In Re: Henry Cisneros

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Filed July 21, 2006
Division No. 95-1
IN RE: CISNEROS
(FINKELSTEIN FEE APPLICATION)
Division for the Purpose of
Appointing Independent Counsels
Ethics in Government Act of 1978, As Amended
Before: SENTELLE, Presiding, FAY and REAVLEY, Senior
Circuit Judges.
ORDER
This matter coming to be heard and being heard before the
Special Division of the Court upon the petition of Barry J.
Finkelstein for reimbursement of attorneys’ fees and costs
pursuant to section 593(f) of the Ethics in Government Act of
1978, as amended, 28 U.S.C. § 591 et seq. (2000), and it
appearing to the court for the reasons set forth more fully in the
opinion filed contemporaneously herewith, that the petition is
for the most part well taken, it is hereby
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ORDERED, ADJUDGED, and DECREED that Barry
Finkelstein shall be reimbursed for attorneys’ fees and expenses
in the amount of $110,013.09.
PER CURIAM
For the Court:
Mark J. Langer, Clerk
By:
Marilyn R. Sargent
Chief Deputy Clerk
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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Filed July __, 2006
Division No. 95-1
IN RE: CISNEROS
(FINKELSTEIN FEE APPLICATION)
Division for the Purpose of
Appointing Independent Counsels
Ethics in Government Act of 1978, As Amended
Before: SENTELLE, Presiding, FAY and REAVLEY, Senior
Circuit Judges.
ON APPLICATION FOR ATTORNEYS’ FEES
PER CURIAM: Barry J. Finkelstein petitions this Court under
section 593(f) of the Ethics in Government Act of 1978, as
amended, 28 U.S.C. §§ 591-599 (2000) (the Act), for
reimbursement of attorneys’ fees in the amount of $110,763.09
that he claims were incurred during and as a result of the
investigation conducted by the Independent Counsel (IC).
Because we find that Finkelstein has established his entitlement
under the statutory criteria for reimbursement of a portion of the
fees we will, for the reasons set forth more fully below, allow
recovery of $110,013.09.
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Background
In 1994 allegations arose that Henry Cisneros, then-
Secretary of Housing and Urban Development, during his
appointment process may have made false statements to the FBI
concerning alleged payments made by him to his mistress. After
conducting a preliminary investigation pursuant to the
Independent Counsel statute, the Attorney General requested
that this court appoint an independent counsel to further
investigate the matter, and the appointment was made on
May 24, 1995. Approximately one and a half years after his
appointment, the Independent Counsel requested that his
jurisdiction be expanded to include investigation of possible tax
violations by Cisneros in years 1989, 1991, 1992, and 1993.
This request was granted only for the year 1992.
During his subsequent investigation, the IC apparently came
into possession of an internal IRS memorandum that contained
allegations of impropriety by the IRS Washington, D.C., office
in its decision not to recommend prosecution of Cisneros for tax
violations. The memorandum alleged “possible improprieties by
Assistant Chief Counsel (Criminal Tax).” The IC, beginning in
1997, then undertook his own investigation into whether
obstruction of justice occurred in the decisions of certain IRS
(and DOJ) officials in not authorizing the investigation or
prosecution of Cisneros for possible tax violations (hereinafter
“the obstruction investigation”). Barry Finkelstein, the fee
applicant here, was investigated by the IC in his capacity as the
head of the Assistant Chief Counsel’s Office for Criminal Tax.
In 1998 the obstruction investigation was temporarily
suspended, until 2000. Upon resumption, on May 18, 2000, the
Office of the Independent Counsel (OIC) informed Finkelstein’s
attorney that Finkelstein was a “subject” of the grand jury’s
investigation. Apparently on the following day, May 19,
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Finkelstein was granted use immunity under 19 U.S.C. §§ 6002-
6003. In the following seven months he would be called before
the grand jury 29 times. He was never indicted and now,
pursuant to the Act, seeks reimbursement for his attorneys’ fees
generated between May 22, 2000, and May 31, 2005, in the
amount of $110,763.09. As directed by section 593(f)(2) of the
Act, we forwarded copies of Finkelstein’s fee petition to the
Attorney General and the IC and requested written evaluations
of the petition. The court expresses its appreciation to the IC
and the Attorney General for submitting these evaluations,
which we have given due consideration in arriving at the
decision announced herein.
Discussion
The Ethics in Government Act provides for reimbursement
of attorneys’ fees expended in defense against an investigation
under the Act by subjects who qualify under 28 U.S.C. §
593(f)(1). That section provides:
Upon the request of an individual who is the subject of an
investigation conducted by an independent counsel pursuant
to this chapter, the division of the court may, if no
indictment is brought against such individual pursuant to
that investigation, award reimbursement for those
reasonable attorneys’ fees incurred by that individual during
that investigation which would not have been incurred but
for the requirements of this chapter.
Because the Act “constitutes a waiver of sovereign
immunity it is to be strictly construed.” In re Nofziger, 925 F.2d
428, 438 (D.C. Cir., Spec. Div., 1991) (per curiam). Under the
Act, therefore, we can only order reimbursement for attorneys’
fees when we determine, inter alia, that the fee petitioner was a
“subject” of the independent counsel’s investigation and would
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not have incurred the attorneys’ fees “but for” the requirements
of the Act. See, e.g., In re Pierce (Kisner Fee Application), 178
F.3d 1356, 1358 (D.C. Cir., Spec. Div., 1999) (per curiam). The
petitioner “bears the burden of establishing all elements of his
entitlement.” In re North (Reagan Fee Application), 94 F.3d
685, 690 (D.C. Cir., Spec. Div., 1996) (per curiam). There is
apparently no dispute that Finkelstein incurred his attorneys’
fees “during” the IC’s investigation. The remainder of the
discussion will therefore address the “subject,” “but for,” and
“reasonable” requirements.
A. “Subject” Status
We have previously defined the term “subject” as a person
whose conduct is within the scope of the independent counsel’s
investigation such that “the Independent Counsel might
reasonably be expected to point the finger of accusation” at him.
In re North (Dutton Fee Application), 11 F.3d 1075, 1078 (D.C.
Cir., Spec. Div., 1993) (per curiam); see also In re North (Shultz
Fee Application), 8 F.3d 847, 850 (D.C. Cir., Spec. Div., 1993)
(per curiam). Additionally, in Shultz we held that, under any
definition of the term, the criterion for “subject” status is
squarely met when the Independent Counsel tells a person that
he is in fact a subject. 8 F.3d at 850. Finkelstein notes that on
May 18, 2000, the OIC indicated that he was a subject of the
investigation. Citing Shultz, 8 F.3d 847, Finkelstein argues that
subject status is “squarely” met when an independent counsel’s
office tells a person that he is a subject.
Finkelstein goes on to argue that although he was granted
use immunity the next day, that grant did not “alter [his] status.”
He first cites Dutton, 11 F.3d at 1078-79, for the proposition that
a subject granted use immunity “does not automatically lose” his
subject status upon the immunity grant. He then cites two
additional fee application cases in the North investigation in
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which the court determined that a grant of immunity did not
change the fee applicant’s subject status. In In re North (Cave
Fee Application), 57 F.3d 1117, 1120 (D.C. Cir., Spec. Div.,
1995) (per curiam), according to Finkelstein, the fee applicant
“remained a subject after the grant of immunity ‘because the
information he provided to the grand jury could have been
derived from two to four other witnesses,’ providing the
government an independent source for the testimony if it chose
to pursue charges against [the applicant].” And in In re North
(Haskell Fee Application), 74 F.3d 277, 282 (D.C. Cir., Spec.
Div., 1996) (per curiam), Finkelstein notes that although the fee
applicant was granted use immunity, he was thereafter
interviewed twice, with the court concluding that he was still
under threat of prosecution until the Independent Counsel
determined that the information he provided was truthful.
Analogizing his case to Cave, Finkelstein claims that “the
testimony [he] provided could have been – and indeed likely
was – obtained from other witnesses,” i.e., obtained from two of
his colleagues at the IRS who provided testimony concerning
the same events and circumstances as he did. As such,
according to Finkelstein, the OIC had a wholly independent
source of information if it chose to pursue charges against him.
And in analogizing his case to Haskell, Finkelstein notes that he
was called before the grand jury 29 times, where “[h]e was
routinely and rigorously questioned about his contemporaneous
communications with others involved in the Independent
Counsel’s inquiry and asked whether he was discussing his
grand jury testimony with those individuals.” Because of the
numerous requests for his grand jury appearances and the nature
of the questioning during those appearances, Finkelstein argues
that although he was granted use immunity, there was still a
realistic possibility that he would become a defendant.
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In its evaluation of Finkelstein’s application, the OIC
responds in two short paragraphs to Finkelstein’s claim to post-
immunity subject status. Although the OIC does not outright
dispute Finkelstein’s claim, it does note that a person still
considered a subject after receiving use immunity is “not the
norm,” In re Pierce (Abrams Fee Application), 190 F.3d 586,
591 (D.C. Cir., Spec. Div., 1999) (per curiam), that a grant of
use immunity changes the “reasonable perception” as to whether
the immunized witness can apprehend becoming a defendant,
id., and that “[t]herefore, Finkelstein could reasonably have
perceived himself to be a subject of the investigation after
receiving his grant of immunity from the OIC only in unusual
circumstances.” Tellingly, the OIC ends its discussion there,
without any assertion that “unusual circumstances” are absent in
Finkelstein’s case.
In its evaluation, the Department of Justice, after first noting
that Finkelstein was informed by the OIC that his status was that
of subject and at some point thereafter granted use immunity,
states that it “do[es] not have sufficient information to determine
definitively whether Mr. Finkelstein remained a subject.”
Nevertheless, the DOJ goes on to note certain factors cited by
Finkelstein which could support his claim to post-immunity
subject status. First, the DOJ asserts that Finkelstein is
apparently correct in claiming that relevant incriminating
information against him could have been obtained from
Finkelstein’s two testifying IRS colleagues. The DOJ notes in
this regard that “[t]he Final Report addresses in detail the
activities of the office Mr. Finkelstein headed with reference to
the testimony of these three individuals as well as others at
IRS.”
Second, the DOJ notes that “the genesis for the Independent
Counsel’s investigation regarding IRS” was the memorandum
entitled “Possible Improprieties by Assistant Chief Counsel
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(Criminal Tax),” which was the office headed by Finkelstein.
As such, argues the DOJ, Finkelstein’s situation falls within the
ambit of Cave, in that
Finkelstein’s status as head of the office that was at the
center of the allegations of impropriety might have led
a “reasonably counseled person at the time of incurring
the fees” to believe that he remained a subject of the
investigation even after receiving use immunity. Cave,
57 F.3d at 1120.
As noted by the OIC, it “is not the norm” for a fee
applicant, after receiving a grant of use immunity, to
“nonetheless believe that there remains a realistic possibility that
he would become a defendant.” Abrams, 190 F.3d at 591(quotation marks and brackets omitted). This court has noted
that in order to move out of the norm, “extraordinary facts” must
be present. Id. (analyzing Cave, 57 F.3d at 1117). Such
extraordinary facts are present here. First, as Finkelstein points
out, two of his colleagues were brought before the grand jury to
be questioned on the same topics as him. Therefore,
paraphrasing Cave, the grant of use immunity did not protect
Finkelstein from the realistic possibility that he would become
a defendant because the information he provided to the grand
jury could have been derived from two other witnesses, thus
providing the OIC with a wholly independent source for the
testimony if it chose to pursue charges against him. 57 F.3d at
1120.
Second, within a seven-month time span, Finkelstein was
called before the grand jury an “extraordinary” 29 times, where
he was questioned “rigorously” about any conversations he may
have had with others about his grand jury testimony. This alone
may be sufficient to bring him out of the norm. But also, as
pointed out by the DOJ, the obstruction investigation was
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initiated when the OIC came into possession of the so-called
“improprieties memo,” which primarily concerned alleged
misconduct on the part of Finkelstein. “Extraordinary facts”
therefore led Finkelstein to believe that notwithstanding the
grant of use immunity he nevertheless reasonably believed that
there remained a realistic possibility that he could become a
defendant.
B. Fees Not Incurred “But For” the Requirements of the
Act
The Act requires that to be reimbursable, attorneys’ fees
must “not have been incurred but for the requirements of [the
Act].” 28 U.S.C. § 593(f)(1) (emphasis added). Accordingly,
“[a]ll requests for attorneys’ fees under the Act must satisfy the
‘but for’ requirement of” the Act. In re Sealed Case, 890 F.2d
451, 452 (D.C. Cir., Spec. Div., 1989) (per curiam). The
purpose of limiting fee awards to fees that would not have been
incurred “but for” the Act is to ensure that “officials [and here
derivative ‘subjects’] who are investigated by independent
counsels will be subject only to paying those attorneys’ fees that
would normally be paid by private citizens being investigated
for the same offense by” federal executive officials such as the
United States Attorney. Id. (citing S. REP. NO. 97-496, 97th
Cong., 2d Sess. 18 (1982), reprinted in 1982 U.S.C.C.A.N.
3537, 3554 (referring to “fees [that] would not have been
incurred in the absence of the [Act]”)).
Finkelstein begins his argument for passing the “but for”
test by quoting from In re Meese, 907 F.2d 1192, 1201 (D.C.
Cir., Spec. Div., 1990) (per curiam), to the effect that during the
IC’s investigation he was subjected to a “more rigorous
application of the criminal law than is applied to other citizens.”
He notes that in Meese the independent counsel’s initial
investigation concerned only “a single, narrow question,” but
11
that later his jurisdiction was expanded to include an additional
six matters, and that because of this “extreme expansion” of the
investigation the court found Meese to have fulfilled the “but
for” requirement. In his case too, argues Finkelstein, “the
investigation was expanded exponentially by the Independent
Counsel,” who “pursued a portion of the investigation that a
normal prosecutor – restrained by the consideration of finite
resources and competing law enforcement priorities – would
never have had the time, resources, or discretion to pursue.”
Citing to a number of previous Special Division fee application
decisions, e.g., In re Espy (Townsend Fee Application), 346 F.3d
199 (D.C. Cir., Spec. Div., 2003) (per curiam); In re Espy
(Kearney Fee Application), 319 F.3d 526 (D.C. Cir., Spec. Div.,
2003) (per curiam), Finkelstein goes on to argue that even if an
“ordinary prosecutor” would have undertaken the obstruction
investigation, “it can hardly be doubted that the investigation
undertaken by the Independent Counsel was significantly longer,
more far-reaching, and more rigorous than any such
investigation by an ordinary prosecutor would have been.”
The OIC in its evaluation disputes Finkelstein’s claim that
he fulfills the “but for” requirement. First, the OIC asserts that
this court has “identif[ied] four situations in which applicants
are entitled to awards because the special limitations and
procedures of the Act imposed legal expenses on the subject,”
see, e.g., In re Pierce (Seligman Fee Application), 201 F.3d 473,
475 (D.C. Cir., Spec. Div., 2000) (per curiam), and that
Finkelstein has not brought himself within any of these
categories. Instead, argues the OIC, he has relied on Meese,
which “presents numerous unique facts not present here.” The
OIC distinguishes this case from Meese by asserting that in that
case the investigation was not based on any evidence of
wrongdoing, but rather “was a generalized effort to place
[Meese] under scrutiny.” But here, according to the OIC, the
investigation was based on the “improprieties memorandum,”
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which “directly accused Finkelstein of wrongdoing.” In sum,
states the OIC, “whereas Meese was scrutinized when there was
no evidence of wrongdoing, Finkelstein was scrutinized because
there was evidence of his wrongdoing.” (emphases in original).
Finally, the OIC notes that there were “serious allegations
against [Finkelstein] contained in the Improprieties
Memorandum” and that the Memorandum led the Treasury
Inspector General’s office to initiate an investigation. The OIC
further claims that two U.S. Senators had requested that
“allegations of Justice Department interference with IRS
investigations of Clinton Administration officials and
Democratic Party figures” be looked into. Consequently, argues
the OIC, “[h]ad there not been an independent counsel
investigation, Finkelstein would still have faced some form of
intense scrutiny,” thus incurring attorneys’ fees.
The DOJ in its evaluation agrees with Finkelstein that he
has satisfied the “but for” requirement. First, the Department
notes that although “it is appropriate” for it to take over any
remaining investigations of a closing independent counsel
office, no such action occurred here. According to the DOJ, this
case is thus analogous to In re Segal (Segal Fee Application),
145 F.3d 1348, 1352 (D.C. Cir., Spec. Div., 1998) (per curiam),
and In re Olson (Perry Fee Application), 892 F.2d 1073, 1074
(D.C. Cir., Spec. Div., 1990) (per curiam), in that here, as there,
“this Court . . . found the ‘but for’ test satisfied based on a lack
of prosecutorial interest.”
Second, in the DOJ’s opinion the allegations investigated by
the IC “appear much more akin to bureaucratic conflict than
suggestive of criminal behavior.” In support of this statement,
the DOJ asserts that the central issue investigated by the
Independent Counsel was a dispute between the IRS’s regional
office and Washington office over whether there was sufficient
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evidence to criminally prosecute Cisneros for tax violations.
Dissecting the so-called “improprieties memorandum,” the DOJ
argues that “the complaints in the memorandum were in the
nature of bureaucratic conflict,” and further that
[t]hese sorts of allegations . . . would not in the normal
course, without additional evidence, generate a
criminal investigation of government employees
carrying out their respective duties in evaluating the
matters in question.
Third, the DOJ points out that the IC, after investigating
Cisneros for tax year 1992, ultimately decided not to indict
because wilfulness could not be established – the same reason
that led the IRS to decline referral in the first place. And the
DOJ also notes that it too declined to refer other tax years to the
IC, leading to the conclusion that in the end the IC, the DOJ, and
the IRS Washington office were all in agreement that
prosecution of the tax matters was not warranted. Under such
circumstances, asserts the DOJ, “the conflict would not have
been the topic of a criminal investigation ‘but for’ the existence
of the Independent Counsel statute.”
As the DOJ suggests, the matter looked into in the IC’s
“obstruction investigation” appears to have been nothing more
than a “bureaucratic conflict.” In several fee applications
considered at the end of the Iran/Contra independent counsel
investigation, this court noted that during that investigation the
Independent Counsel treated efforts to circumvent the Boland
Amendments as a criminal conspiracy. See, e.g., In re North
(Dutton Fee Application), 11 F.3d 1075, 1080 (D.C. Cir., Spec.
Div., 1993); In re North (Gardner Fee Application), 30 F.3d
143, 146 (D.C. Cir., Spec. Div., 1994) (per curiam). The court
stated in those cases that no executive branch authorities,
including a politically appointed Attorney General, would have
14
subjected such attempts to criminal prosecution, and thus the
“but for” requirement was fulfilled as no fees would have been
incurred “but for” the appointment of the Independent Counsel.
Id. The situation here appears to be analogous – executive
branch authorities do not treat “bureaucratic conflicts” as
criminal, and the Department of Justice says as much in its
evaluation: “[An] internal disagreement of this sort over a
prosecution decision would rarely, if ever, lead to a criminal
investigation by the Department of Justice.”
Furthermore, addressing the “but for” requirement in In re
Nofziger, 925 F.2d 428, 444 (D.C. Cir., Spec. Div., 1991) (per
curiam), we held that the appropriate question was whether
“Nofziger, absent the statute, [would] have been similarly
investigated and prosecuted by the Department of Justice . . . .”
In its evaluation the Department strongly opines more than once
that the answer to that question here is in the negative:
[I]t is unlikely that an investigation of the pertinent
matters in this case would have been conducted by the
Department of Justice absent the existence of the
Independent Counsel statute.
It is exceedingly unlikely that the core allegations that
gave rise to the Independent Counsel’s investigation
with respect to IRS employees would have led to an
investigation by an ordinary prosecutor.
In sum, it appears that in the absence of the Act an
investigation of this matter would not have been undertaken by
the Department of Justice, and Finkelstein would therefore not
have incurred attorneys’ fees “but for” the appointment of the
Independent Counsel.
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C. Fees are “Reasonable” under the Act
This court must determine whether Finkelstein’s attorneys
charged reasonable rates, and whether the time expended by
Finkelstein’s attorneys on his representation was reasonable. In
re Meese, 907 F.2d 1192, 1201 (D.C. Cir., Spec. Div., 1990)
(per curiam). The IC argues that, should the court find that
Finkelstein passes the “subject” and “but for” tests, several of
the billing entries are unreasonable under this court’s precedents
and should be denied. First taking issue with various time-
billing entries, the IC asserts that deductions should be made for
meetings between multiple attorneys representing Finkelstein,
phone conferences between Finkelstein’s attorneys, two or more
of Finkelstein’s attorneys conferring on the case, and two or
more attorneys billing for the same task. The IC then addresses
Finkelstein’s request for expenses, asserting that certain items
for cab fare, photocopying, courier service, and computer
research should be rejected or reduced in that they “are
generically described, without an explanation of why the
services were necessary or a specific correlation to the tasks
performed by attorneys on any given day.”
The DOJ, while stating that “the fees generally are
adequately documented and appear to be reasonable,” brings
two points to the court’s attention. First, the DOJ notes that the
fee application seeks approximately $40,000 for work performed
in connection with Finkelstein’s response to the IC’s Final
Report, and that such an amount is “disproportionately large in
light of the overall request, and, under this Court’s precedents,
cannot be reimbursed in full.” Second, the DOJ asserts that
deductions should be made for charges for multiple attorneys
attending grand jury appearances.
The billing documents appear to contain sufficient
descriptions of the work performed and the fee application
16
includes an affidavit attesting to the reasonableness of the hourly
rates charged. The main concern appears to be, as the DOJ
notes, the significant amount ($40,643) requested for reviewing
and responding to the IC’s Final Report. This amount is 37% of
the total requested. In prior cases involving requests for
significant fees for review of an independent counsel’s final
report, the court reduced those fees to between 10 and 15
percent of the total requested. See, e.g., In re Madison Guar.
Sav. & Loan Assoc. (Moore Fee Application), 406 F.3d 675, 683
(D.C. Cir., Spec. Div., 2005) (per curiam) (reduction from 45 to
15 percent); In re North (Shields and Gruner Fee Applications),
53 F.3d 1305 (D.C. Cir., Spec. Div., 1995) (per curiam)
(reduction from 20 to 10 percent).
Several factors, however, appear to make this case unusual
concerning the review and comment period to the Final Report.
First, Finkelstein (as well as others who were mentioned in the
Final Report) pursuant to orders of the court, was allowed to
review the Report on more than one occasion: once when the
Report was set to be publicly released, but minus the section
concerning the obstruction investigation; and once after a
determination was made to release the Report in full. Second,
as the DOJ points out, Finkelstein’s attorneys billed a fair
amount of time addressing the issue of the possible public
disclosure of the Report, an issue that was to ultimately take up
a considerable amount of time of all parties involved. Third, a
significant portion of the billing concerning the Final Report
appears to concern the matter of Finkelstein’s grand jury
testimony, much of which is included in the Report. Taking all
of these factors into consideration, we find that the amount
billed for the review and comment period is reasonable.
As the OIC points out, however, the expense pages contain
multiple entries for “Taxi” cab rides, “Photocopying,” “Courier
Service,” and “Computer Legal Research,” all of which are not
17
otherwise explained. The total amount sought for these entries
is $1,588.09. The court has in the past made deductions for
comparable expenses because of a lack of supporting
documentation, see, e.g., In re Madison Guar. Sav. & Loan
(Marceca Fee Application), 366 F.3d 922, 929 (D.C. Cir., Spec.
Div., 2004) (per curiam), and should do so here, reducing the
amount by $750.00. We find the remaining arguments made by
the OIC and DOJ concerning the unreasonableness of certain
fees and expenses to be without merit.
In sum, Finkelstein has requested that his attorneys’ fees be
reimbursed in the amount of $110,763.09. Deductions in the
amount of $750 yields a total to be reimbursed of $110,013.09.
Conclusion
In light of the foregoing discussion, Barry J. Finkelstein
shall be reimbursed for attorneys’ fees and expenses in the
amount of $110,013.09.