she was
engaged as an attorney at that time, and points to an engagement
letter that supports his claim. The government, however, maintains
that it justly and reasonably believed that Travis was not and had
never been an attorney for the Trust. In any event, by Travis' own
account, she became concerned about the legitimacy of the Trust and
feared that she herself was being defrauded. As a result, she left
her post in Europe and approached the FBI with her concerns. In
June and July, 1991, she met with Special Agent Alvin Powell and
voluntarily provided him with a package of relevant documents.
Those documents indicated that the Trust was engaged in a fraud.
Over the course of a three-day interview at a New Jersey
motel in mid-July of 1991, Travis detailed the fraud for Powell.
Noting that Travis was an attorney, and having seen a letter on
Trust letterhead purporting to appoint Travis as attorney for the
Trust, Powell asked Travis whether she had acted in a legal
capacity for the Trust. Travis indicated on several occasions that
she had not acted as a legal representative for the Trust but,
rather, that she had been primarily responsible for initiating and
maintaining contacts with banks. Travis also insisted that the
letter purporting to appoint her as an attorney for the Trust was
false.
Travis indicated that she went to work for the Trust in
1990, first in the U.S. and later in Europe, believing it to be a
bona fide financial institution. Over time, however, she
discovered that, notwithstanding Voigt's contention that the Trust
possessed $75 billion in assets, the Trust was simply a shell
corporation with few assets. Travis then related that the Trust
was engaged in an advance-fee scheme for loans in which fees were
paid but no loan was ever funded. Based on Travis' allegations,
and on Powell's belief that she had not represented the Trust or
its members in a legal capacity, Powell enlisted the assistance of
Travis. Powell devised a pretext whereby Travis would reingratiate
herself with the Trust by falsely informing Voigt that she had
negotiated an MCC. Powell hoped that this would lead Voigt to
divulge further information about the Trust's activities. Powell
eventually had Travis officially designated as a "cooperating
witness" on the FBI's records.
Having enlisted Travis as an informant, Powell asked her
to sign a document allowing the consensual recording of her
conversations with Trust members, including Voigt. In that
document, however, Powell carefully noted that the purpose of the
recordings was to corroborate her statements, based on the
understanding that she had not acted, and would not act, as an
attorney for the Trust or any of its members. In September of
1991, Travis made three supervised calls from the FBI office in New
Jersey, although apparently none involved Voigt or his
coconspirators.
In October of 1991, Travis informed Powell that she had
been invited to Europe by someone associated with the Trust.
Powell asked her to maintain contact with him, and she called once
during her trip to inform Powell that she had met with Voigt, but
that they had discussed only personal matters. When Travis
returned from Europe, Powell met her in an Atlantic City hotel,
where she provided him with several cassette recordings of
conversations, documents obtained during the trip, and information
acquired by talking with Voigt. Travis was still convinced that
the Trust was engaged in a fraud. According to Powell's version of
the meeting, Travis indicated that she had not performed legal work
for the Trust or Voigt during her trip to Europe.
In February of 1992, Travis informed Powell that she had
prepared a tax opinion for Voigt. She claimed it was a "one-shot
deal," and that it concerned Voigt and not the Trust, but she did
not share the substance of the opinion with Powell. Powell had no
prior knowledge that Travis would be providing legal advice to
Voigt. In March of 1992, Travis advised Powell that she had
persuaded Voigt to let her become the Trust's attorney, but that
her role would be to facilitate communications between the Trust
and other entities. Powell became concerned about this latest
development because of potential attorney-client privilege problems
and because Travis herself might become an active participant in
what she had insisted was a fraud. He therefore instructed Travis
to meet with Assistant United States Attorney ("AUSA") Paul Zoubek,
who was supervising the investigation. Travis replied that she
would inform Powell if her status changed from facilitating loans
and investments to providing legal advice. Travis next called
Powell on March 10 to inform him that she indeed had been appointed
as attorney for the Trust. Powell again warned her about acting in
a legal capacity and warned her not to engage in any illegal
activity. He also gave her a firm date for their meeting with AUSA
Zoubek. In another telephone call two days later, Powell again
instructed Travis not to act as an attorney, and she reassured
Powell that the information she was providing raised no issue of
privilege.
On March 25, 1992, Travis and Powell met with AUSA Zoubek
at the U.S. Attorney's Office in Newark. After listening to Travis
recount her version of the events, AUSA Zoubek pointed out the
stark inconsistency between her original allegation that the Trust
was a fraud and her recent decision to rejoin the Trust as its
attorney. Travis indicated that she wanted to determine for
herself whether in fact the Trust was legitimate and would inform
the government of her findings within two weeks. AUSA Zoubek
nevertheless told her that she would be on her own, and that any
time spent in Europe working for the Trust would not be as a
government informant due to potential privilege problems.
According to Zoubek, as verified by Powell's notes of the meeting,
the only way that information otherwise privileged could be
provided to the government would be if the crime-fraud exception
were deemed to be applicable. Travis indicated that she
understood. At the same time, however, Powell instructed Travis to
report to him as to whether the Trust had sufficient funds to cover
its existing loan commitments.
From the time of their last meeting on March 25, 1992,
until May 1, 1992, Powell did not hear from Travis, but received
information indicating that she was participating in the same type
of fraudulent conduct that originally had motivated her to come
forward to the FBI. On May 1, 1992, Travis made two separate calls
to Powell from Europe. Her first call, which Powell maintained was
unsolicited, was from a pay phone because, according to Travis, she
was afraid her calls were being monitored. Travis again told
Powell that the Trust had no funds to lend, and that she would make
her "official" call later that day. In her second call, Travis
indicated that she was representing Voigt in connection with two
grand jury subpoenas for records of the Trust that Powell had
served on Voigt. At trial, however, Travis testified that at that
point she was representing only the Trust, and that attorney James
Binns was representing the Trust and its directors for purposes of
the criminal investigation. Powell advised Travis that she and
Voigt should appear at the FBI office to discuss the matter. It
was not until sometime after this May 1 call from Travis that
Powell had Travis officially taken off the books as a confidential
informant.
Travis did not contact the government again until
September of 1992, when Travis called AUSA Robert Ernst (who had
taken over the investigation) to discuss grand jury subpoenas that
had been served on the Trust in August. Travis informed Ernst that
she was representing the Trust in connection with the subpoenas.
Before any further discussion occurred, Ernst informed Travis that
she was a target of the investigation and, given her earlier
contacts with the government, that she had a conflict of interest
and should withdraw as counsel for the Trust. AUSA Ernst
documented this admonition in a letter sent to Travis eight days
later.
On November 6, 1992, Travis again made an unsolicited
call to Powell, warning him that an unsuspecting potential customer
was about to transfer $21 million to the Trust and asking him to
stop the transaction. In response to a question by Powell, Travis
indicated that she was not represented by counsel. After
reiterating that Travis was a target, Powell asked Travis whether
she would appear voluntarily before a federal grand jury. Travis
agreed to testify. After Travis had arrived in Newark, but prior
to her grand jury testimony, she met with Powell and AUSA Ernst.
Ernst repeated that Travis was a target, and informed her of her
rights. Ernst warned Travis not to disclose any confidences
between her and any person affiliated with the Trust because of
potential attorney-client privilege issues, and stated that he
would not ask any questions that would risk eliciting potentially
privileged information. In fact, when Travis indicated that she
had brought Trust documents with her to turn over to the
government, Ernst refused to examine them. Notwithstanding Travis'
insistence that the documents were not privileged because the Trust
did not actually exist, Ernst turned them over to an AUSA who was
not part of the investigation into the Trust to make an independent
privilege determination.
Before the grand jury, Travis again was informed of her
rights and that she was a target of the investigation. She was
again admonished not to disclose privileged information, and when
it appeared that she was about to do so, Ernst instructed her not
to answer. On January 12, 1993, Ernst wrote to Travis informing
her once more that she was a target of the grand jury's
investigation and invited her to provide additional testimony or
evidence in her own behalf, which she did on January 15, 1993.
B.
Contending that the government's reliance on Travis to
build a case against him constitutes "outrageous government
conduct" in violation of the Fifth Amendment's Due Process Clause,
Voigt moved pretrial to dismiss the indictment. The district court
declined to hold an independent evidentiary hearing because it
determined that Voigt had failed to make a prima facie showing of
outrageousness and the trial would address the issues raised by his
motion. The district court ultimately denied Voigt's renewed
posttrial motion to dismiss the indictment:
[A]s far as outrageous conduct by the
Government, I certainly can't find that here.
I have had the benefit of seeing Agent Powell
testify, I have seen Mercedes Travis testify
and the cross examination of both of them, and
I can't find that that was the case.
To the extent there is any conflict
between the testimony of Powell and Travis, I
credit the testimony of Powell . . . because
Powell convinced me that the Government was
acting reasonably based upon what Travis had
told them when they went forward, even though
she was an attorney, that she was not acting
as an attorney. I can't find any outrageous
conduct whatsoever here and, of course, we
know later, Travis was not a Government agent,
[and] was really acting on her own at the
time. I can't see any outrageous conduct
whatsoever and I have had the benefit of the
full trial hearing on this.
App. at 1122-23.
Our standard of review is mixed. When the district court
decides a constitutional claim based on a developed factual record,
we exercise plenary review of the district court's legal
conclusion. United States v. Driscoll, 852 F.2d 84, 85 (3d Cir.
1988). We defer to the factual findings supporting that conclusion
unless they are clearly erroneous. United States v. Bonanno, 852
F.2d 434, 437 (9th Cir.), cert. denied, 488 U.S. 1016, 109 S. Ct.
812 (1989).
1.
In 1952 the Supreme Court recognized that outrageous
misconduct by law enforcement officers in detecting and obtaining
incriminating evidence could rise to the level of a due process
violation. Rochin v. California, 342 U.S. 165, 72 S. Ct. 205(1952) (vacating conviction and dismissing indictment where police
had pumped stomach of suspected drug pusher to obtain incriminating
evidence). Since Rochin was decided the Court has discussed the
viability of an outrageous government conduct claim only in the
context of government instigation of and overinvolvement in the
very criminal activity it seeks to punish. See United States v.
Russell, 411 U.S. 423, 93 S. Ct. 1637 (1973); see also Hampton v.
United States, 425 U.S. 484, 96 S. Ct. 1646 (1976) (five Justices
reaffirm viability of due process claim for government
overinvolvement in crime). In United States v. Payner, 447 U.S.
727, 100 S. Ct. 2439 (1980), however, the Court discussed, in
dictum, whether an illegal search of a third party's briefcase
might constitute outrageous government conduct. Id. at 737 n.9,
100 S. Ct. at 2447 n.9. Thus, we have no reason to doubt that the
Court continues to recognize a due process claim premised upon
outrageous law enforcement investigative techniques.
The showing required to establish a due process
violation, though often recited, is by no means pellucid. Writing
for the Court in Rochin, Justice Frankfurter said that "the
proceedings by which this conviction was obtained do more than
offend some fastidious squeamishness or sentimentalism about
combatting crime too energetically. This is conduct that shocks
the conscience." Rochin, 342 U.S. at 172, 72 S. Ct. at 209. In
Russell, the Court elaborated on the standard it had enunciated in
Rochin:
While we may some day be presented with a
situation in which the conduct of law
enforcement agents is so outrageous that due
process principles would absolutely bar the
government from invoking judicial processes to
obtain a conviction, the instant case is
distinctly not of that breed. . . . The law
enforcement conduct here stops far short of
violating that "fundamental fairness, shocking
to the universal sense of justice," mandated
by the Due Process Clause of the Fifth
Amendment.
Russell, 411 U.S. at 431-32, 93 S. Ct. at 1643 (citation omitted).
And in Hampton, the Court's most recent opportunity to visit the
outrageous government conduct issue, Justice Powell, concurring in
the judgment, noted that "[p]olice overinvolvement in crime would
have to reach a demonstrable level of outrageousness before it
could bar conviction." Hampton, 425 U.S. at 495 n.7, 96 S. Ct.
1653 n.7 (Powell, J., concurring in the judgment).
We have also noted that the judiciary is extremely
hesitant to find law enforcement conduct so offensive that it
violates the Due Process Clause. In United States v. Janotti, 673
F.2d 578 (3d Cir.) (in banc), cert. denied, 457 U.S. 1106, 102 S.
Ct. 2906 (1982), we observed that "the majority of the Court has
manifestly reserved for the constitutional defense only the most
intolerable government conduct." Id. at 608 (emphasis added).
Relying on well-settled separation-of-powers principles, we
cautioned that
[w]e must necessarily exercise scrupulous
restraint before we denounce law enforcement
conduct as constitutionally unacceptable . . .
. Unless the behavior of the F.B.I. agents
rose to the level of outrageousness which
would bar conviction, the conduct of agents of
the executive branch who must protect the
public from crime is more appropriately
considered through the political process where
divergent views can be expressed in the ballot
box.
Id. at 607, 609.
Subsequent decisions have heeded Janotti's call for
judicial restraint. As a result, the doctrine of outrageous
government misconduct, although often invoked by defendants, is
rarely applied by courts. See United States v. Santana, 6 F.3d 1,
4 (1st Cir. 1993) ("The banner of outrageous misconduct is often
raised but seldom saluted."). Although litigants continue to
assert the doctrine as a defense against conviction, "courts have
rejected its application with almost monotonous regularity." Id.at 4
(collecting cases). Indeed, the doctrine has only once been
applied by a federal appellate court since the Supreme Court's
Hampton decision in 1976: in this court's decision in United States
v. Twigg, 588 F.2d 373 (3d Cir. 1978). Since Twigg, however, "this
court and other appellate courts have . . . exercised extreme
caution in finding due process violations in undercover settings."
United States v. Gambino, 788 F.2d 938, 945 n.6 (3d Cir.), cert.denied,
479 U.S. 825, 107 S. Ct. 98 (1986). See United States v.
DeRewal, 10 F.3d 100, 105 n.3 (3d Cir. 1993), cert. denied, 114 S.
Ct. 1544 (1994).
2.
Bearing in mind the amount of restraint we must exercise
in subjecting law enforcement conduct to judicial review, we must
determine whether, as a matter of law, the conduct that Voigt
alleges occurred in this case raises a cognizable claim of
outrageous government conduct. Despite the paucity of directly
relevant authority, we are not writing on a clean slate. Our
review of the case law demonstrates that a claim of outrageous
government conduct premised upon deliberate intrusion into the
attorney-client relationship will be cognizable where the defendant
can point to actual and substantial prejudice.
In United States v. Ofshe, 817 F.2d 1508 (11th Cir.),
cert. denied, 484 U.S. 963, 108 S. Ct. 451 (1987), for example, the
government used a defense attorney as an informant against the
defendant in a matter unrelated to the subject of the attorney's
representation (a drug prosecution). With the attorney's
permission, the government placed a body bug on him to record
conversations with the defendant. Despite strict instructions to
the attorney not to elicit privileged information, secret defense
strategy concerning Ofshe's drug prosecution was recorded by
government agents. Nevertheless, the Eleventh Circuit concluded
that this government misconduct was not so outrageous as to violate
the Fifth Amendment. Id. at 1516. This conclusion was based on
two findings: (1) that the attorney's cooperation concerned a
different crime from the one for which he was representing the
defendant, thus the invasion of the attorney-client relationship
did not produce any evidence against the defendant; and (2) that
the defendant was not prejudiced in his defense because the
attorney's cocounsel continued to provide zealous representation to
the defendant throughout the trial. Id. The court noted, however,
that "[h]ad there been demonstrable evidence of prejudice, we would
be compelled to reverse." Id. Accord United States ex rel.
Shiflet v. Lane, 815 F.2d 457 (7th Cir. 1987) (dismissal not
warranted where disclosure of privileged information to police lead
to discovery of crucial evidence against defendant because
government played no role in the breach of the privilege), cert.
denied, 485 U.S. 965, 108 S. Ct. 1234 (1988); cf. United States v.
Levy, 577 F.2d 200 (3d Cir. 1976) (dismissal of indictment on Sixth
Amendment grounds warranted where government employs codefendant as
confidential informant in order to obtain and reveal confidential
defense strategy).
Only one decision has ordered that an indictment be
dismissed due to preindictment intrusion into the attorney-client
relationship so pervasive and prejudicial as to be considered
"outrageous." United States v. Marshank, 777 F. Supp. 1507 (N.D.
Cal. 1991). In Marshank, Ronald Minkin, the attorney for two
cooperating defendants, provided information to the government
leading to the indictment of another one of his clients. Minkin
then encouraged that client to cooperate with the government in
order to secure an indictment against Marshank, with whom Minkin
also had an ongoing attorney-client relationship. The government
never warned the attorney to avoid ethical impropriety, and
affirmatively hid from both the court and the defendants the
attorney's multiple, conflict-ridden representation while acting as
a government informant. Granting Marshank's motion to dismiss the
indictment based on a due process violation for outrageous
preindictment conduct, the district court distinguished between
passive tolerance and active encouragement of impropriety:
[T]he government actively collaborated with
Ron Minkin to build a case against the
defendant, showing a complete lack of respect
for the constitutional rights of the defendant
and Minkin's other clients and an utter
disregard for the government's ethical
obligations. . . . [T]he agents and the
prosecutor here never warned Minkin not to
engage in unethical behavior and in fact
facilitated that behavior by hiding it from
the defendant. Moreover, the government
colluded with Minkin to obtain an indictment
against the defendant, to arrest the
defendant, to ensure that Minkin would
represent the defendant despite his obvious
conflict of interest, and to guarantee the
defendant's cooperation with the government.
Id. at 1524 (second emphasis added).
C.
1.
Voigt claims that, at the very least, the factual
disputes raised by his moving papers and the government's response
warranted an independent evidentiary hearing prior to trial, and
that the district court's determination that he had failed to make
out a prima facie showing of "outrageous government conduct" was
erroneous. The district court had before it: (1) Agent Powell's
affidavit, to which contemporaneous notes of his contacts with
Travis were attached as exhibits; (2) Voigt's affidavit, in which
Voigt claimed that Travis had been the Trust's and his attorney
from the summer of 1990 through June of 1993; (3) Travis'
affidavit; and (4) Travis' and Powell's grand jury testimony.
Although we agree with Voigt that conducting a hearing prior to
trial would have been more prudent and the better practice, a
remand is unnecessary under the facts of this case since we find
that the record developed at trial, taken together with Voigt's
moving papers and the government's response, provided the district
court an adequate basis with which to resolve Voigt's
constitutional claim.
a.
Rule 12(b)(1) of the Federal Rules of Criminal Procedure
requires that all "defects in the institution of the prosecution"
be raised by pretrial motion. Fed. R. Crim. P. 12(b)(1). Although
Rule 12 does not by its terms specify when such a motion entitles
a defendant to a pretrial evidentiary hearing, we have held that a
defendant's moving papers must demonstrate a "colorable claim" for
relief. United States v. Brink, 39 F.3d 419, 424 (3d Cir. 1994)
(remanding for hearing where Brink alleged facts that, if true,
"could violate a defendant's rights under the Sixth Amendment").
See United States v. Soberon, 929 F.2d 935, 941 (3d Cir.) (if
district court had "reasonable suspicion" of prosecutorial
misconduct proper course was to hold evidentiary hearing), cert.
denied, 502 U.S. 818, 112 S. Ct. 73 (1991). In order to be
"colorable," a defendant's motion must consist of more than mere
bald-faced allegations of misconduct. United States v. Sophie, 900
F.2d 1064, 1071 (7th Cir.) ("A district court does not have to hold
evidentiary hearing on a motion just because a party asks for
one."), cert. denied, 498 U.S. 843, 111 S. Ct. 124 (1990). There
must be issues of fact material to the resolution of the
defendant's constitutional claim. See United States v. Panitz, 907
F.2d 1267, 1273-74 (1st Cir. 1990) (refusal to hold evidentiary
hearing on outrageousness claim proper because material facts were
not in dispute); Sophie, 900 F.2d at 1071 (refusal to hold hearing
proper where defendant's own submissions refuted his claim).
As our survey of the relevant case law indicates, see
supra III.B.2, in order to raise a colorable claim of
outrageousness pertaining to alleged governmental intrusion into
the attorney-client relationship, the defendant's submissions must
demonstrate an issue of fact as to each of the three following
elements: (1) the government's objective awareness of an ongoing,
personal attorney-client relationship between its informant and the
defendant; (2) deliberate intrusion into that relationship; and
(3) actual and substantial prejudice. See Ofshe, 817 F.2d at 1516;
Lane, 815 F.2d at 466; United States v. Santopietro, 809 F. Supp.
1008, 1015 (D. Conn. 1992) (no due process violation where
defendant fails to demonstrate that attorney/informant revealed
client confidences); Marshank, 777 F. Supp. at 1524.
Although the issue is a close one, after comparing
Voigt's motion and Travis' affidavit with the government's
response, we think the district court should have conducted an
evidentiary hearing. Travis' relationship with both Powell and
Voigt was highly disputed. Furthermore, Voigt's moving papers
raised enough of a specter of ethical impropriety on the
government's part to warrant closer scrutiny. Even the district
court, skeptical though it was as to the degree of purposeful
intrusion, believed that whatever factual disputes existed on that
issue would be resolved at trial. This was an acknowledgement by
the court that there were some disputed factual issues raised by
Voigt's motion that needed to be resolved. Since the government
itself notes that suppression of evidence is a more appropriate
remedy than dismissal of the indictment, factual determinations
that can lead to suppression logically should be resolved at an
evidentiary hearing conducted prior to trial.
Conducting a pretrial evidentiary hearing certainly has
its advantages. The district court is then in a position to
place in the record its findings of facts and conclusions of law,
see Fed. R. Crim. P. 12(e), which greatly facilitates appellate
review. Prieto-Villa, 910 F.2d at 610. This is especially true
where the legal claim, outrageous government conduct, is so highly
fact sensitive. While we are not unmindful of the district court's
strong interest in avoiding duplicative proceedings, judicial
economy is not fostered when substituting trial testimony for a
pretrial hearing generates postverdict and appellate litigation and
potentially frustrates appellate review.
b.
Nevertheless, any "error" arising from the district
court's failure to hold an independent evidentiary hearing in this
case is unquestionably harmless. Most of the factual issues
depended for their resolution on assessing Powell's and Travis'
credibility. In our view, their trial testimony, when taken
together with Voigt's motion papers and the government's response,
provided the district court with a sufficient evidentiary record
against which to measure Voigt's outrageousness claim. At trial,
Voigt cross-examined Powell thoroughly about whether he in fact
believed that Travis had acted in a legal capacity on behalf of the
Trust or Voigt when she first approached the government. Powell
also was cross-examined extensively about the degree to which he
encouraged Travis to reestablish contact with the Trust and whether
it was his understanding that she would do so in her capacity as an
attorney. Travis testified in her own behalf and was cross-
examined at length by the government as to her understanding of her
relationship with Powell and her role as a confidential informant.
Finally, during the trial the district court ruled on numerous
claims of attorney-client privilege, which certainly provided it
with insight into the nature and degree of any alleged government
intrusion into the attorney-client relationship. Thus, the
district court's failure to conduct a hearing, although ill-
advised, was at worst harmless error.
2.
Voigt claims, however, that even assuming the record as
it now stands is sufficiently developed, and we determine that it
is, the district court should have dismissed the indictment because
the record unequivocally demonstrates outrageous government
conduct. Relying on the three-part test we set forth above,
supraIII.C.1.a, we hold that Voigt's claim of outrageousness fails as a
matter of law with respect to the period between July 13, 1991, and
May 1, 1992, because Voigt failed to establish the first element--
the government's objective awareness of an attorney-client
relationship between Travis and Voigt during that time. We further
agree with the district court's implicit determination that there
is insufficient evidence in the record on the second and third
elements, purposeful intrusion and prejudice, as to the period
thereafter.
a.
Voigt's claim of outrageousness based on the government's
contacts with Travis during the period from July 13, 1991 (when
Travis first approached the government), to May 1, 1992 (when
Travis first announced that she was representing Voigt in response
to the grand jury subpoenas), fails as a matter of law for two
reasons. First, the record is wholly devoid of any evidence that
the government was or should have been aware of a personal
attorney-client relationship between Travis and Voigt during that
time. Voigt argues that the tax opinion Travis prepared for him
should have alerted Powell that by February or March of 1992 Travis
had an ongoing personal attorney-client relationship with Voigt.
According to Powell, however, Travis claimed that it was a "one-
shot deal" and did not share the opinion with him. The district
court credited Powell's version of the events, and we find nothing
in the record to indicate that the district court's finding in this
respect was clearly erroneous. In any event, the record clearly
indicates that at about the same time Travis informed Powell of the
tax opinion AUSA Zoubek discontinued Travis as a confidential
informant.
Voigt also argues inferentially that the government's
entire case at trial was based on the premise that the Trust was
essentially his "alter ego." Since the Trust was a fictitious
entity, Voigt reasons, any legal work Travis performed for the
Trust in reality must have been performed for him personally. In
this way Voigt attempts to bootstrap himself into an attorney-
client relationship that is essential to the maintenance of his
outrageousness claim, at least with respect to the period preceding
May 1, 1992. Voigt cannot have it both ways. Having abused the
corporate structure such that the Trust, in effect, became his
"alter ego," we think that Voigt may not now rely on that abuse as
a shield by claiming a personal attorney-client relationship with
the attorney for the fraudulent corporate entity. Moreover, far
from creating additional protections for officers of fraudulent
corporations, the "alter ego" doctrine exists to pierce the
corporate veil, thereby stripping those officers of the protections
normally associated with the corporate form. See generally Charles
Clark, Corporate Law 2.4, at 71 (1986).
In any event, even if Travis' status as an attorney for
the Trust were relevant to our resolution of the outrageousness
issue, the record fully supports the district court's implicit
finding that Powell reasonably believed that Travis was not acting
as counsel for the Trust during the period between July 13, 1991,
and May 1, 1992. Accordingly, any claim of outrageousness must be
premised upon the government's contacts with Travis after May 1,
1992, for that is the day Travis informed the government that she
was representing the Trust and Voigt in connection with the very
investigation in which she had acted as an informant.
b.
As for Travis' contacts with the government from May 1,
1992, until her indictment, the record falls woefully short of
establishing the sort of purposeful intrusion into her attorney-
client relationship with Voigt that would rise to the level of
outrageousness. For example, Travis made two phone calls to Powell
on May 1 1992. Contending that these calls were "staged" to
maintain Travis' cover, Voigt asserts that they constitute proof of
"purposeful intrusion." We are not persuaded. First, by the time
Travis placed these calls to Powell, AUSA Zoubek had affirmatively
cut off contact with Travis given her decision to rejoin the Trust
as counsel. This demonstrates the government's awareness of and
sensitivity to Travis' ethical obligations and belies Voigt's
sinister characterization. Second, Powell asserted that he did
nothing to solicit the calls, and the record supports his
contention. Thus, to the extent that Travis disclosed privileged
information, and there is no proof that she did, it was not at the
behest of government agents.
All of Travis' post-May 1, 1992, contacts with the
government were unsolicited except for her appearances before the
grand jury. The government's actions during this period
demonstrated sensitivity to potential ethical problems and
contradicts Voigt's claim of "purposeful intrusion." Illustrative
of the government's sensitivity was Travis' call to AUSA Ernst in
September of 1992. Ernst did not attempt to extract information
from Travis. Instead, he informed her that she was a target of the
investigation and admonished her to withdraw as counsel given her
obvious conflict of interest. Travis' next contact with the
government was her unsolicited call to Powell in November of 1992
to warn him about an impending fraud. To the extent that such
information was privileged, it was volunteered and cannot have
constituted "deliberate intrusion" on the part of the government.
Similarly, we find no impropriety in Powell's asking Travis to
appear before the grand jury. By this time Travis knew she was a
target of the investigation and had been warned to withdraw as
counsel for Voigt. Therefore, to the extent Travis continued to
provide legal advice to Voigt in connection with the criminal
investigation, she was violating her ethical obligation to avoid a
conflict of interest. Finally, AUSA Ernst's efforts to steer clear
of privileged information during Travis' grand jury testimony
demonstrate that the government was attentive to ethical
constraints. We fail to see any purposeful intrusion on the
government's part.
Voigt's alternative claim of purposeful intrusion, which
arguably has some merit, might be that the government had an
affirmative duty to inform him that Travis had acted as an
informant when it discovered that she was representing him in
connection with the very criminal investigation in which she had
acted as an informant. At least one court of appeals has
speculated as to whether the government, during the investigative
phase of a prosecution, may have some affirmative duty to inform a
defendant of a potential conflict of interest caused by its prior
association with the defendant's lawyer. See, e.g., United States
v. Lopez, 71 F.3d 954, 963-64 (1st Cir. 1995) (attorney for
defendant had begun grand jury investigation into his client as
AUSA before switching sides). We need not reach that issue,
however, because as our discussion in the next subsection
indicates, Voigt has made no showing of prejudice.
c.
We find no evidence in the record of significant
prejudice--the third element of our outrageous government conduct
test. As the party bearing both the burden of production and
persuasion on his outrageousness claim, Voigt has failed to
demonstrate that he suffered any ill effects flowing from the
government's allegedly improper investigative activity. For
instance, Voigt does not cite even a single occasion on which
Travis gave him legal advice that was calculated to damage him to
the benefit of the government. Nor does he claim that Travis
intentionally declined to assert the attorney-client privilege in
response to the government's grand jury subpoenas or that Travis
advised him to pursue a course of conduct she knew to be illegal
simply to help the government build its case. More significantly,
however, Voigt failed to demonstrate that any of the information
Travis provided the government after May 1, 1992, was in fact
privileged. We think this alone is fatal to his claim of
outrageousness. Voigt contends on appeal that he does not assail
the district court's attorney-client privilege rulings because of
the lenient standard of review we would apply. But we think if
Voigt's assertion that "the evidence introduced both prior to and
at the trial included hundreds, if not thousands, of privileged
attorney-client communications" (Voigt's Br. at 12) had any merit
whatsoever, he would have pointed to at least one document Travis
provided the government that was privileged. By failing to meet
his burden to establish the privilege he claims, Voigt has
precluded us from finding that an attorney-client relationship
between Travis and him ever existed, let alone that it was
violated.
Finally, Voigt invokes our decision in Levy, 577 F.2d at
200, along with other similar decisions, in an attempt to have us
find that the government's intrusion into his attorney-client
relationship, standing alone, is per se prejudicial. Levy,
however, is distinguishable on two fronts. First, Levy was decided
under the Sixth Amendment. Second, and more importantly, Levy,
like most of the cases that Voigt has cited, concerned the
government's deliberate intrusion into a defendant's attorney-
client relationship in order to gain access to confidential defense
strategy. See, e.g., United States v. Valencia, 541 F.2d 618 (6th
Cir. 1976) (dismissal appropriate where government obtains defense
strategy). The record in this case demonstrates that the
government was scrupulous in its effort to avoid procuring
confidential defense strategy. See generally Ofshe, 817 F.2d at
1516 (no dismissal warranted where inadvertently intercepted
defense strategy not used against the defendant). If any
privileged information was disclosed to the government in this
case, it concerned the workings of the Trust, not Voigt's legal
strategy in responding to the criminal investigation into his
activities. Voigt's claim of severe prejudice amounts to little
more than an argument that "where there's smoke, there must be
fire." We find neither.
IV.
RIGHT TO COUNSEL OF CHOICE
Voigt claims that the district court's disqualification
of James Binns, a third attorney he sought to add to his defense
team, violated his right to counsel of choice under the Sixth
Amendment. Voigt seeks per se reversal of his conviction on the
theory that the manner in which the district court disqualified
Binns was arbitrary.
A.
1.
The nature and extent of James Binns' relationship with
the Trust, like that of Travis, is somewhat ambiguous and eludes
precise definition. An attorney who also was Voigt's long-time
friend, Binns first came into contact with the Trust in April of
1992 when he was contacted by Travis and Voigt in connection with
the government's investigation into the Trust. Shortly thereafter,
he accompanied Voigt to the Linwood, New Jersey offices of the FBI
and "attempted" to meet with Powell.
Binns then met with Anderskow regarding the grand jury
subpoenas that had been served on him. By Binns' own account, he
told Anderskow that he would be acting as counsel for Voigt only,
but would "facilitate the production of documents to the
Government" in connection with Anderskow's subpoena. In a June
interview with the FBI, however, in response to the FBI's request
to review certain documents, Anderskow apparently stated that Binns
had been retained by the Trust and was representing Voigt,
Anderskow, and any other Trust members who came under investigation
regarding the activities of the Trust. Binns was not present at
Anderskow's interviews, nor did he have any contact with the FBI
around that time.
In June of 1992, Travis and Binns spent five days
together in a New Jersey hotel assembling documents responsive to
grand jury subpoenas that had been served on Voigt and Anderskow
that spring. Travis asserted that "Binns was operating in the role
of attorney for the Trust and its various members" at that time;
Binns maintained that Travis was the attorney for Voigt, Anderskow,
and the Trust, and that she withheld many documents from Binns on
grounds of attorney-client privilege with respect to those parties.
Binns and Travis also worked together that weekend and
periodically until November of 1992, to devise Voigt's defense
strategy. According to Binns, he advised Travis numerous times
that as a potential target of the grand jury's investigation she
should seek a criminal defense attorney to represent her. Travis
replied that she did not want an attorney and that she would
represent herself.
On November 12, 1992, Binns sent a letter to AUSA Ernst
that stated as follows:
Please be advised that for the limited purpose
of responding to outstanding subpoenas I am
representing . . . [the Trust], Ralph
Anderskow, John Voigt and Jack Dunn.
App. at 56. When Binns filed a notice of appearance in July of
1993 indicating that he was joining Voigt's defense team, which
already consisted of two privately retained attorneys, the
government submitted a letter to the district court suggesting a
potential conflict arising out of Binns' prior representation of
the Trust and Anderskow during the investigative phase of the case
and requesting a hearing. The government also indicated that there
was a possibility that Binns would be called to testify at trial
since a potential victim of the Trust had been instructed to
deposit his advance fee into Binns' escrow account.
Shortly thereafter, codefendant Mercedes Travis filed a
formal motion to disqualify Binns. She submitted an affidavit
describing her professional interaction with Binns and his actions
in representing the Trust and its members in response to government
subpoenas. She argued that when Binns formerly represented the
Trust he "was loosely representing all members of the Trust," and
that she had consulted with him numerous times when he was acting
in that capacity, such that she was in effect a former client of
his.
Travis also alleged that Binns might be in possession of
certain documents or recordings material to her defense. According
to her affidavit, four boxes of her Trust documents and personal
material had been shipped to Binns, but only two of those boxes
were produced to the government. The remaining boxes and their
contents have not been seen since they were shipped from Geneva.
Travis maintained that they are in Binns' possession and control.
The only missing item that Travis mentioned specifically is a tape
of a two-and-one-half-hour telephone conversation between Voigt,
and Dunn and herself that she had surreptitiously recorded in March
of 1992. Travis stated that she phoned and faxed Binns repeatedly
in an effort to recover her papers and this tape in particular, but
Binns did not respond. Travis asserted this as a separate ground
for Binns' disqualification, arguing that
it is possible in the defense of this matter
that I may need to have access to this tape or
documents or to account for their absence.
Mr. Binns may well have duties to his current
client not to provide access to this tape or
these documents. Mr. Binns could conceivably
be the only witness available to me should it
be necessary for me to account for the absence
of the tape or the documents.
Id. at 71.
In response to the government's letter and Travis'
disqualification motion, Binns submitted a letter to the district
court attempting to dispel any notion that his representation of
Voigt at trial would raise a conflict problem. First, Binns
asserted that he never had an attorney-client relationship with
Travis. Binns claimed, therefore, that he could not have acquired
any confidential information in the course of his association with
Travis that would prejudice her defense. Binns also disavowed any
knowledge of the potential use of his escrow account in connection
with a victim of the Trust. Binns asserted that "[t]here is no
possibility that anyone acting in good faith would call me as a
fact witness at the trial of this case." App. at 87. Finally,
Binns asserted that his alleged "representation" of codefendant
Anderskow had been limited to facilitating the Trust's response to
the government's subpoenas. Binns also claimed that after
Anderskow's meeting with the FBI, in which Anderskow had indicated
that Binns was representing the Trust and its members, he made
clear to Anderskow that he was representing only Voigt.
With respect to the documents, Binns offered the
following account of the way in which they came into his possession
and the manner in which he disposed of them:
In October, 1992 I received four (4)
boxes of documents from Jack Dunn. He sent
them from Geneva, Switzerland. Messrs. Voigt
and Dunn told me that they couldn't get
Mercedes Travis to either come to the United
States or send documents responsive to Agent
Powell's 2nd Grand Jury subpoena. They told
me that she refused their repeated requests to
send the documents unless she was paid a
considerable sum of money.
When I received the boxes I did not open
them or look at the contents. I asked Mr.
Voigt to come to my office to pick up the
boxes. He said he wanted to produce
everything. . . . Mr. Voigt produced all of
the documents to the Grand Jury. According to
him, Ms. Travis withheld a number of documents
which she had in her possession.
Id. at 86.
2.
Before hearing oral argument on Travis' motion, the
district court stated:
I must say that the record before me raises
great concern in my mind. We have here
additional counsel. My concern is if we allow
this additional counsel to participate, we may
wind [] up polluting an otherwise hopefully
error-free trial and creating issues of
conflict of interest, as well as the
possibility that this person who seeks to act
as an attorney is, in fact, a potential
witness.
Id. at 190-91. Binns then addressed the district court,
essentially reiterating his reasons as to why the motion to
disqualify should be denied, and offered to take the stand to
repeat them under oath. Attorneys for codefendants Anderskow and
Anchors indicated their clients' willingness to waive any issue of
conflict arising out of Binns' representation of Voigt. Both the
government and Travis reiterated why Binns should be disqualified.
The district court did not hold an evidentiary hearing.
Instead, relying on the affidavits and Binns' oral representations,
the court decided to grant the disqualification motion:
We have here a number of very serious
issues. As a matter of fact, I would
characterize it really as a foaming caldron of
representation issues here. Such that I am
convinced that it would be foolhardy for me to
go forward and inject potential error and
possible violation of the rights of
codefendants in what purports to be a lengthy
and complicated criminal case right at its
inception before we have even heard any
motions.
. . . .
. . . Mr. Binns has had substantial
involvement in pre-indictment events
concerning the case. I don't need to pass on
his credibility versus Ms. Travis's
credibility or to the extent that Mr.
Anderskow did or did not authorize his
representation. We have a letter that he
represented him for a limited purpose. We
have Mr. Anderskow, according to counsel's
submission, saying that he thought Mr. Binns
was going to represent him and later saying
that he didn't. While Mr. Anderskow certainly
can waive any conflict, the waiver would have
to be knowing and voluntary, and we'll get
into that a bit later.
And certainly Ms. Travis doesn't waive
any issue here. . . .
And I am convinced, based upon the
precedent, that it would be very foolish for
me to proceed and to allow [Binns to represent
Voigt]. . . . [T]o allow him to come into
court and cross-examine other persons based
upon his personal knowledge, possibly to
examine persons as to whom he has represented
beforehand, whether directly or otherwise, is
exactly the concern that the cases have
raised.
Id. at 216-18. The district court went on to note that it did not
think that Anderskow's or Anchor's waiver could be considered
knowing and voluntary at the beginning of a large multi-defendant,
multi-count trial. Binns ultimately was never called to testify at
trial, although there were sporadic references to him during
testimony.
B.
The Sixth Amendment provides that "[i]n all criminal
prosecutions, the accused shall enjoy the right . . . to have the
Assistance of Counsel for his defence." U.S. Const. amend VI. One
element of this basic guarantee is the right to counsel of choice.
Powell v. Alabama, 287 U.S. 45, 53, 53 S. Ct. 55, 58 (1932). The
right to counsel of choice, however, is not absolute. Wheat v.
United States, 486 U.S. 153, 108 S. Ct. 1692 (1988). Thus, where
"considerations of judicial administration" supervene, the
presumption in favor of counsel of choice is rebutted and the right
must give way. Fuller v. Diesslin, 868 F.2d 604, 607 & n.3 (3d
Cir.), cert. denied, 493 U.S. 873, 110 S. Ct. 203 (1989).
Our decision in Fuller reveals that counsel of choice
cases can further be divided into two categories. The first and
most common type of case involves "arbitrary" denials of the right
to counsel. Fuller, 868 F.2d at 604; United States v. Flanagan,
679 F.2d 1072, 1075 (3d Cir. 1982) (Sixth Amendment "goes no
further than preventing arbitrary dismissal of the chosen
attorney."), vacated on other grounds, 465 U.S. 259, 104 S. Ct.
1051 (1984). A disqualification of counsel of choice is arbitrary
not because it is substantively "erroneous," but because it was the
product of a failure to balance proper considerations of judicial
administration against the right to counsel. See Fuller, 868 F.2d
at 604 (flat refusal to admit out-of-state attorneys pro hac vice);
United States v. Romano, 849 F.2d 812 (3d Cir. 1988) (summarily
denying request for chosen counsel); United States v. Rankin, 779
F.2d 956 (3d Cir. 1986) (summarily denying request for continuance
that would permit defendant to retain chosen counsel); United
States v. Laura, 607 F.2d 52 (3d Cir. 1979) (failure to make
findings essential to balancing required by Sixth Amendment).
Under current circuit precedent, arbitrary denials of the right to
counsel of choice mandate per se reversal. Fuller, 868 F.2d at
607-08 (citing Romano, 849 F.2d at 818, 820).
The second type of right to counsel of choice case
concerns "a nonarbitrary, but erroneous denial." Id. at 609 n.4.
In these cases, as Fuller's dictum describes, "a trial court could
make a reasoned determination on the basis of a fully prepared
record (hence a nonarbitrary determination), but still err in
concluding that counsel of choice should be denied." Id. Thus,
although a trial court's disqualification decision may be
substantively erroneous, it is nonarbitrary because the trial court
engaged in the balancing required by the Sixth Amendment and
developed the record necessary to do so. Id. This is an important
distinction for two reasons. First, and most importantly,
Fullersuggested, albeit in dictum, that nonarbitrary-yet-erroneous
denials of the right to counsel of choice might be subject to
harmless error analysis, and noted that no Third Circuit case has
decided that issue definitively. Id. Second, the standard of
review may be different, for the question whether a
disqualification is "arbitrary" is quite different from the
question whether the disqualification was substantively unjustified
under Wheat and its progeny.
C.
Voigt claims that the district court failed to conduct
the sort of inquiry required by our cases and, thus, that it
arbitrarily violated his right to counsel of choice. In the
alternative, Voigt contends that even if nonarbitrary, the district
court's disqualification decision constituted an abuse of
discretion.
1.
Although two potential grounds for disqualification were
raised in the district court (Binns' prior representation and his
status as a potential witness), it appears that the court relied on
only the former.
a.
The district court's oral disqualification decision,
which spanned four pages of transcript, indicates that the
principal, if not the sole, basis for its decision was Binns' prior
status as an attorney for the Trust, Anchors, Anderskow and,
perhaps, Travis during the grand jury investigation. See, e.g.,
App. at 218 ("[T]o allow him . . . possibly to examine persons as
to whom he represented beforehand . . . is exactly the concern that
the cases have raised."). The court viewed this as raising the
potential for serious conflicts. Clearly, the potential for
serious conflicts is a consideration of judicial administration
that can outweigh a defendant's right to counsel of choice. Wheat,
486 U.S. at 163, 108 S. Ct. at 1699; United States v. Moscony, 927
F.2d 742, 750 (3d Cir.), cert. denied, 510 U.S. 1211, 111 S. Ct.
2812 (1991); Davis v. Stamler, 650 F.2d 477, 480 (3d Cir. 1981).
There is no question that the trial court performed the balancing
required by our cases and considered a factor legitimately weighing
against the right to counsel of choice.
Voigt contends that the district court's refusal to hold
a separate evidentiary hearing renders the district court's
disqualification of Binns per se arbitrary. He relies on two
authorities in support of his claim: Fuller, 868 F.2d at 604, and,
to a lesser extent, United States v. Romano, 849 F.2d 812 (3d Cir.
1988). In Fuller, a defendant who was represented by in-state
counsel filed a motion for admission of two out-of-state lawyers
pro hac vice to represent him. The state trial court denied the
motion without holding a hearing or making particularized findings
of fact, on the grounds that the local counsel was competent to try
the case and that the admission of the two out-of-state attorneys
would likely result in delays and administrative hassles. 868 F.2d
at 605. On appeal from the grant of Fuller's petition for a writ
of habeas corpus, this court held that "the trial court's wooden
approach and its failure to make record-supported findings
balancing the right to counsel with the demands of the
administration of justice resulted in an arbitrary denial of
Fuller's motion for counsel pro hac vice." Id. at 611.
Contrary to Voigt's assertion, our decision in Fullerdoes not
stand for the proposition that a trial court's denial of
a defendant's chosen counsel must be based on a hearing and
supported by factual findings in order to pass constitutional
muster. While we held in Fuller that a trial court may not deny a
defendant's right to counsel of choice on the basis of
generalizations alone, we took pains to clarify that "we d[id] not
hold that a court is prohibited from using its 'instinct and
judgment based on experience' when it weighs the competing rights
of the litigant to counsel of his choice and wise judicial
administration." Id. (citation omitted). As long as the court
makes a "reasoned determination on the basis of a fully prepared
record," its decision will not be deemed arbitrary. 868 F.2d at
609 n.4.
Voigt also cites United States v. Romano, 849 F.2d at
812, in support of his argument that the district court's failure
to hold a hearing and make factual findings was reversible error.
In Romano, a pro se defendant sought to reserve the right to select
counsel of her choice in the event that the court found it
necessary to have stand-by counsel take over. The district court
summarily denied her request, instead appointing stand-by counsel
to back up defendant and potentially take over her defense. This
court ruled, as it did in Fuller, that the failure to conduct a
hearing and make findings of fact as to the suitability of
defendant's chosen counsel violated the defendant's Sixth Amendment
rights and constituted reversible error.
Taken together, Fuller and Romano do no more than
illustrate the well-established principle that a trial court may
not arbitrarily deny a defendant's right to counsel of choice.
While in both of those cases the court's failure to hold a hearing
or make factual findings was fatal, neither case establishes formal
procedures that a court must follow in weighing a defendant's Sixth
Amendment right to counsel of choice against the interests of the
proper and fair administration of justice. Rather, we found
hearings and/or factual findings necessary in those cases because
the district courts' determinations had no basis in fact or reason;
the trial court in Fuller denied the defendant's request for
admission of counsel pro hac vice on the basis of generalizations
and speculation, while the district court in Romano denied the
defendant's request for no apparent reason at all. Without some
sort of fact finding or hearing, these determinations could only be
considered arbitrary.
In determining whether to disqualify counsel on conflict
of interest grounds, the district court need not find an actual,
existing conflict of interest. As the Supreme Court stated in
Wheat, the court
must recognize a presumption in favor of
petitioner's counsel of choice, but that
presumption may be overcome not only by a
demonstration of actual conflict but by a
showing of serious potential for conflict.
The evaluation of the facts and circumstances
of each case under this standard must be left
primarily to the informed judgment of the
trial court.
486 U.S at 164, 108 S. Ct. at 1700. Determining whether such a
potential conflict exists is no simple task. "The likelihood and
dimensions of nascent conflicts of interest are notoriously hard to
predict, even for those thoroughly familiar with criminal trials."
Id. at 162-63, 108 S. Ct. at 1699.
In this case, the district court heard oral argument, but
did not hold an evidentiary hearing. At the time of the argument,
however, the court had before it the submissions of the various
parties, including sworn affidavits and documentary evidence
attached as exhibits. This record was fairly substantial--
certainly far more so than anything that was before the courts in
Fuller and Romano. The government's eleven-page letter of August
6, 1993, attached exhibits including: (1) correspondence between
Binns and the U.S. Attorney's Office regarding whom he represents;
(2) a memorandum and notes by Mercedes Travis regarding litigation
strategies and mentioning Binns; and (3) communications with
investors in the Trust directing them to contact Binns or deposit
funds into his escrow account. Travis' motion included a sworn
affidavit setting forth her relationship with Binns. Binns'
letter to the court laid out his version of events in great detail
and attached ninety-six pages of documentary support, including but
not limited to affidavits, grand jury transcripts, correspondence
to and from Binns, and FBI reports. Indeed, Binns' letter and
supporting documentation were so thorough that he told the court at
the hearing, "in substance, you have the story. The story is
contained in my letter . . . ." App. at 204. Under these
circumstances, we conclude that the record was more than sufficient
to enable the district court to make a reasoned and well-informed
decision. Formal findings of fact are not required.
b.
We agree with Voigt, however, that Binns' status as a
potential witness, standing alone, cannot render the district
court's disqualification order nonarbitrary. Although Binns'
status as a potential witness is certainly a proper consideration
of judicial administration, Stamler, 650 F.2d 480-81, the record
indicates that the decision to disqualify Binns was based primarily
on his alleged prior representation of the Trust and its members.
To be sure, the district court made passing reference to the
possibility of Binns' becoming a witness at trial. See App. at
190-91. Yet none of the reasons referred to by the district court
in its final oral decision indicated that Binns' status as a
potential witness was one of the "considerations of judicial
administration" that weighed into its balancing. Moreover, the
record is devoid of any "findings" as to Binns' status as a
potential witness that would have allowed the district court
properly to weigh that consideration against Voigt's presumed right
to counsel of choice (and allowed us to exercise appellate review).
The government's retort that "Voigt conspicuously fails
to argue that the district court could not have made the necessary
findings . . . .," Government's Br. at 34, is unsatisfactory in
several respects. First, it all but concedes that the district
court failed to make any findings with respect to Binns' status as
a potential witness. Second, the government appears to make this
argument in suggesting that the district court's disqualification
was nonarbitrary. But to be nonarbitrary, as we have noted, the
district court actually must make findings based on evidence in the
record and weigh those findings against the right to counsel.
Permitting the government to argue that there was evidence in the
record upon which the district court could have based findings that
it concededly failed to make would simply inject a harmless error
inquiry into the one area that our right to counsel of choice
jurisprudence indicates is singularly inappropriate. Therefore,
since the district court failed to address adequately the
likelihood that Binns would be called as a witness, record evidence
concerning that potential is irrelevant to the "arbitrariness"
question.
In any event, we have determined that the court had
sufficient other evidence before it to suggest that
disqualification was appropriate. It specifically referred to that
evidence in announcing its decision to disqualify Binns. That is
all our decisions prohibiting arbitrary denials of the right to
counsel of choice require. See, e.g., Fuller, 868 F.2d at 604;
Romano, 849 F.2d at 812. We therefore reject Voigt's claim that
the district court arbitrarily denied his Sixth Amendment right to
counsel of choice.
2.
In the alternative, Voigt contends that the
disqualification decision amounted to an abuse of discretion
because it was unwarranted given the information before the
district court. We disagree. In Wheat, 486 U.S. at 153, 108 S.
Ct. at 1692, the Supreme Court considered the circumstances under
which a trial court, consistent with the Sixth Amendment, could
disqualify a defendant's chosen attorney. Wheat involved an
attorney's potential representation of several codefendants in the
same trial. Referring to the balancing required of trial courts in
determining whether a potential conflict warranted
disqualification, the Court wrote:
[A] district court must pass on the issue
whether or not to allow a waiver of a conflict
of interest by a criminal defendant not with
the wisdom of hindsight after the trial has
taken place, but in the murkier pre-trial
context when relationships between parties are
seen through a glass, darkly. The likelihood
and dimensions of nascent conflicts of
interest are notoriously hard to predict, even
for those thoroughly familiar with criminal
trials. . . . For these reasons we think the
district court must be allowed substantial
latitude in refusing waivers of conflicts of
interest . . . in the more common cases where
a potential for conflict exists which may or
may not burgeon into an actual conflict as the
trial progresses. . . .
. . . .
. . . The District Court must recognize a
presumption in favor of [a defendant's]
counsel of choice, but that presumption may be
overcome not only by a demonstration of actual
conflict but by a showing of a serious
potential for conflict.
Id. at 162-64, 108 S. Ct. at 1699-1700. The court also noted that,
even apart from the requirements of the Sixth Amendment, the
district court's independent duty "to investigate potential
conflicts arises in part from the legitimate wish of district
courts that their judgments remain intact on appeal." Id. at 161,
108 S. Ct. at 1698. Finally, the Court noted with approval that in
the case before it "the District Court relied on instinct and
judgment based on experience in making its decision." Id. at 163,
108 S. Ct. at 1699.
We begin by observing that the unique factual scenario
presented by Binns' proposed representation of Voigt is quite
different from the one presented in Wheat. This is not a case
where the district court's sole or even primary interest was in
protecting Voigt's right to the effective assistance of counsel by
disqualifying an attorney whose potential conflicts of interest
might impede his ability to defend his client. See, e.g., United
States v. Lussier, 71 F.3d 456 (2d Cir. 1995) (reviewing propriety
of trial court's decision to accept defendant's waiver of conflict-
free representation), cert. denied, 116 S. Ct. 1321 (1996); United
States v. Ross, 33 F.3d 1507 (11th Cir. 1994) (reviewing propriety
of disqualification ordered to safeguard defendant's right to
conflict-free representation), cert. denied, 115 S. Ct. 2558(1995).
On the contrary, as the record makes clear, what
concerned the district court was the possibility that Binns' prior
representation of the Trust and its members during the grand jury
investigation might affect Anderskow's, Anchor's and Travis'
ability to receive a fair trial. Nevertheless, because the effect
of a disqualification is to deny a criminal defendant his or her
presumptive right to chosen counsel, the question under Wheat is
the same, even where the trial court's disqualification of chosen
counsel is aimed at protecting the rights of persons other than the
defendant. Thus, we must determine whether the district court's
conclusion that there was an actual or serious potential for
conflict of interest constituted an abuse of discretion. Cf.Moscony, 927
F.2d at 750-51 (reviewing disqualification of
defendant's attorney aimed, in part, at protecting rights of
several government witnesses attorney represented at grand jury);
United States ex rel. Stewart v. Kelly, 870 F.2d 854 (2d Cir. 1989)
(reviewing disqualification of attorney aimed, in part, at
protecting rights of witness attorney had represented in the
past).
We find no abuse of discretion in the district court's
disqualification of Binns. It was undisputed that Binns
represented the Trust and Anderskow for purposes of responding to
the grand jury subpoenas. There was also a very real possibility
that Anderskow might testify at trial, thereby subjecting himself
to cross-examination by Binns. We noted in Moscony that
"[c]onflicts of interest arise whenever an attorney's loyalties are
divided, and an attorney who cross-examines former clients
inherently encounters divided loyalties." 927 F.2d at 750
(citation omitted). Since there was a strong possibility that
Anderskow might face cross-examination by a former attorney, there
was a serious potential for a conflict of interest which,
notwithstanding Voigt's attempt to downplay it on appeal, warranted
disqualification. Wheat, 486 U.S. at 153, 108 S. Ct. at 1692(disqualification due to conflict proper despite defendant's
attempts on appeal to minimize its extent).
Voigt makes much of the district court's refusal to
accept Anchors' and Anderskow's proffered waiver of the attorney-
client privilege in the event that Binns would have to cross-
examine them at trial. Nevertheless, we find no abuse of
discretion in the district court's decision. As the Wheat Court
noted, at the beginning of a criminal trial, "[t]he likelihood and
dimensions of nascent conflicts of interest are notoriously hard to
predict . . . ." Id. at 162-63, 108 S. Ct. at 1699. Here, the
district court obviously feared that if during trial the nature of
Binns' relationship with Anderskow and Anchors turned out to be
more significant than first thought, Anchors' and Anderskow's
rights to a fair trial could be jeopardized, thereby generating
potential appellate issues. We have recognized that the district
court has "an institutional interest in protecting the truth-
seeking function of the proceedings over which it is presiding . .
. [and] an independent interest in protecting a fairly rendered
verdict from trial tactics that may be designed to generate issues
on appeal." Moscony, 927 F.2d at 749. Accord Stewart, 870 F.2d at
856-57 ("Wheat emphasized the trial judge's duty to preserve the
integrity of the justice system by assuring [all] defendants a fair
trial."). We find nothing improper in the district court's refusal
to accept Anchors' and Anderskow's proffered waiver.
Moreover, at least one codefendant vehemently refused to
waive the attorney-client privilege. Travis was a member of the
Trust during the grand jury investigation and had substantial
interaction with Binns during that period. Apart from the fact
that this only added to the district court's growing concern about
the ability of Voigt's codefendants to receive a fair trial, Binns'
prior interaction with Travis may have been sufficient, in and of
itself, to warrant disqualification since Binns may have acquired
confidential information about her.
In Stamler, for example, we held that a trial court had
properly disqualified counsel for a corporation from serving as the
criminal defense attorney to the corporation's former president
despite the counsel's insistence that he had received no
information about the president's criminal activities while acting
as counsel to the corporation. "[I]t was not unreasonable for the
[trial court] to find that [the lawyer] might have obtained
information related to the criminal proceeding." 650 F.2d at 480.
In United States v. Rogers, 9 F.3d 1025 (2d Cir. 1993), cert.
denied, 115 S. Ct. 95 (1994), the Court of Appeals for the Second
Circuit upheld the disqualification of a corporate attorney who
sought to represent a corporate officer after having previously
attended a deposition with one of the corporation's employees. The
deposition concerned the same matter giving rise to the
prosecution, and the employee was to testify against the officer
during the criminal trial. The Second Circuit rejected the
defendant's claim that the disqualification was improper because
the attorney-client relationship allegedly giving rise to the
conflict was between the corporation and the attorney: "in this
case, [the witness], as an employee at [the corporation] when he
was deposed, should be considered a privy of the company. As such
his joinder in the motion to disqualify [the attorney] was
sufficient to assert the adverse nature of his interest and the
confidences he may have disclosed . . . ." Id. at 1031.
Here, Travis was adamant that she had imparted
confidential information to Binns, and she indicated that she would
take the stand in her own defense at trial, thereby subjecting
herself to potential cross-examination by Binns. The district
court once again had an independent duty to safeguard Travis' right
to a fair trial and to protect a potential judgment against her
from attack on appeal. See Moscony, 927 F.2d at 751; Stamler, 650
F.2d at 480; see also Rogers, 9 F.3d at 1025.
In sum, we conclude that the district court acted
prudently given the unenviable situation with which it was
presented. James Binns had substantial involvement in the grand
jury investigation and he had sent a letter to the government
tacitly acknowledging his multiple representation of Voigt,
Anderskow and the Trust. In light of the district court's obvious
interest in safeguarding the codefendants' rights to a fair trial
by avoiding the possibility that they would be cross-examined by
Binns, we hold that the presumption in favor of Voigt's
constitutional right to counsel of choice had been adequately
rebutted. Accordingly, we reject Voigt's claim that the disquali-
fication of Binns violated his Sixth Amendment right to counsel of
choice.
V.
THE MONEY LAUNDERING CONVICTIONS
Voigt alleges that his convictions on two counts of money
laundering in violation of 18 U.S.C. 1956(a)(1)(A)(i) are
legally insufficient because the government failed to prove beyond
a reasonable doubt that the financial transactions forming the
basis of the laundering convictions "in fact involve[d] the
proceeds of specified unlawful activity." Id. We review
sufficiency of the evidence claims under a deferential standard.
"It is not for us to weigh the evidence or to determine the
credibility of the witnesses. The verdict of a jury must be
sustained if there is substantial evidence, taking the view most
favorable to the Government, to support it." United States v.
Schoolcraft, 879 F.2d 64, 69 (3d Cir.) (internal citations and
quotation marks omitted), cert. denied, 493 U.S. 995, 110 S. Ct.
546 (1989). If "any rational trier of fact could have found the
essential elements of the crime beyond a reasonable doubt," Jackson
v. Virginia, 443 U.S. 307, 319, 99 S. Ct. 2781, 2789 (1979), then
the verdict of the jury must be sustained.
A.
In this case, Voigt was convicted of depositing the
proceeds of a certain transaction known as the "Neville Price
transaction" into an account in the First Fidelity Bank in
violation of 18 U.S.C. 1956(a)(1)(A)(i). The evidence adduced at
trial demonstrated that on October 1, 1991, a $500,000 advance fee
from the "Neville Price" transaction was deposited into codefendant
Ralph Anderskow's escrow account, which at the time contained over
$600,000 from other sources. On October 4, 1991, two wire
transfers were made from Anderskow's account to Voigt's First
Fidelity account, one for $90,000 and the other for $32,000. These
deposits formed the basis of the two money-laundering convictions
that Voigt now challenges. Voigt contends that because only
$500,000 out of the $1.1 million in Anderskow's account was
"tainted," the government failed to prove beyond a reasonable doubt
that the two wire transfers, which totaled $122,000, "involve[d]
the proceeds of specified unlawful activity." Id.B.
Voigt concedes that not all of the money involved in a
financial transaction that is the subject of a money laundering
charge must derive from the proceeds of money laundering activity.
Rather, he contends that because Congress required that the
financial transaction "in fact involve[]" the "proceeds of
specified unlawful activity," id. (emphasis added), the government
must prove that at least one dollar (or, even, one penny) is
traceable to the proceeds of unlawful activity--a mathematical
impossibility in cases such as this where (1) the wire transfers
came from an account in which tainted funds had been commingled
with untainted funds, and (2) the amount of the transfer was less
than the amount of untainted funds in the account. Both the
government and Voigt characterize the issue as one involving "which
side should bear the uncertainty when tracing becomes an
impossibility." Government's Br. at 46.
While the trend in our sister circuits has been to reject
the sort of legal sufficiency challenge raised by Voigt as a matter
of statutory construction, see United States v. Cancelliere, 69
F.3d 1116, 1120 (11th Cir. 1995), we need not decide this issue,
because we conclude that Voigt's claim fails on the facts. While
the flow-chart that the government relied on to establish the
source of the $122,000 deposit does not reveal the source of the
other funds in Anderskow's account, Anderskow himself conceded on
cross-examination that all but $26,000 of the funds deposited into
his Continental Bank account between 1990 and 1993 were advance
fees paid by borrowers of and investors in the Trust. As there was
uncontroverted evidence at trial that no borrower or investor ever
received any funds from the Trust, and as the jury found that the
Trust was the engine of a scheme to defraud, we conclude that a
rational trier of fact could easily have concluded that virtually
all of the funds in Anderskow's account at the time of the $122,000
transfer represented the fruits of specified illegal activity.
VI.
THE FORFEITURE ORDER
In connection with the four money laundering counts
charged in the superseding indictment, the government brought
separate criminal forfeiture allegations under 18 U.S.C. 982
seeking forfeiture of certain vehicles and pieces of jewelry either
as "involved in" or "traceable to" Voigt's money laundering
activity, id. 982(a)(1), or as substitute assets under 21 U.S.C.
853(p)(5), the CCE criminal forfeiture provision, which is
incorporated in 18 U.S.C. 982(b)(1). At a nonjury proceeding
conducted prior to sentencing, the district court determined that
Voigt's money laundering convictions rendered him liable to the
government for $1,661,960 in criminal forfeiture. In satisfaction
of that amount, the court ordered forfeiture of, inter alia, two
pieces of jewelry, finding "by a preponderance of the evidence"
that they were "items personal property . . . traceable to the
money involved in the [money-laundering] violations. App. at 1246.
The jewelry had been purchased with funds from an account in which
money laundering proceeds had been commingled with other funds --
numerous deposits and withdrawals having intervened between the
deposit of the laundered funds and the purchase of the jewelry.
Voigt raises two assignments of error. First, he
contends that the district court applied the wrong burden of
persuasion. He maintains that our decision in United States v.
Pelullo, 14 F.3d 881 (3d Cir. 1994), requires the government to
prove its forfeiture allegations beyond a reasonable doubt.
Second, Voigt asserts that the government failed to prove that the
jewelry it sought was "traceable to" the proceeds of his money
laundering activity, since it had been purchased with commingled
funds from an account subject to numerous intervening deposits and
withdrawals after the original deposit of the laundered funds.
Both of these contentions raise issues of first
impression in this circuit. With respect to the burden-of-proof
issue, we conclude, as did the district court, that the
preponderance standard applies. We agree with Voigt, however, that
the numerous intervening deposits and withdrawals into his account
subsequent to the deposit of the tainted funds make it impossible
to say that the two items of jewelry are "traceable to" property
"involved in" the money laundering offense. Accordingly, we will
vacate the forfeiture order that was incorporated into the judgment
and remand for further proceedings.
A.
The forfeiture provision upon which the court's order was
based, 18 U.S.C. 982, provides that a district court sentencing
a person convicted of, inter alia, money laundering in violation of
18 U.S.C. 1956, "shall order that the person forfeit to the
United States any property, real or personal, involved in such
offense, or any property traceable to such property." 18 U.S.C.
982(a)(1). Voigt first contends that the government's burden of
persuasion for criminal forfeiture under 18 U.S.C. 982(a)(1) is
proof beyond a reasonable doubt. We have not yet had occasion to
address the burden-of-proof issue with respect to 982(a)(1), and
to date only one other court of appeals has considered it,
concluding that preponderance-of-the-evidence standard applies.
United States v. Myers, 21 F.2d 826, 829 (8th Cir. 1994), cert.
denied, 115 S. Ct. 742 (1995). We have, however, addressed this
issue twice previously in the context of other criminal forfeiture
provisions. Pelullo, 14 F.3d at 881 (RICO; reasonable doubt);
United States v. Sandini, 816 F.2d 869 (3d Cir. 1987) (CCE;
preponderance). A description of the Sandini, Pelullo and Myersdecisions
is in order.
1.
In Sandini, 816 F.2d at 869, we addressed the appropriate
burden of persuasion under 21 U.S.C. 853, the CCE criminal
forfeiture provision. The defendant there argued that 853(d)'s
inclusion of a rebuttable presumption of forfeitability if the
government could demonstrate two factors by a preponderance of the
evidence was unconstitutional to the extent it failed to require
proof beyond a reasonable doubt. After discussing the history of
and distinction between civil in rem and criminal in personamforfeiture,
we concluded that criminal forfeiture under CCE
constitutes punishment for a crime, and not a separate element of
the offense, notwithstanding Fed. R. Crim. P. 7(c)(2) (requiring the
indictment to specify the extent or interest of the property
subject to forfeiture) and Fed R. Crim. P. 31(e) (requiring the jury
to return a special verdict on same). Sandini, 816 F.2d at 875 &
n.7 ("assumption" in Rule 31(e) that forfeiture is element of the
offense to be tried and proved is akin to nonbinding legislative
history). Because other federal statutes providing for enhanced
penalties have established the government's burden of proof as a
preponderance of the evidence, we concluded that 853(d)
withstands constitutional scrutiny as long as the forfeiture
proceeding follows a conviction by proof beyond a reasonable doubt.
Seven years later we confronted the same question in the
context of 18 U.S.C. 1963, the RICO statute's criminal forfeiture
provision. Pelullo, 14 F.3d at 881. We held that the beyond-a-
reasonable-doubt standard governs such forfeitures. Our conclusion
was premised mainly on Congress' simultaneous amendments to the
RICO and CCE forfeiture statutes in 1984, and its decision not to
add a rebuttable presumption provision to 1963(a) when it added
such a provision to the CCE statute. See 21 U.S.C. 853(d)
(discussed in Sandini, 816 F.2d at 874-75). We concluded that the
omission was deliberate and, hence, dispositive: "This indicates
that Congress intended the higher beyond a reasonable doubt
standard to control in a 1963(a) proceeding. If Congress wanted
a preponderance standard for 1963(a), it would have so stated as
it specifically did for CCE." Pelullo, 14 F.3d at 905. See id. at
903 ("Most important, the CCE rebuttable presumption . . . does notexist
in the RICO forfeiture provisions.") (citations omitted). We
distinguished our decision in Sandini on the basis that it
pertained only to CCE and could not bind a future panel of this
court considering a different forfeiture provision. See id.("Sandini does
not decide the issue in this case because the
statute at issue there was CCE, not RICO.").
In Myers, 21 F.3d at 826, the Court of Appeals for the
Eighth Circuit concluded that the government's burden of proof
under 982(a)(1) was the preponderance standard. Noting that it
had decided in a different case handed down the same day that the
preponderance standard governed forfeitures under CCE, the court
reasoned that
[t]he language of the money laundering
forfeiture statute is very similar to the
language of section 853(a). By stating that
"the court, in imposing sentence on a person
convicted" of a money laundering offense,
shall forfeit property involved in the
offense, Congress indicates that forfeiture
under the money laundering provision is also a
sentencing sanction, not an offense or element
of an offense.
Id. at 829 (alteration omitted).
2.
While Sandini and Pelullo are useful guides, we begin by
observing that prior decisions of this court interpreting different
criminal forfeiture provisions do not constitute binding precedent
on the issue before us. Similarly, the reasoning underlying those
decisions is not binding, although to the extent that the statutes
are analogous it may be persuasive. We must begin the task afresh
and determine which burden of proof Congress intended to apply to
982(a)(1).
Perhaps the most striking feature of the forfeiture
provision is that it requires the district court to order
forfeiture "in imposing sentence on a person [already] convicted of
an offense in violation of . . . section 1957 . . . of this title
. . . . " 18 U.S.C. 982(a)(1) (emphasis added). As the Myerscourt
observed, the plain language of the statute reveals that
forfeiture is a form of sentence enhancement that follows a
previous finding of personal guilt. Myers, 21 F.3d at 829. As a
result, we conclude that the preponderance, not the reasonable
doubt, standard governs forfeiture under 982(a)(1).
Voigt's most forceful argument to the contrary is that
when Congress enacted the money laundering forfeiture statute, it
specifically incorporated in 982(b)(1), the statute's procedural
component, virtually all of the subsections of 21 U.S.C. 853, the
procedural provisions of the CCE forfeiture statute, yet it omitted
853(d), the rebuttable presumption provision we found dispositive
in Sandini. Relying on Pelullo, where we attached much
significance to Congress' failure to add a provision like 853(d)
to RICO's forfeiture provision, Voigt argues that Congress'
decision not to include 853(d) as one of the subsections
incorporated via 982(b)(1) evinces an intent to require
application of the reasonable doubt standard. We think Voigt's
argument proves too much. At most, Congress may have decided it
did not want the rebuttable presumption to apply in money
laundering cases. But that by no means compels us to conclude that
the reasonable doubt standard should apply in such cases.
Furthermore, acknowledging that the burden of proof is
simply a means of expressing our tolerance for erroneous outcomes,
there are good reasons for employing the reasonable doubt standard
in the RICO context but not in the money laundering context. The
RICO forfeiture provision is by far the most far reaching,
requiring the district court to order forfeiture of "any interest
the person has acquired or maintained in violation of section
1962," 18 U.S.C. 1963(a)(1), as well as any "interest in,"
"security of," "claim against," or "property or contractual right
of any kind affording a source of influence over[] any enterprise
which the person has established, operated, controlled, conducted,
or participated in the conduct of in violation of section 1962."
Id. 1963(a)(2). The statute further requires forfeiture of "any
property constituting, or derived from, any proceeds which the
person obtained, directly or indirectly, from racketeering activity
. . . in violation of section 1962." Id. 1963(a)(3). Section
1963(a)'s coverage, to say the least, is extremely broad and
sweeping. See Rusello v. United States, 464 U.S. 16, 26, 104 S.
Ct. 296, 302 (1983) ("The legislative history clearly demonstrates
that the RICO statute was intended to provide new weapons of
unprecedented scope for an assault upon organized crime and its
economic roots."); Craig W. Palm, RICO Forfeiture and the Eighth
Amendment: When is Everything Too Much?, 53 U. Pitt. L. Rev. 1, 27
(1991) ("The most striking aspect of RICO's forfeiture provisions
is their unprecedented nature and breadth. The language of the
forfeiture provisions is extremely broad and comprehensive . . .
."). Indeed, 1963(a) sweeps far more broadly than the elements
of the substantive RICO offense itself. See 18 U.S.C. 1962.
Accordingly, since the identity and extent of property subject to
forfeiture will not have been addressed in the course of proving
the substantive RICO charge, a reasonable doubt burden of
persuasion ensures greater accuracy in determining the scope of
property subject to forfeiture.
In the money laundering context, by contrast, the
forfeiture provision makes clear that the government is entitled
only to property "involved in" or "traceable to" money laundering
activity. See generally United States v. $448,342.85, 969 F.2d
474, 476 (7th Cir. 1992) (government entitled only to "funds" used
in offense, not whole account into which such funds had been
deposited). Furthermore, "property involved in a financial
transaction" is part of an element of the money laundering offense,
see 18 U.S.C. 1956(a)(1), and the term "transaction" is defined
in the statute. See id. 1956(c)(3). Unlike the RICO context, we
have no reason to doubt that the amount of the transaction that
forms the basis of a substantive money laundering offense will be
identified in the indictment and, thus, that its connection to
money laundering activity will have been proved beyond a reasonable
doubt at trial. As the government has observed, in many cases the
only factual issues left for resolution after trial will be whether
particular items bought with tainted funds are "traceable to" money
laundering activity. Applying a beyond-a-reasonable-doubt standard
to that issue appears unnecessary. Accordingly, we agree with the
Eighth Circuit's decision in Myers that the government's burden for
forfeiture under 982(a)(1) is the preponderance standard.
B.
Voigt next argues that the government failed to prove
that the money used to purchase the jewelry in question was
"traceable to" money laundering proceeds, as required by 18 U.S.C.
982(a)(1). His argument is based on the fact that the jewelry
was purchased with funds drawn from an account in which money
laundering proceeds had been commingled with other funds, and that
those funds were further "diluted" by numerous intervening deposits
and withdrawals. Voigt asserts that if the jewelry was subject to
forfeiture, it was under 21 U.S.C. 853(p)(5), the CCE substitute
asset provision incorporated into the money laundering forfeiture
scheme via 18 U.S.C. 982(b)(1). The government counters by
observing that criminal forfeiture is an in personam punishment,
which obviates the need for strict tracing, especially where
tainted and untainted funds are commingled in a bank account,
making tracing a virtual impossibility.
1.
The government's observation concerning the in personamnature of
criminal forfeiture is helpful to a certain extent: the
amount of forfeiture to which the government is entitled under 18
U.S.C. 982 is not dictated by whether the government can prove
that certain of the defendant's property is in fact property
"traceable to" money laundering activity. When a defendant has
been convicted of committing $1.6 million in money laundering
offenses (as Voigt was here), the government has proved beyond a
reasonable doubt that it is entitled to $1.6 million in criminal
forfeiture; that amount represents property "involved in" money
laundering activity for purposes of 982(a)(1). What is at issue
here is the question of how the government may go about seizing
property in satisfaction of that $1.6 million amount.
The government's principal contention is that money is
fungible, making it impossible to differentiate between "tainted"
and "untainted" dollars in a bank account. The government also
advances what is clearly a policy argument, contending that
interpreting the term "traceable to" to require even some tracing
"would perversely permit money launderers to escape with all of
their proceeds intact simply by commingling such tainted proceeds
with untainted sums--a result Congress could not have intended."
Government's Br. at 53.
To support its arguments, the Government has cited a
number of cases dealing with the tracing issue in the context of 18
U.S.C. 1963(a), the RICO statute's criminal forfeiture provision.
See generally United States v. Robilotto, 828 F.2d 940, 949 (2d
Cir. 1987), cert. denied, 484 U.S. 1011, 108 S. Ct. 711 (1988);
United States v. Ginsburg, 773 F.2d 798, 802-03 (7th Cir. 1985) (en
banc), cert. denied, 475 U.S. 1011, 106 S. Ct. 1186 (1986); United
States v. Conner, 752 F.2d 566, 576 (11th Cir.), cert. denied 474
U.S. 821, 106 S. Ct. 72 (1985). These cases hold that where crime
proceeds have been commingled in a bank account with untainted
funds, tracing is not required. The reasoning supporting those
holdings is (1) the in personam nature of criminal forfeiture, and
(2) the courts' conclusion that when Congress used the term
"traceable to," it could not have intended to require the
government to demonstrate some nexus between the criminal activity
and the property sought--at least not where cash has been deposited
into a bank account.
Regardless of whether these cases were correct on their
merits, however, they were decided before the President signed into
law the Anti-Drug Abuse Act of 1988. Pub. L. No. 100-690, 102
Stat. 4374-75 (1988). With that act Congress added subsection (b)
to 982, which incorporates the CCE forfeiture statute's
"substitute asset" provision:
[i]f any of the property described in
subsection (a) of this section, as a result of
any act or omission of the defendant . . . has
been commingled with other property which
cannot be divided without difficulty; the
court shall order the forfeiture of any other
property of the defendant up to the value of
any property described in paragraph[] . . .
(5).
21 U.S.C. 853(p)(5). The inclusion of the substitute asset
provision in the money laundering forfeiture scheme represents
Congress' express recognition that property subject to criminal
forfeiture can be commingled with "untainted" property. It may
also be an acknowledgement by Congress that its earlier-enacted
criminal forfeiture provisions, such as RICO and CCE, were
unartfully drafted to the extent that they failed to address the
problem posed by commingled property.
In our view the specific inclusion in 982 of a
substitute asset provision precludes us from interpreting the term
"traceable to," as did the courts in the RICO context, to avoid a
perceived bad policy result. See United States v. Ripinsky, 20
F.3d 359, 365 n.8 (9th Cir. 1994) (" 982 . . . defines forfeitable
assets to be only those associated with the underlying offense or
traceable to the offense and distinguishes between 'forfeitable'
and 'substitute' assets."). Because Congress has made the
determination not to "perversely permit money launderers to escape
with all of their proceeds intact simply by commingling such
tainted proceeds with untainted sums . . . .," Government's Br. at
53, we should not be in the business of overlooking the plain terms
of a statute in order to implement what we, as federal judges,
believe might be better policy. Accordingly, the government's
policy arguments, along with the cases supporting them, are
inapposite.
Seeking to avoid our conclusion that cases decided prior
to the enactment of the money laundering forfeiture statute are not
controlling, the government observes that in 1986 Congress added a
substitute asset provision to RICO's forfeiture scheme. Relying on
In re Billman, 915 F.2d 916, 920 (4th Cir. 1990), cert. denied, 500
U.S. 952, 111 S. Ct. 2258 (1991), the government contends that the
addition of a substitute asset provision to the RICO statute could
not affirmatively undo the settled judicial determination that the
words "traceable to" in the RICO forfeiture statute do not require
tracing of commingled funds. The government therefore suggests
that in the money laundering forfeiture context it can seek
forfeiture of items purchased with commingled funds either as
"traceable to" or as substitute assets. We disagree.
As the Ninth Circuit's decision in Ripinsky makes clear,
the government's position is internally inconsistent. The
substitute asset provision comes into play only when forfeitable
property cannot be identified as directly "involved in" or
"traceable to" money laundering activity. Clearly, if funds
commingled in a bank account are sufficiently identifiable as to be
considered "traceable to" money laundering activity, then the
substitute asset provision should have no applicability whatsoever.
Accordingly, the government's contention that the "traceable to"
and substitute asset theories merely create alternative paths to
forfeiture, which the government may choose at its option, is
illogical.
We also do not understand why an amendment to a statute
cannot affirmatively reverse, or at least cast substantial doubt
on, prior court decisions interpreting earlier versions of that
statute. This is especially true where, in undertaking to discern
the plain meaning, those decisions essentially held (for policy
reasons) that Congress simply could not have meant what it said.
Indeed, if the legitimacy of the courts' interpretation of the RICO
statute had been beyond doubt, then the addition of a substitute
asset provision to the RICO, CCE and money laundering criminal
forfeiture schemes would seem superfluous.
Furthermore, we think the government's interpretation of
Billman proves too much. In Billman the Fourth Circuit cited to
the prior case law holding that the in personam nature of criminal
forfeiture makes tracing under the RICO statute's forfeiture
provision unnecessary. It then made the unremarkable observation,
which the government apparently finds significant, that "[t]hese
principles are embodied in an amendment to the act, which makes
provision for the forfeiture of substitute assets." 915 F.2d at
920. Contrary to the government's interpretation, however, that
observation may signal the Fourth Circuit's view (which we
expressed above) that Congress recognized its unartfulness in using
the term "traceable to" in its forfeiture statutes. Moreover, the
Fourth Circuit may have recognized that in amending forfeiture
statutes to include a substitute asset provision, Congress may have
appreciated that courts had been stretching to avoid the result of
applying the plain meaning of the term "traceable to" to commingled
property.
Even if Billman can be read to suggest that the addition
of a substitute asset provision to RICO's criminal forfeiture
scheme cannot undo prior judicial interpretations of the words
"traceable to" in the RICO context, we simply cannot ignore the
plain fact that the money laundering criminal forfeiture provision
contains a substitute asset provision that appears to be addressed
directly to the situation confronting us in this case. We are
unaware of any decision that has imported the restrictive
definition of "traceable to" prevalent in the RICO context into the
money laundering forfeiture scheme.
In sum, to accept the government's argument that
"traceable to" does not mean what it says for purposes of
commingled property, in effect would render the substitute asset
provision a nullity, in contravention of a well-settled canon of
statutory construction that "courts should disfavor interpretations
of statutes that render language superfluous." Connecticut Nat'l
Bank v. Germain, 503 U.S. 249, 253, 112 S. Ct. 1146, 1149 (1992).
2.
We hold that the term "traceable to" means exactly what
it says. In light of our holding on the burden of proof, this
means that the government must prove by a preponderance of the
evidence that the property it seeks under 982(a)(1) in
satisfaction of the amount of criminal forfeiture to which it is
entitled has some nexus to the property "involved in" the money
laundering offense. For example, if the defendant receives
$500,000 cash in a money laundering transaction and hides the cash
in his house, the government may seize that money as property
"involved in" the money laundering offense. If the defendant
purchased a $250,000 item with that money, the government may seek
the remaining cash as "involved in" the offense, whereas the item
purchased is subject to forfeiture as property "traceable to"
property involved in the money laundering offense.
Where the property involved in a money laundering
transaction is commingled in an account with untainted property,
however, the government's burden of showing that money in the
account or an item purchased with cash withdrawn therefrom is
"traceable to" money laundering activity will be difficult, if not
impossible, to satisfy. While we can envision a situation where
$500,000 is added to an account containing only $500, such that one
might argue that the probability of seizing "tainted" funds is far
greater than the government's preponderance burden (50.1%), such an
approach is ultimately unworkable. As the Seventh Circuit,
speaking through Judge Easterbrook, has observed, a bank account is
simply a number on a piece of paper:
Bank accounts do not commit crimes; people do.
It makes no sense to confiscate whatever
balance happens to be in an account bearing a
particular number, just because proceeds of
crime once passed through that account. . . .
An "account" is a name, a routing device like
the address of a building; the money is the
"property" [for purposes of the forfeiture
statute]. Once we distinguish the money from
its container, it also follows that the
presence of one illegal dollar in an account
does not taint the rest--as if the dollar
obtained from [money laundering activity] were
like a drop of ink falling into a glass of
water.
$448,342.85, 969 F.2d 474, 476 (7th Cir. 1992).
The solution, we think, is to give effect to the
substitute asset provision. See 18 U.S.C. 982(b)(1)
(incorporating 21 U.S.C. 853(p)(5)). Thus, once a defendant has
commingled laundered funds with untainted funds--whether in a bank
account or in a tattered suitcase--such that they "cannot be
divided without difficulty," 21 U.S.C. 853(p)(5), the government
must satisfy its forfeiture judgment through the substitute asset
provision. Once property subject to forfeiture under 982(a)(1)
is no longer identifiable due to some act of the defendant, the
government may seek any property, cash or merchandise, in
satisfaction of the amount of criminal forfeiture to which it is
entitled.
3.
In light of our analysis, the district court's forfeiture
order, which is incorporated into Voigt's judgment of conviction
and sentence, cannot stand. Even under the preponderance standard,
the items of jewelry cannot be considered "traceable to" the
proceeds of money laundering activity; the jewelry was purchased
with funds from an account into which money laundering proceeds had
been commingled with other funds, and after numerous intervening
deposits and withdrawals. We therefore cannot say that, more
probably than not, the jewelry is "traceable to" money laundering
activity.
Notwithstanding our conclusion, the government continues
to be entitled to $1.6 million in criminal forfeiture. But to the
extent that the forfeiture order incorporated in the judgment
required Voigt to hand jewelry over to the government under an
erroneous legal determination, the government is improperly in
possession of that jewelry. We do not envision that the district
court will have to conduct a de novo forfeiture proceeding on
remand. Since all that is at issue is the process by which the
government may seize property in satisfaction of the $1.6 million
to which it is lawfully entitled, on remand the government should
be permitted to move to amend the judgment to reflect that the
jewelry is forfeitable as a substitute asset. Cf. United States v.
Hurley, 63 F.3d 1, 23 (1st Cir. 1995) (no error where, after notice
of appeal from conviction was filed, government moved for and
received from district court permission to seize certain property
as "substitute assets"); Todd Barnet & Ivan Fox, Trampling on the
Sixth Amendment: The Continued Threat of Attorney Fee Forfeiture,
22 Ohio N.U. L. Rev. 1, 55 (1995) ("The substitute assets
provisions constitute a procedural alternative for collecting a
forfeiture judgment and are not a form of punishment in their own
right . . . .").
VII.
THE TAX EVASION CONVICTIONS
Voigt contends that his convictions on two counts of tax
evasion under 26 U.S.C. 7201 (relating to the 1990 and 1991 tax
years) are legally insufficient because the government failed to
adduce evidence of an "affirmative act" of tax evasion, which is an
essential element of the offense.
A.
Prior to trial, Voigt moved for and received a bill of
particulars relating to the tax evasion counts because the
indictment failed to specify the affirmative acts on which the
government intended to rely at trial. The bill of particulars
indicated four separate acts of evasion: (1) Voigt's submission of
a partially false and partially incomplete Internal Revenue Service
("IRS") Form 433-A understating the amount in his First Fidelity
Bank account, his failure to fulfill his promise to provide the
missing information to an IRS agent, and his failure to tell the
agent of his advance-fee income earned in 1989 and 1990; (2)
Voigt's decision not to purchase a piece of jewelry with cash when
informed that a Currency Transaction Report would have to be filed
with the IRS; (3) Voigt's role in requiring potential victims of
the Trust to fill out bizarre confidentiality agreements that
forbade them from disclosing details of their transaction; and (4)
Voigt's maintenance of overseas bank accounts and his direction to
Anderskow to wire funds into those accounts. At trial the
government introduced evidence on all four affirmative acts.
B.
Essential to a conviction under 26 U.S.C. 7201 is "1)
the existence of a tax deficiency, 2) an affirmative act
constituting an attempt to evade or defeat payment of the tax, and
3) willfulness." United States v. McGill, 964 F.2d 222, 229 (3d
Cir.), cert. denied, 506 U.S. 1023, 113 S. Ct. 664 (1992). Voigt
claims that the government's proof at trial failed to establish the
second element as a matter of law because none of the alleged
affirmative acts shows that his purpose was to evade the payment of
taxes. Bearing in mind that "[o]ur review of the sufficiency of
the evidence is 'governed by strict principles of deference to a
jury's findings,'" id. (quoting United States v. Ashfield, 735 F.2d
101, 106 (3d Cir.), cert. denied, 469 U.S. 858, 105 S. Ct. 189(1984)), we reject Voigt's legal sufficiency challenge.
1.
With respect to the first affirmative act charged by the
government, the submission in September of 1990 of a materially
misleading Form 433-A, Voigt claims that "[t]hese false statements
could not . . . have been used to evade taxes for 1990 and 1991,
taxes which were not even due until April 15, 1991 and April 15,
1992, respectively." Voigt's Br. at 36. The IRS uses Form 433-A
to identify potential assets with which a taxpayer who owes back
taxes can pay them and to establish a method of collection. Since
the form at issue dealt with payment of taxes owed in (or prior to)
1990, and since it was submitted before the deficiencies that are
the focus of the tax evasion charges arose, Voigt contends that it
cannot have been calculated "to mislead the government or conceal
funds to avoid payment of an admitted and accurate deficiency" as
a matter of law. McGill, 964 F.2d at 230 (emphasis added).
In McGill we addressed the question whether an
affirmative act can predate the existence of a tax deficiency and
cited to conflicting authority on that issue. We declined to
answer that question definitively, however, because the crime
charged in the indictment pointed to the date the deficiency arose
as the date of the offense: "The indictment by its terms required
the jury to look forward in time for evidence of affirmative acts."
Id. at 231. Once again, we decline the parties' invitation to rule
as a general matter on whether predeficiency conduct can satisfy
the statute's "affirmative act" element. For here, as in McGill,
the superseding indictment charged Voigt with violating 26 U.S.C.
7201 "[o]n or about April 15, 1991" and "[o]n or about April 15,
1992." App. at 432, 433. Accordingly, even if conduct predating
the existence of a deficiency can constitute proof of an
affirmative act of tax evasion, the government's failure to include
the predeficiency period in the indictment's specification of the
offense charged precludes it from relying on conduct predating the
existence of the deficiency as substantive evidence of affirmative
acts of evasion. McGill, 964 F.2d at 231 ("The Government must
prove attempted evasion for each count beginning at the dates
[charged in the indictment].").
This same reasoning applies to the government's
contentions that Voigt's failure to fulfill his promise to provide
the IRS agent with income information missing from his Form 433-A
and his failure to disclose to the IRS agent advance-fee income
earned in 1989 and 1990 constitute affirmative evasive acts. These
actions, like the submission of the false Form 433-A in the first
place, were taken in the context of a collection action for
delinquent taxes from prior years, and preceded the tax liabilities
on which the evasion charges are based. As with the submission of
the false Form 433-A, we believe that the circumstances do not
warrant a finding that these prior acts were affirmative evasive
acts that laid the groundwork for later tax evasion.
2.
Nevertheless, the three additional affirmative acts
proved by the government at trial, when taken together, are
sufficient to sustain the jury's verdict. The Supreme Court has
said of the affirmative act element that "[i]f the tax evasion
motive plays any part in such conduct[,] the offense may be made
out even though the conduct may also serve other purposes such as
concealment of other crime." Spies v. United States, 317 U.S. 492,
499, 63 S. Ct. 364, 368 (1943). Elaborating on the "affirmative
act" requirement, we stated in McGill that an "affirmative act is
anything done to mislead the government or conceal funds to avoid
payment of an admitted and accurate deficiency." McGill, 964 F.2d
at 230. We also noted that "[o]ne act will suffice." Id. at 229
(citing United States v. Conley, 826 F.2d 551, 556-57 (7th Cir.
1987)). Whereas simple nonpayment of taxes owed cannot sustain a
conviction under the statute, acts intended to conceal or mislead
are sufficient.
Voigt argues that the government's proofs as to the
second, third and fourth affirmative acts were legally insufficient
because they were equally consistent with innocent activity and,
more specifically, because there was no evidence linking them to a
"motive" or "intent" to evade. According to Voigt, therefore,
there must be direct evidence of intent before a rational trier of
fact can conclude beyond a reasonable doubt that an affirmative act
was undertaken, in part, to evade the payment of income tax.
Voigt's legal proposition is without precedential support.
In the majority of criminal cases, the element of intent
is inferred from circumstantial evidence. See generally United
States v. Iafelice, 978 F.2d 92, 98 (3d Cir. 1992) ("It is not
unusual that the government will not have direct evidence. [Mens
rea] is often proven by circumstances."). The rule is no different
in tax evasion prosecutions. The Supreme Court in Spies stated
that "any conduct, the likely effect of which would be to mislead
or conceal," is sufficient to satisfy the "affirmative act"
element. Spies, 317 U.S. at 499, 63 S. Ct. at 368 (emphasis
added). Accord United States v. Mal, 942 F.2d 682, 687 (9th Cir.
1991) (evasion of payment "involves conduct designed to place
assets beyond the government's reach after a tax liability has been
assessed") (emphasis added); Conley, 826 F.2d at 556 (rational jury
can infer intent to evade upon learning of manner in which
defendant conducted his financial affairs); United States v.
Shorter, 809 F.2d 54, 57-58 (D.C. Cir.) (jury could infer intent to
evade where defendant carried on "cash lifestyle"), cert. denied,
484 U.S. 817, 108 S. Ct. 71 (1987); United States v. Voorhies, 658
F.2d 710, 714-15 (9th Cir. 1981) ("Voorhies' conduct in 1974 [of
liquidating assets and transporting proceeds to Switzerland] had
the 'likely effect' of misleading or concealing."). These cases
simply require that there be some evidence from which a jury could
infer an intent to mislead or conceal beyond mere failure to pay
assessed taxes; it is for the jury to determine, as a matter of
fact, whether the affirmative act was undertaken, in part, to
conceal funds from or mislead the government.
We have no difficulty concluding, therefore, that Voigt's
refusal to pay for a piece of jewelry in cash; his use of bizarre
confidentiality agreements; and his maintenance of overseas bank
accounts, taken together, provided the jury with sufficient
evidence from which it could infer that they were "designed" to
evade the payment of admitted tax deficiencies, even if such
actions otherwise might constitute wholly innocent conduct. SeeUnited
States v. Jungles, 903 F.2d 468, 473-74 (7th Cir. 1990)
(activity that is lawful itself can constitute affirmative act to
evade); see also United States v. Pollen, 978 F.2d 78, 86 (3d Cir.
1992) (transporting funds to foreign countries, thereby making it
more difficult to trace, provides inference of intent to evade),
cert. denied, 508 U.S. 906, 113 S. Ct. 2332 (1993).
The evidence at trial indicating a possible motive
unrelated to tax obligations for some or all of the affirmative
acts, upon which Voigt heavily relies on appeal, was before the
jury. It chose to reject Voigt's proffered interpretation and
accept the government's. Given our deferential standard of review,
United States v. Casper, 956 F.2d 416, 421 (3d Cir. 1992), along
with the settled rule that we draw all reasonable inferences in
favor of the jury's verdict, Jackson v. Virginia, 443 U.S. 307,
319, 99 S. Ct 2781, 2789 (1979), we may not substitute our (or
Voigt's) judgment for that of the jury; Voigt's legal sufficiency
challenge is essentially a futile attempt to rehash his closing
argument.
Finally, even were we to agree that, standing alone, the
three remaining affirmative acts were insufficient to establish
Voigt's intent to evade payment, our decision in McGill instructs
that the jury was entitled to consider Voigt's submission of a
materially misleading Form 433-A in 1990 as relevant evidence on
the question whether his later actions were intended to be evasive.
See supra n.25. This provided the jury with ample basis on which
to convict, since in 1990 Voigt had materially misled the IRS in
order to hamper its attempts to collect back taxes. The jury
readily could have concluded that Voigt's later actions were not
innocent as Voigt claimed but, rather, were part of a conscious and
continued attempt to thwart the IRS's collection efforts.
Accordingly, we reject Voigt's legal sufficiency challenge to his
tax evasion convictions.
VIII.
THE RESTITUTION ORDER
At sentencing, the district court ordered Voigt to make
$7,040,000 in restitution. Finding that Voigt had secreted
substantial sums of money derived from the Trust's advance-fee
scheme, the district court noted in its amended judgment that
as was demonstrated at trial and at various
motion hearings, [] defendant has himself
deposited or forwarded to others for deposit
in various accounts in various European banks,
millions of dollars in cash and other
property. To cite but two examples, the
Government has already obtained a release and
assignment of funds and property currently
frozen at United Overseas Bank in Switzerland
in the account of defendant's former
girlfriend; and the Government has received a
similar release and assignment from defendant
pertaining to funds frozen in his accounts at
the same bank.
App. at 1394. Voigt now challenges the district court's
restitution order and, more specifically, the lack of "specific
findings" as to his ability to pay. Claiming that "there is no
evidence of any funds elsewhere," Voigt's Br. at 48, Voigt asks us
to vacate the restitution order and remand for recalculation. We
review the restitution award for abuse of discretion. United
States v. Graham, 72 F.3d 352, 355 (3d Cir. 1995), cert. denied,
116 S. Ct. 1286 (1996).
A.
In United States v. Logar, 975 F.2d 958 (3d Cir. 1992),
we held that when a district court imposes an order of restitution
under the Victim and Witness Protection Act ("VWPA"), codified at18 U.S.C.
3663-64, it is required "'to make specific findings as
to the factual issues that are relevant to the application of the
restitution provisions . . . .'" Id. at 961 (quoting United States
v. Palma, 760 F.2d 475, 480 (3d Cir. 1985)). One of the relevant
provisions to which the requirement of specific factual findings
applies is "the defendant's ability to pay and the financial need
of defendant and the defendant's dependents." United States v.
Copple, 24 F.3d 535, 549 (3d Cir.) ("Copple I") (citing Logar, 975
F.2d at 961), cert. denied, 115 S. Ct. 488 (1994)). The
restitution amount must reflect the defendant's ability to pay
within five years after the date of sentencing. 18 U.S.C.
3663(e)(2)(C).
In Copple I, the district court ordered restitution of
approximately four million dollars after simply adopting as its
factual findings the amount of loss to the victims calculated in
the presentence report, but without specific findings on either the
amount of loss or Copple's ability to pay. After the case had been
remanded to the district court and a resentencing hearing had been
held, the court reinstated its restitution order of four million
dollars. Although it had made specific findings concerning the
amount of the loss, which Copple did not challenge, the district
court found that despite the defendant's current financial
hardship, he had the potential to earn money in the future given
his past success as a businessman.
On appeal a different panel of this court again vacated
the restitution award and remanded for resentencing. United States
v. Copple, 74 F.3d 479 (3d Cir. 1996) ("Copple II"). We found that
a defendant's past success as a businessman, alone, could not
justify the four-million-dollar restitution award, since it was
unrealistic that the defendant would be able to earn that amount of
money over five years. The court made no "findings about Copple's
financial needs, and observed only that 'the family is in dire
financial straights at this time,' an assertion hardly supportive
of the exceptionally large restitution amount it ultimately
ordered." Id. at 483.
As to the government's contention that the restitution
award should be sustained because it implicitly reflected amounts
attributable to assets Copple acquired with misappropriated funds,
we agreed that
[t]he proceeds from a defendant's illegal
conduct that the defendant still retains or
can recoup are certainly encompassed within
the "financial resources of the defendant"
that the district court should consider in
fashioning a restitution order. Of course,
the continued existence of such proceeds is a
factual issue that should be accompanied by
"specific findings."
Id. at 484 (citation omitted). We went on to note that, in
determining a restitution award based on "the court's reasonable
belief that there are secreted assets," id., the district court may
calculate the total proceeds of defendant's crime minus amounts
already accounted for, and then place the burden of accounting for
the remainder on the defendant. The defendant may point to
specific disbursements indicating that he is no longer in
possession of funds obtained as a result of his crimes or assets
purchased therewith. "Unless [the defendant] can disprove
possession of any remaining amount in this manner, the court may
consider the resulting figure as constituting 'financial resources
of the defendant.'" Id.B.
In light of our decision in Copple II, which was filed
after briefing and argument in this case had been completed, we see
no basis for setting aside the district court's restitution award
as an abuse of discretion. In fact, the district court's analysis
was prescient in that it essentially employed the framework
contemplated by Copple II for ordering restitution where there is
reason to believe that a defendant has secreted proceeds from
illegal activity. Relying on Copple II, we divide our analysis
into two parts. We first determine whether the district court's
finding that Voigt had secreted the proceeds of his crime, thereby
shifting to him the burden to explain their whereabouts, was an
abuse of discretion. We then determine whether the district
court's ultimate restitution order constituted an abuse of
discretion given that the burden of persuasion as to the location
of the proceeds, as well as on financial resources and ability to
pay, had shifted to defendant. Copple II, 74 F.3d at 484; 18
U.S.C. 3664(d).
1.
That the district court was entitled to proceed with the
sort of analysis contemplated in Copple II cannot seriously be
disputed. The district court's restitution order, along with the
evidence at trial, provided ample basis for the court's conclusion
that Voigt had attempted to secrete the proceeds of his criminal
activity in foreign bank accounts and in his former girlfriend's
name. Since there is evidence in the record to support the
district court's "reasonable apprehension that [Voigt] has secreted
certain assets," Copple II, 74 F.3d at 484, the derivation of a
"starting point" and the concomitant shifting of the burden to the
defendant cannot constitute an abuse of discretion.
To the extent that Voigt complains that the district
court's starting point ($7,040,000) did not represent the amount of
his actual holdings at sentencing, he misses the point. Copple IImakes
clear that once the district court has reasonably concluded
that the defendant is concealing the proceeds of his crime, the
district court may use as a starting point the entire amount of the
loss caused minus any amount already accounted for (in this case,
the amount sought by the government in forfeiture). Again, we see
no abuse of discretion in the district court's decision to require
Voigt to account for the entire $7,040,000.
2.
The essence of Voigt's complaint is that the district
court's ultimate restitution award was the same amount as the
starting point it had derived. Voigt assails the district court's
failure to make specific findings on his ability to pay or on his
financial resources. But under Copple II and 18 U.S.C. 3664(d),
it was Voigt who bore the burden of persuasion (and, logically, the
burden of production) on whether he possessed the $7,040,000 in
crime proceeds and on the issue of his financial resources and
needs. Voigt failed to adduce sufficient evidence on either
subject. For instance, Voigt never submitted to the Probation
Department a completed Personal Financial Statement form. Instead,
he claimed that he was "living off savings and other assets," yet
never accounted for the source of those funds. This was simply
insufficient to demonstrate by a preponderance of the evidence his
financial resources and needs. United States v. Cannistraro, 871
F.2d 1210, 1214 (3d Cir. 1989) (no abuse of discretion where
restitution amount not reduced to reflect ability to pay when
defendant fails to adduce evidence on that subject).
Given Voigt's complete failure to meet his statutory
burden of demonstrating his financial resources and needs, it is
not surprising that the district court was unable to announce
"specific findings" on that subject. Quite simply, because Voigt
had failed to account for the $7,040,000 in crime proceeds, and
because he failed to adduce sufficient evidence on his ability to
pay and financial needs, the district court had no choice but to
impose what had been its "starting point" as the final amount of
restitution. Such a result is entirely "consistent with . . . our
policy-based conviction that defendants ought not be permitted to
profit, quite literally, from uncertainty for which their illegal
conduct is ultimately responsible." Copple II, 74 F.2d at 484.
Put another way,
if the government bore the burden of proving
that such defendants still possess illegally
obtained assets, the government would be
unable to locate hidden assets, those assets
would not be taken into account in framing
restitution orders, and the defendants would
continue to profit at the expense of the
innocent victims. This would be
unconscionable.
The solution is to place the burden of
proof on the defendant to show what has
happened to all of the illegally obtained
assets. All assets for which the defendant
cannot account may be included in the amount
of restitution ordered. To the extent that
records are unavailable, the risk of
inaccuracy should be borne by the defendant
rather than the victims.
Id. at 486 (Alito, J., concurring) (citation omitted).
Finally, we do not view the district court's decision to
accept Voigt's representations of indigency for purposes of
appointing appellate counsel as mandating a contrary result. The
district court explained that it did so simply to expedite Voigt's
appeal. In United States v. Hallman, 23 F.3d 821, 827 (3d Cir.),
cert. denied, 115 S. Ct. 216 (1994), we held that a finding of
indigence at the time of sentencing is not a bar to imposing
restitution as long as the award is based "on realistic prospects
that the defendant will be able to pay it, and not on fantastic or
overly speculative possibilities." Copple II, 74 F.3d at 485.
Given the district court's record-supported findings that Voigt
concealed substantial sums of crime proceeds, and given Voigt's
failure to rebut those findings with competent evidence, the
district court's restitution order was based on "realistic
prospects that the defendant will be able to pay it . . ." Id.IX.
THE MOTIONS FOR SEVERANCE
Finally, Voigt argues that the district court erred in
denying his motions to sever his trial from those of his
codefendants on the ground of mutually antagonistic defenses, and
that his convictions must therefore be reversed. The district
court's denial of Voigt's motion is reviewable only for abuse of
discretion. United States v. Thornton, 1 F.3d 149, 152 (3d Cir.),
cert. denied, 114 S. Ct. 483 (1993).
A.
In appealing his conviction on this ground, Voigt faces
an uphill battle. As the Supreme Court has recently noted,
"[t]here is a preference in the federal system for joint trials of
defendants who are indicted together." Zafiro v. United States,
506 U.S. 534, 113 S. Ct. 933, 937 (1993). See Fed. R. Crim. P. 8(b)
("Two or more defendants may be charged in the same indictment or
information if they are alleged to have participated in the same
act or transaction or in the same series of acts or transactions
constituting an offense or offenses."). Such joint trials promote
efficiency in the courts and serve the interests of justice by
preventing "the scandal and inequity of inconsistent verdicts."
Zafiro, 506 U.S. at 537, 113 S. Ct. at 937 (quoting Richardson v.
Marsh, 481 U.S. 200, 209, 107 S. Ct. 1701, 1708 (1987)). In
addition, joint trials of defendants charged under a single
conspiracy aid the finder of fact in determining the "full extent
of the conspiracy," United States v. Provenzano, 688 F.2d 194, 199
(3d Cir.), cert. denied, 459 U.S. 1071, 103 S. Ct. 492 (1982), and
prevent "the tactical disadvantage to the government from
disclosure of its case." United States v. Jackson, 649 F.2d 967,
973 (3d Cir.), cert. denied, 454 U.S. 1034, 102 S. Ct. 574 (1981).
As a result, when defendants have been properly joined
pursuant to Rule 8(b) of the Federal Rules of Criminal Procedure,
"a district court should grant a severance under Rule 14 only if
there is a serious risk that a joint trial would compromise a
specific trial right of one of the defendants, or prevent the jury
from making a reliable judgment about guilt or innocence." Zafiro,
506 U.S. at 539, 113 S. Ct. at 938. See Fed. R. Crim. P. 14 ("If it
appears that a defendant or the government is prejudiced by a
joinder of . . . defendants . . . for trial together, the court may
order an election or separate trials of counts, grant a severance
of defendants or provide whatever other relief justice requires.").
Many courts have recognized that such a risk arises when
codefendants assert "mutually antagonistic" defenses. See Zafiro,
506 U.S. at 538, 113 S. Ct. at 937 (collecting cases). Even where
a defendant establishes that his defense and those of his
codefendants are mutually antagonistic, however, severance is not
mandatory. Id., 113 S. Ct. at 938. Mutually antagonistic defenses
are not prejudicial per se; and even if they were, Rule 14 "leaves
the tailoring of the relief to be granted, if any, to the district
court's sound discretion." Id. at 539, 113 S. Ct. at 938.
Therefore, to obtain a reversal of conviction for failure to sever
where codefendants assert mutually antagonistic defenses, a
defendant "must demonstrate clear and substantial prejudice
resulting in a manifestly unfair trial." United States v.
Reicherter, 647 F.2d 397, 400 (3d Cir. 1981).
Although precise articulations may differ, courts agree
that "[m]utually exclusive defenses . . . exist when acquittal of
one codefendant would necessarily call for the conviction of the
other." United States v. Tootick, 952 F.2d 1078, 1081 (9th Cir.
1991). This type of situation arises "when one person's claim of
innocence is predicated solely on the guilt of a co-defendant."
United States v. Harris, 9 F.3d 493, 501 (6th Cir. 1993). In
determining whether mutually antagonistic defenses exist such that
severance may be required, the court must ascertain whether "the
jury could reasonably construct a sequence of events that
accommodates the essence of all appellants' defenses." United
States v. Perez-Garcia, 904 F.2d 1534, 1548 (11th Cir. 1990).
While mutually antagonistic defenses have been much
discussed in theory, only rarely have courts found that they exist
in practice. See Zafiro, 506 U.S. at 538, 113 S. Ct. at 937; see
also Tootick, 952 F.2d at 1078 (finding mutually antagonistic
defenses warranting reversal where two defendants charged with
assault both defended themselves by arguing that the other
committed the assault alone). Far more frequently, courts have
concluded that the asserted defenses, while in conflict with one
another, are not so irreconcilable that "[t]he jury could not have
been able to assess the guilt or innocence of the defendants on an
individual and independent basis." Tootick, 952 F.2d at 1083.
See, e.g., United States v. Flanagan, 34 F.3d 949, 952 (10th Cir.
1994) (affirming denial of motion to sever because a jury "could
logically" accept one defendant's defense without concluding that
the codefendant was guilty, and vice versa); Harris, 9 F.3d at 501(affirming denial of motion to sever trials of coconspirators, one
of whom claimed innocence and the other of whom claimed entrapment,
on the ground that these defenses are not inconsistent because the
jury could logically have accepted both); Perez-Garcia, 904 F.2d at
1548 (affirming denial of motion to sever because "the jury could
reasonably construct a sequence of events that accommodates the
essence of all appellants' defenses").
Moreover, courts have consistently held that finger-
pointing and blame-shifting among coconspirators do not support a
finding of mutually antagonistic defenses. See Provenzano, 688
F.2d at 198 (affirming denial of motion to sever where all
defendants blamed one coconspirator on the ground that these
defenses were not antagonistic, because if jury had believed that
only one defendant was to blame there would have been a failure of
proof on the conspiracy charges); see also United States v. Smith,
44 F.3d 1259, 1266-67 (4th Cir.) (affirming denial of motion to
sever where defendant's codefendants claimed that he ran the whole
scheme and they were just victims of his criminal influence), cert.
denied, 115 S. Ct. 1970 (1995); United States v. Linn, 31 F.3d 987,
992 (10th Cir. 1994) (affirming denial of motion to sever where
each coconspirator defended himself by blaming the others on the
ground that the jury could have believed all defendants' theories
and acquitted them all); United States v. Rivera, 6 F.3d 431, 438
(7th Cir. 1993) (affirming denial of motion to sever where
codefendants in a drug conspiracy all claimed ignorance and blamed
each other on ground that "plain and simple blame-shifting" does
not necessarily prevent jury from making reliable judgment about
guilt or innocence), cert. denied, 114 S. Ct. 1098 (1994); United
States v. Barber, 442 F.2d 517, 530 (3d Cir.) (holding that "the
mere presence of hostility among defendants or the desire of one to
exculpate himself by inculpating another" are insufficient grounds
to require severance), cert. denied, 404 U.S. 958, 92 S. Ct. 3271971). These cases illustrate the well-settled principle that
"defendants are not entitled to severance merely because they may
have a better chance of acquittal in separate trials." Zafiro, 504
U.S. at 540, 113 S. Ct. at 938.
B.
Voigt's argument is essentially indistinguishable from
those that were rejected in the conspiracy cases cited above. The
basis of his claim is that his codefendants "directed blame at
[him] as the architect of the scheme . . . ." Smith, 44 F.3d at
1267. Travis argued throughout the trial that Voigt had deceived
her, and that "[s]he was one of the victims of John Voigt." App.
at 985 (Travis' counsel's closing argument). Similarly, Anderskow
and Anchors argued that they were pawns in a scheme created and
perpetrated by John Voigt.
Voigt contends that "the defenses presented [by his
codefendants] would, in order to have succeeded, have required
defendant Voigt's conviction, and certainly enhanced that
possibility." Voigt's Br. at 30. In light of the case law and on
logical grounds, we disagree. The basic theory behind the defenses
of Travis, Anderskow, and Anchors was that they lacked criminal
intent. Although it is fairly clear that these defenses, by
pointing the finger of blame at Voigt, increased the likelihood
that Voigt would be convicted, the Supreme Court has stated that
this type of injury alone does not mandate severance. Zafiro, 506
U.S. at 540, 113 S. Ct. at 938. As the government correctly argued
in its brief, "it was not logically impossible for the jury to have
either (i) disbelieved all of the defenses, given the government's
affirmative proof or (ii) believed all of them, on the basis that
the government had not adduced sufficient evidence of intent."
Government's Br. at 39. Under these circumstances, we cannot
conclude that the defenses in this case were mutually antagonistic.
The limiting instructions that the district court gave to
the jury reinforce our conclusion. See Smith, 44 F.3d at 1267;
Rivera, 6 F.3d at 438. The court instructed the jury (1) to
"consider each count of the indictment and each defendant's
involvement in that count separately," (2) that "the burden is
always on the prosecution to prove guilt beyond a reasonable
doubt," (3) that its "verdict as to any defendant on any count
should not control [its] verdict as to any other defendant or any
other count," and (4) that opening statements and closing arguments
are not evidence. Anderskow's App. at 4251, 4257 & 4278. We are
convinced that these instructions "were sufficient to cure any
potential prejudice from antagonistic defenses." Rivera, 6 F.3d at
438 (relying on similar instructions). We therefore conclude that
the district court did not abuse its discretion in denying Voigt's
motions for a severance.
X.
CONCLUSION
We will affirm Voigt's conspiracy, money laundering and
tax evasion convictions, as well as the district court's order of
restitution. We will vacate the forfeiture order, which is
incorporated into the judgment of conviction and sentence, and
remand for further proceedings consistent with this opinion.
TO THE CLERK:
Please file the foregoing opinion.
United States Circuit Judge
M E M O R A N D U M
TO: P. Douglas Sisk, Clerk
FROM: Judge Cowen
DATE: July 8, 1996
RE: U.S.A. v. Voigt, No. 95-5092, argued 1/25/96
Dear Doug:
Please file the enclosed opinion which has cleared in
accordance with our procedure. A signed original will be mailed
today. Also, please note that Voigt's appeal was consolidated for
argument with the appeals of U.S.A. v. Anderskow, No. 95-5093, and
U.S.A. v. Anchors, No. 95-5094. The opinion disposing of
Anderskow's/Anchors' appeals is being filed simultaneously
herewith.
Sincerely,
Robert E. Cowen
REC/ds
enclosure
cc: Judge Sarokin (memo only)
Judge Pollak (memo only)
Pat McCafferty (memo only)