People v. Dillard

Filed 3/29/18
CERTIFIED FOR PARTIAL PUBLICATION*
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION FIVE
THE PEOPLE,
Plaintiff and Respondent,
A141998
v.
NANETTE SHEREE DILLARD, et al., (Alameda County
Super. Ct. Nos. CH-53179A &
Defendants and Appellants. CH-53179B)
Nanette Sheree Dillard and Paul Daniels appeal their convictions, following a jury
trial, of crimes related to their work at an anti-poverty agency, the Associated
Community Action Program (ACAP or the Agency). We conclude two of appellants’
convictions were preempted by federal law and reverse these convictions. We otherwise
affirm.
PROCEDURAL BACKGROUND
Dillard and Daniels were charged by amended information with the following:
Count 1: Conspiracy to commit grant theft by false pretenses (Pen. Code, §§ 182,
subd. (a)(1), 487, subd. (a))1, with overt acts of drafting, signing, and delivering a letter to
the United States Department of Health and Human Services (HHS) “falsely attesting”
*
Pursuant to California Rules of Court, rules 8.1105(b) and 8.1110, this opinion is
certified for publication with the exception of parts II–IV.
1
All undesignated section references are to the Penal Code.
1
that ACAP had more than $426,000 in “ ‘non-federal match funds’ ” in a Citibank
account, and sending a draft of such a letter to a Citibank manager.
Count 2: Grand theft by false pretenses (§ 487, subd. (a)) by unlawfully taking
grant funds from HHS. This count included an allegation that the property taken
exceeded $200,000 (§ 12022.6, subd. (a)(2)).
Count 3: Making a false account of public moneys (§ 424, subd. (a)(3)) by signing
and sending false and inaccurate letters to HHS. A third co-defendant, Vivian Rahwanji,
was also charged with this count. Rahwanji entered into a plea agreement with the
People on the eve of trial and, as part of this agreement, testified as a prosecution witness.
Count 4: Using public moneys for a purpose not authorized by law (§ 424,
subd. (a)(2)), by improperly using over $280,000 of funds intended for a HHS grant
program to fund Agency payroll and other Agency expenses.
In addition, Dillard was charged with the following:
Count 5: Appropriating public moneys to her own use (§ 424, subd. (a)(1)), by
instructing employees to work on her personal residence at below-market rates and
obtaining reimbursement for improper business expenses, such as massages and
expensive meals.
Count 6: Preparing false and ante-dated documentary evidence (§ 134), by
preparing a memoranda regarding the residency status of Agency clients and an agenda
of a seminar at a hotel.
Following a lengthy trial, the jury convicted appellants of theft by false pretenses
(count 2) and making a false account of public moneys (count 3), and convicted Dillard
of preparing false documentary evidence (count 6). The jury acquitted appellants on all
remaining counts.
FACTUAL BACKGROUND
The Agency
ACAP was an anti-poverty agency created pursuant to a joint powers agreement
between Alameda County (the County) and several cities in the County. A governing
board (the Board) consisted of representatives from each of the municipalities and,
2
among other powers, selected the Agency’s executive director. Dillard was appointed the
Agency’s interim executive director in 2004 and its executive director in 2005. Daniels
was hired as an administrative assistant at the Agency in 2004, and was promoted to
grants manager the following year. Daniels and Dillard married in 2007.
The Assets for Independence Grant Program
In June 2005, the Agency sought, and was awarded, a five-year, $500,000 Assets
for Independence (AFI) grant from HHS. Two HHS employees testified about the rules
governing AFI grants: Katrina Morgan, an HHS grants management officer, and Anne
Yeoman, a 10-year contract employee with HHS who worked primarily on the AFI
program. AFI grants are awarded to organizations or agencies to fund programs that help
low-income people build assets. We will refer to the organizations or agencies
administering the AFI programs as “grantees,” and the low-income individuals served by
these programs as “savers.” In an AFI program, savers deposit money in a designated
individual bank account. These deposits are matched with federal AFI grant funds and an
equal amount of nonfederal funds. The matched deposits can be withdrawn for approved
uses, including higher education, starting a business, or buying a house.
Grantees do not receive the federal AFI money when the grant is awarded.
Instead, during the five-year grant period, grantees periodically “drawdown” some or all
of the federal grant funds into a dedicated bank account maintained by the grantee, called
the reserve account. A grantee can only drawdown federal funds for which it has an
equal amount of nonfederal funds on deposit, referred to as “matching nonfederal funds.”
Before each drawdown, grantees must submit to HHS a letter requesting the drawdown
and a letter from the bank holding the reserve fund confirming the presence of matching
nonfederal funds in that account. AFI federal grant funds must be drawn down into the
reserve account within the five-year grant period, and the distribution of grant funds to
savers must be completed by the end of an additional year. Grantees can spend no more
than 15 percent of the drawn down federal AFI funds on program administration; the
remainder must be used to match saver deposits. HHS provides grantees with an “AFI
3
Grantee Handbook,” an AFI resource center available to answer grantee questions by
phone or email, and in-person trainings at grantee conferences.
The Agency’s Drawdowns of Federal AFI Grant Funds
The Agency’s AFI reserve account, and the hundreds of individual saver deposit
accounts participating in the Agency’s AFI program, were held at a Citibank branch. The
reserve account was the “umbrella” account, and the individual saver accounts were
attached to the reserve account. Vivian Rahwanji was the manager of that Citibank
branch. Dillard was the sole signatory on the AFI reserve account, and both she and
Daniels had access to the AFI account records.
The Agency’s five-year AFI grant period ended on June 14, 2010; this date was
the last day the Agency could drawdown federal AFI funds. As of the beginning of that
month, the Agency had drawn down less than $75,000 out of the $500,000 available
federal AFI funds. On June 10, although the Agency only had approximately $47,000 in
its AFI reserve account, Daniels emailed Rahwanji a template letter to HHS stating the
Agency had $426,874.44 of “non-federal match funds” on deposit in its AFI reserve
account and requested she “place the letter on Citibank stationary [and] sign it.”2
Rahwanji did so. Daniels sent the Citibank letter to HHS and HHS transferred the
requested federal AFI grant funds to the Agency’s reserve account. The prosecution
argued this letter was the basis for the theft by false pretenses and false account of public
moneys counts (counts 2 and 3)—even though the letter was signed by Rahwanji, the
People argued appellants prepared the letter knowing Rahwanji would “rubber-stamp” it
and/or aided and abetted her act.3
2
The parties presented evidence of emails and telephone calls leading up to this June 10
email; we omit these facts as unnecessary to our resolution of the appeal.
3
Dillard, Daniels, and Rahwanji all testified they believed the savers’ deposits could be
counted as “non-federal match funds.” The combined individual saver accounts
contained less than $200,000. Daniels testified he relied on Rahwanji to verify the
amount before she signed the letter. Rahwanji testified she attempted to so verify but
abandoned the cumbersome task, believing based on an “eyeball” assessment that the
figures were about right.
4
Events Following the June 2010 Drawdown
In August of 2010, the Agency did not have enough funds to meet payroll and AFI
federal grant funds were used for this purpose. By February 1, 2011, approximately
$280,000 of the federal AFI funds had been used for payroll and approximately $40,000
had been transferred to an Agency “petty cash” account.4 The People confirmed in
closing statements that they were not alleging appellants used AFI funds for their own
personal use.
On February 2, 2011, the Board placed Dillard on administrative leave. Both
appellants were subsequently terminated.
Following appellants’ termination, an independent audit determined the Agency
was in financial disarray and the Board decided to dissolve it. The interim executive
director in charge of overseeing the Agency’s dissolution determined that out of the
nearly $500,000 in drawn down federal AFI funds, the Agency either lacked nonfederal
matching funds for or had used for non-AFI purposes approximately $435,000. The
County informed HHS of this and HHS demanded the Agency return these funds. The
Agency had approximately $117,000 left in the AFI reserve account and this amount was
paid back to the federal government, leaving a remaining liability of approximately
$317,000.
Facts Relevant to Count 6 (Preparing False Documentary Evidence)
Count 6 alleged Dillard prepared two ante-dated documents. The first related to
reimbursed expenses. On August 26, 2010, Dillard paid for meals, drinks, and massages
for herself and the Agency’s deputy director at a local hotel and spa, and was
subsequently reimbursed by the Agency for these expenses. On February 3, 2011, the
day after she was placed on administrative leave, Dillard emailed her assistant asking for
“copies of all my expenses that have been submitted.” The following day, Dillard
4
Dillard testified she believed this use of the funds was permissible as long as all of the
money was returned when the AFI grant closed out, and she intended to return the funds
so used to the Citibank AFI reserve account. As noted above, the jury acquitted
appellants of improperly using AFI funds.
5
emailed her assistant a document purporting to be an “agenda” for an “ACAP
Organizational Management” seminar held on August 26, 2010 at the hotel where the
expenses had been incurred. Dillard’s email asked her assistant to “[p]lease attach to
expenses.” Her assistant, who made all the arrangements for the hotel visit, had never
seen the agenda before. The deputy director testified that several aspects of the agenda
did not accurately represent what happened that day.
The second document related to an Agency program called CREW, which
provided job training and employment to eligible participants living in the County.
Dillard’s nephew and his friend were participants in the CREW program but their June
2010 Agency paperwork stated they lived outside the County. In February 2011, the day
after Dillard was placed on administrative leave, she emailed her assistant asking if she
could “get a hold of the client files for [her nephew and his friend]? I would like to
review them in order to prepare any defense I might need. [¶] Please do not hesitate if
anything I request makes you uncomfortable.” The following day, Dillard emailed her
assistant memoranda dated June 16, 2010 stating Dillard’s nephew and his friend were
homeless but staying within the County. The email asked her assistant to “[p]lease file in
client files,” a reference to the CREW participant files.
Dillard admitted both documents were prepared after the fact and ante-dated, but
claimed they were recreations of contemporaneously-prepared documents.
DISCUSSION
I. Preemption
Appellants argue the prosecutions of counts 2 and 3—theft by false pretenses and
false accounting of public moneys, both based on the representation to HHS that the
Agency had matching nonfederal funds in its AFI reserve account—were preempted by
federal law. We agree.
A. Legal Standard
“ ‘The supremacy clause of the United States Constitution establishes a
constitutional choice-of-law rule, makes federal law paramount, and vests Congress with
the power to preempt state law.’ [Citations.] . . . Preemption is foremost a question of
6
congressional intent: did Congress, expressly or implicitly, seek to displace state law?
[Citations.] [¶] We have identified several species of preemption. Congress may
expressly preempt state law through an explicit preemption clause, or courts may imply
preemption under the field, conflict, or obstacle preemption doctrines.[5] [Citations.] . . .
The burden is on . . . the party asserting preemption[] to demonstrate [one of these
species of preemption] applies.” (Quesada v. Herb Thyme Farms, Inc. (2015) 62 Cal. 4th
298, 307–308 (Quesada).)
Appellants do not identify any explicit preemption clause, nor do they contend
conflict preemption—present “when simultaneous compliance with both state and federal
directives is impossible” (Viva!, supra, 41 Cal.4th at p. 936)—applies. Appellants rely in
part on field preemption, which “applies ‘where the scheme of federal regulation is
sufficiently comprehensive to make reasonable the inference that Congress “left no
room” for supplementary state regulation.’ ” (Ibid.) However, as will be shown below,
the federal laws and regulations governing the AFI program are “not so complex or
comprehensive that it may be inferred Congress intended to occupy the field.” (In re
Jose C. (2009) 45 Cal. 4th 534, 553.)
We focus instead on appellants’ obstacle preemption argument. “Obstacle
preemption permits courts to strike state law that stands as ‘an obstacle to the
accomplishment and execution of the full purposes and objectives of Congress.’
[Citations.] It requires proof Congress had particular purposes and objectives in mind, a
demonstration that leaving state law in place would compromise those objectives, and
reason to discount the possibility the Congress that enacted the legislation was aware of
the background tapestry of state law and content to let that law remain as it was.
5
“ ‘The categories of preemption are not “rigidly distinct.” ’ [Citations.] We and the
United States Supreme Court have often identified only three species of preemption,
grouping conflict preemption and obstacle preemption together in a single category.
[Citations.] As conflict and obstacle preemption are analytically distinct and may rest on
wholly different sources of constitutional authority, we treat them as separate categories
here.” (Viva! Intern. Voice for Animals v. Adidas Promotional Retail Operations, Inc.
(2007) 41 Cal. 4th 929, 935–936, fn. 3 (Viva!).)
7
Ultimately, ‘what constitutes a “sufficient obstacle [for a finding of implied preemption]
is a matter of judgment, to be informed by examining the federal statute as a whole and
identifying its purpose and intended effects.” ’ ” (Quesada, supra, 62 Cal.4th at p. 312.)
One of the primary cases relied on by appellants is Buckman Co. v. Plaintiffs’ Leg.
Com. (2001) 531 U.S. 341 (Buckman). In Buckman, the plaintiffs claimed to be injured
by a medical device and brought a state law tort lawsuit against a consultant to the
device’s manufacturer. (Id. at p. 343.) The plaintiffs claimed the consultant “made
fraudulent representations to the Food and Drug Administration (FDA or Administration)
in the course of obtaining approval to market the [devices]” and, “[h]ad the
representations not been made, the FDA would not have approved the devices, and
plaintiffs would not have been injured.” (Ibid.)
The high court discussed the federal statutory scheme governing medical devices,
set forth in the Federal Food, Drug, and Cosmetic Act (FDCA), 52 Stat. 1040, as
amended by the Medical Device Amendments of 1976 (MDA), 90 Stat. 539, 21 United
States Code section 301. (Buckman, supra, 531 U.S. at p. 344.) Devices which
“ ‘presen[t] a potential unreasonable risk of illness or injury,’ ” like the one at issue in
that case, “must complete a thorough review process with the FDA before they may be
marketed.” (Ibid.) However, “devices that were already on the market prior to the
MDA’s enactment in 1976” and any “ ‘substantially equivalent’ ” devices may seek an
exception to this review process whereby they “remain available until the FDA initiates
and completes the [review] process.” (Id. at p. 345.) Manufacturers applying for this
exception, referred to as the “ ‘§ 510(k) process,’ ” must submit certain information to the
FDA, including the intended use for the device. (Ibid.) The plaintiffs contended that the
defendant’s successful section 510(k) application fraudulently represented the intended
use of the device. (Id. at pp. 346–347.)
Buckman first considered whether there was a presumption against preemption:
“Policing fraud against federal agencies is hardly ‘a field which the States have
traditionally occupied’ [citation], such as to warrant a presumption against finding federal
pre-emption of a state-law cause of action. To the contrary, the relationship between a
8
federal agency and the entity it regulates is inherently federal in character because the
relationship originates from, is governed by, and terminates according to federal law.
[Citation.] Here, petitioner’s dealings with the FDA were prompted by the MDA, and the
very subject matter of petitioner’s statements were dictated by that statute’s provisions.
Accordingly—and in contrast to situations implicating ‘federalism concerns and the
historic primacy of state regulation of matters of health and safety,’ [citation]—no
presumption against pre-emption obtains in this case.” (Buckman, supra, 531 U.S. at
pp. 347–348.)
Buckman concluded the plaintiffs’ claims were preempted because “the federal
statutory scheme amply empowers the FDA to punish and deter fraud against the
Administration, and that this authority is used by the Administration to achieve a
somewhat delicate balance of statutory objectives. The balance sought by the
Administration can be skewed by allowing fraud-on-the-FDA claims under state tort
law.” (Id. at p. 348.) The court highlighted the existence of statutory and regulatory
“provisions aimed at detecting, deterring, and punishing false statements made during
this and related approval processes. The FDA is empowered to investigate suspected
fraud [citations], and citizens may report wrongdoing and petition the agency to take
action [citation]. In addition to the general criminal proscription on making false
statements to the Federal Government [citation], the FDA may respond to fraud by
seeking injunctive relief [citation], and civil penalties [citation]; seizing the device
[citation]; and pursuing criminal prosecutions [citation]. The FDA thus has at its disposal
a variety of enforcement options that allow it to make a measured response to suspected
fraud upon the Administration. [¶] This flexibility is a critical component of the statutory
and regulatory framework under which the FDA pursues difficult (and often competing)
objectives.” (Buckman, supra, 531 U.S. at p. 349, fns. omitted.) For example, the FDA
must “ensure both that medical devices are reasonably safe and effective and that, if the
device qualifies under the § 510(k) exception, it is on the market within a relatively short
period of time,” and must “regulat[e] the marketing and distribution of medical devices
9
without intruding upon decisions statutorily committed to the discretion of health care
professionals,” such as the off-label use of a medical device. (Id. at pp. 349–350.)
The court continued: “State-law fraud-on-the-FDA claims inevitably conflict with
the FDA’s responsibility to police fraud consistently with the Administration’s judgment
and objectives. As a practical matter, complying with the FDA’s detailed regulatory
regime in the shadow of 50 States’ tort regimes will dramatically increase the burdens
facing potential applicants—burdens not contemplated by Congress in enacting the
FDCA and the MDA. Would-be applicants may be discouraged from seeking § 510(k)
approval of devices with potentially beneficial off-label uses for fear that such use might
expose the manufacturer or its associates (such as petitioner) to unpredictable civil
liability. . . . [¶] Conversely, fraud-on-the-FDA claims would also cause applicants to fear
that their disclosures to the FDA, although deemed appropriate by the Administration,
will later be judged insufficient in state court. Applicants would then have an incentive
to submit a deluge of information that the Administration neither wants nor needs,
resulting in additional burdens on the FDA’s evaluation of an application.” (Buckman,
supra, 531 U.S. at pp. 350–351.) The court emphasized the fact that the plaintiffs’ “fraud
claims exist solely by virtue of the FDCA disclosure requirements. . . . [¶] In sum, were
plaintiffs to maintain their fraud-on-the-agency claims here, they would not be relying on
traditional state tort law which had predated the federal enactments in questions. On the
contrary, the existence of these federal enactments is a critical element in their case. For
the reasons stated above, we think this sort of litigation would exert an extraneous pull on
the scheme established by Congress, and it is therefore pre-empted by that scheme.” (Id.
at p. 353.)6
6
Appellants also rely on two other United States Supreme Court cases. Arizona v. U.S.
(2012) 567 U.S. 387 was a field preemption case. (Id. at p. 401.) The high court rejected
the state’s argument that the challenged law had “the same aim as federal law” because it
“ignores the basic premise of field preemption—that States may not enter, in any respect,
an area the Federal Government has reserved for itself.” (Id. at p. 402.) The court also
noted the argument was “unpersuasive on its own terms. Permitting the State to impose
its own penalties for the federal offenses here would conflict with the careful framework
10
Quesada, supra, 62 Cal. 4th 298 is a contrasting case. In Quesada, the plaintiff
alleged the defendant was selling conventionally grown produce under an organic label,
and brought state law false advertising and unfair competition claims. (Id. at pp. 303–
304.) The defendant argued these state law claims were preempted by the federal
Organic Foods Production Act of 1990 (7 U.S.C. §§ 6501–6522; Organic Foods Act).
(Quesada, at p. 304.) As in Buckman, the Quesada court considered whether a
presumption against preemption applied. (Quesada, at pp. 312–314.) The court noted
“[t]he regulation of food labeling to protect the public is quintessentially a matter of
longstanding local concern” and “the federal government has assumed a more peripheral
role and routinely left undisturbed local policy judgments about how best to protect
consumers.” (Id. at p. 313.) “Consequently, the presumption against preemption ‘applies
with particular force’ where state consumer protection laws regulating deceptive food
labeling are at issue.” (Id. at p. 314.)
The California Supreme Court proceeded to consider the defendant’s obstacle
preemption argument. The court highlighted the express purposes of the Organic Foods
Act: “ ‘to establish national standards governing the marketing of’ ” organic food, “ ‘to
assure consumers that organically produced products meet a consistent standard,’ ” and
“ ‘to facilitate interstate commerce in’ ” organic food. (Quesada, supra, 62 Cal.4th at
p. 316.) The court found that “permitting state consumer fraud actions would advance,
not impair, these goals. Substitution fraud, intentionally marketing products as organic
Congress adopted. [Citations.] Were [the state law] to come into force, the State would
have the power to bring criminal charges against individuals for violating a federal law
even in circumstances where federal officials in charge of the comprehensive scheme
determine that prosecution would frustrate federal policies.” (Ibid.) Wisconsin Dept. of
Industry v. Gould Inc. (1986) 475 U.S. 282, involved the National Labor Relations Act
(NLRA), which “largely displaced state regulation of industrial relations.” (Id. at p. 286.)
The high court found a state law debarring repeat NLRA violators from state contracts
“functions unambiguously as a supplemental sanction for violations of the NLRA,”
“conflicts with the [National Labor Relations] Board’s comprehensive regulation of
industrial relations,” and “detracts from the ‘integrated scheme of regulation’ created by
Congress.” (Id. at p. 288–289.)
11
that have been grown conventionally, undermines the assurances the USDA Organic
label is intended to provide. Conversely, the prosecution of such fraud, whether by
public prosecutors where resources and state laws permit, or through civil suits by
individuals or groups of consumers, can only serve to deter mislabeling and enhance
consumer confidence. [Citation.] From the grower perspective too, anything that deters
the few bad apples, the ‘dishonest traders looking to cash in on the premium prices
organic food commands’ [citation], enhances the overall health of the interstate market
and benefits those producers that play by the rules in processing and marketing their
products. Private claims like those here are thus consistent with the Organic Foods Act’s
goals of reassuring consumers and enabling fair competition.” (Id. at pp. 316–317,
fn. omitted.)
B. AFI Legislation and Regulations
We turn now to the federal statutory and regulatory scheme governing the AFI
program. The Assets for Independence Act (hereafter, AFI Act or the Act) was enacted
in 1998 and codified as a note to 42 United States Code section 604.7 The express
purpose of the Act is “to provide for the establishment of demonstration projects
designed to determine-- [¶] (1) the social, civic, psychological, and economic effects of
providing to individuals and families with limited means an incentive to accumulate
assets by saving a portion of their earned income; [¶] (2) the extent to which an asset-
based policy that promotes saving for postsecondary education, homeownership, and
microenterprise development may be used to enable individuals and families with limited
means to increase their economic self-sufficiency; and [¶] (3) the extent to which an
asset-based policy stabilizes and improves families and the community in which the
families live.” (AFI Act, § 403.)
7
(Pub. L. 105-285 (Oct. 27, 1998) 112 Stat. 2759, as amended by Pub. L. 106-554 (Dec.
21, 2000) 114 Stat. 2763; Pub. L. 107-110 (Jan. 8, 2002) 115 Stat. 1947; Pub. L. 114-95
(Dec. 10, 2015) 129 Stat. 2168.)
12
To this end, the Act authorizes HHS to approve demonstration projects designed
to help low-income, low-net worth individuals accumulate assets for specified purposes,
including postsecondary education and buying a home. (AFI Act, §§ 404, 405, 408.)
The demonstration projects may be administered by nonprofit organizations, state or local
government agencies, tribal governments, or certain credit unions and financial
institutions. (Id., § 404.)
For approved projects, the grantee “shall establish a Reserve Fund” and deposit in
it “all funds . . . from any public or private source in connection with the demonstration
project.” (AFI Act, § 407(a), (b)(1)(A).)8 HHS shall disburse the grants over the course
of the five-year demonstration projects “in an amount not to exceed the lesser of-- [¶] (1)
the aggregate amount of funds committed as matching contributions from non-Federal
public or private sector sources; or [¶] (2) $1,000,000.” (Id., § 406(b).) Each dollar an
individual deposits up to $2,000 shall be matched by between $0.50 and $4 of nonfederal
funds and an equal amount of federal AFI grant funds. (Id., § 410(a)–(b).) The Act sets
forth detailed requirements for individual saver eligibility and qualified uses of the
matched deposit account funds. (Id., §§ 404, 408.)
The Act requires grantees to submit annual progress reports including the “number
and characteristics” of individual savers, the amounts deposited and withdrawn, how
configurations of the program and grantee organization impacted saver participation, and
how the impact on participation varied among “different populations or communities.”
(AFI Act, § 412(a).) The Act further requires HHS to hire “an independent research
organization to evaluate the demonstration projects conducted under [the Act],
individually and as a group.” (Id., § 414(a).) The independent evaluation is to consider a
number of factors including the demonstration projects’ effects on savings behavior,
savings rates, and rates of homeownership and postsecondary education, as well as the
8
The Act excludes state and local government grantees from the requirement to establish
a reserve fund. (AFI Act, § 407(a).) However, the Agency’s AFI grant award obligated
it to establish a reserve fund.
13
“economic, civic, psychological, and social effects of asset accumulation,” and for all of
these factors, how they vary among different populations or communities. (Id.,
§ 414(b)(1)–(4).) The evaluation must also consider “potential financial returns” to the
federal government, and whether “a permanent program of individual development
accounts should be established.” (Id., § 414(b)(5)–(6).)
The Act provides that grantees shall “have sole authority over the administration
of the project. [HHS] may prescribe only such regulations or guidelines with respect to
demonstration projects conducted under [the Act] as are necessary to ensure compliance
with the approved applications and the requirements of [the Act].” (AFI Act, § 411.)
However, this administrative authority is expressly subject to HHS’s sanction authority
set forth in the Act. (Id., §§ 411, 413.) The Act provides that if HHS determines a
grantee “is not operating a demonstration project in accordance with the entity’s
approved application . . . or the requirements of [the Act] (and has not implemented any
corrective recommendations directed by [HHS]), [HHS] shall terminate such entity’s
authority to conduct the demonstration project,” take control of the grantee’s reserve
fund, and attempt to identify another entity to take over the demonstration project. (Id.,
§ 413.)
HHS has other sanctions available for the failure to comply with requirements
regarding the reserve funds. AFI regulations provide that grantee reserve funds must
comply with HHS’s uniform administrative requirements. (45 C.F.R. § 1000.3.) The
regulations setting forth these administrative requirements provide: “If a non-Federal
entity fails to comply with Federal statutes, regulations, or the terms and conditions of a
Federal award, the HHS awarding agency . . . may impose additional conditions . . . . [or,
if] noncompliance cannot be remedied by imposing additional conditions, the HHS
awarding agency . . . may take one or more of the following actions, as appropriate in the
circumstances: [¶] (a) Temporarily withhold cash payments . . . . [¶] (b) Disallow (that is,
deny both use of funds and any applicable matching credit for) all or part of the cost of
the activity or action not in compliance. [¶] (c) Wholly or partly suspend (suspension of
award activities) or terminate the Federal award. [¶] (d) Initiate suspension or debarment
14
proceedings . . . . [¶] (e) Withhold further Federal awards for the project or program. [¶]
(f) Take other remedies that may be legally available.” (45 C.F.R. § 75.371.) One of the
other legally available remedies for false representations to HHS is to seek federal
criminal prosecution under 18 U.S.C. section 1001.9
C. Presumption Against Preemption
We turn first to whether the presumption against preemption applies in this case.
As highlighted in Buckman, the inquiry is whether the state regulation occurs in “ ‘a field
which the States have traditionally occupied.’ ” (Buckman, supra, 531 U.S. at p. 347.)
The analysis hinges on how we characterize the area of regulation: is it the prosecution of
theft and criminal fraud, which lies within the states’ historic police powers, or is it
“[p]olicing fraud against federal agencies . . . [,] hardly ‘a field which the States have
traditionally occupied’ ” (Buckman, at p. 347).
For purposes of the presumption against preemption, Buckman characterized state
law tort claims as claims involving “[p]olicing fraud against federal agencies,” where the
defendant’s “dealings with the FDA were prompted by [a federal statute], and the very
subject matter of [the defendant’s] statements were dictated by that statute’s provisions.”
(Buckman, supra, 531 U.S. at pp. 347–348.) Similarly, appellants’ dealings with HHS
were prompted by the AFI Act, and the subject matter of the Citibank letter was dictated
by that statute’s provisions.
Commonwealth’s Motion to Appoint Counsel (3d Cir. 2015) 790 F.3d 457
(Commonwealth’s Motion) is also instructive. In that case, a nonprofit organization
providing federal defender services was representing capital prisoners in state post-
9
With exceptions not relevant here, “whoever, in any matter within the jurisdiction of the
executive, legislative, or judicial branch of the Government of the United States,
knowingly and willfully-- [¶] (1) falsifies, conceals, or covers up by any trick, scheme, or
device a material fact; [¶] (2) makes any materially false, fictitious, or fraudulent
statement or representation; or [¶] (3) makes or uses any false writing or document
knowing the same to contain any materially false, fictitious, or fraudulent statement or
entry; [¶] shall be fined under this title, imprisoned not more than 5 years . . . , or both.”
(18 U.S.C. § 1001.)
15
conviction review proceedings. (Id. at pp. 462–463.) In several such proceedings, the
state attorney general asked the state Supreme Court to disqualify the federal defender
organization from appearing absent federal court authorization. (Id. at pp. 463–464.)
“[T]he cited reason for disqualification was based on the organization’s alleged misuse of
federal grant funds to appear in state proceedings,” specifically, grant funds authorized by
the Criminal Justice Act, 18 United States Code § 3006A, and administered by the
Administrative Office of the United States Courts (AO). (Commonwealth’s Motion, at
pp. 461–462.) The state Supreme Court issued orders stating that, if federal grant funds
were being used to fund the federal defender’s appearance in the state proceedings, the
federal defender should be disqualified. (Id. at pp. 464–465.)10 The federal defender
removed the disqualification motions to federal court and argued, inter alia, that federal
law preempted the motions. (Id. at p. 461.)
The federal court of appeals considered whether the presumption against
preemption applied. The state argued the authority for the removal was a state
constitutional provision authorizing the state Supreme Court to prescribe rules governing
the practice and procedure of the state courts. (Commonwealth’s Motion, supra, 790 F.3d
at p. 475.) The court of appeals reasoned: “As a general matter, it is true that the States
have a long history of regulating the conduct of lawyers, who are officers of the courts.
[Citation.] But the impetus for the proceedings here is that the Federal Community
Defender is allegedly applying its federal grant funds to purposes not authorized by the
relevant federal statutes and grant terms. [Citation.] As explained above, these grants are
paid under the supervision of the AO, a federal agency within the Judicial Conference
with regulatory control over the Federal Community Defender. ‘[T]he relationship
between a federal agency and the entity it regulates is inherently federal in character
because the relationship originates from, is governed by, and terminates according to
10
The federal defender claimed only private funds were used for work on state
proceedings, unless that work was preparatory for a federal proceeding.
(Commonwealth’s Motion, supra, 790 F.3d at p. 463.)
16
federal law.’ [Citation.] Policing such relationships ‘is hardly a field which the States
have traditionally occupied,’ and thus there can be no presumption against preemption
here.” (Id. at p. 476.)
We find this case akin to Buckman and Commonwealth’s Motion, and unlike
Quesada. In Quesada, the state laws “regulat[ed] deceptive food labeling,” which the
California Supreme Court found to be “quintessentially a matter of longstanding local
concern.” (Quesada, supra, 62 Cal.4th at pp. 313, 314.) Here, the sole basis for the
prosecutions was appellants’ representation to HHS about the AFI reserve account, made
pursuant to and as required by the AFI Act. (See Buckman, supra, 531 U.S. at pp. 347–
348.) The relationship between appellants and HHS “originates from, is governed by,
and terminates according to federal law.” (Buckman, at p. 347; Commonwealth’s Motion,
supra, 790 F.3d at p. 476.) Appellants’ “dealings with [HHS] were prompted by the [AFI
Act], and the very subject matter of [appellants’] statements were dictated by that
statute’s provisions.” (See Buckman, at pp. 347–348.) Policing such a relationship is not
an area of historic state regulation, accordingly, no presumption against preemption
applies.
D. Obstacle Preemption Analysis
We now return to obstacle preemption and consider whether the prosecution of
counts 2 and 3 is preempted by the AFI Act. As discussed in part I.B, ante, the purpose
of the AFI Act was to establish asset-building demonstration projects and determine the
various effects and impacts of asset-based policies. (AFI Act, § 403.) We conclude that
permitting state criminal prosecutions based on grantees’ representations to HHS made
pursuant to the AFI Act would undermine these Congressional objectives.
The analysis in Commonwealth’s Motion, finding preemption of the state’s
attempt to disqualify the federal public defender’s office for violating the terms of its
federal grant, is instructive. “ ‘Sanctions are drawn not only to bar what they prohibit but
to allow what they permit, and the inconsistency of sanctions [may] undermine[] the
congressional calibration of force.’ [Citation.] This is especially so when a federal
agency is afforded the discretion to apply those sanctions or stay its hand. [Citations.] [¶]
17
Here, Congress has delegated supervisory authority over [Criminal Justice Act] grants to
the AO. The AO has the power to ‘reduce, suspend, or terminate, or disallow payments
. . . as it deems appropriate’ if the Federal Community Defender does not comply with
the terms of its grants. [Citation.] But if the [state] could sanction noncompliance, the
AO could be hindered in its ability to craft an appropriate response. . . . After all, as the
District Court noted . . . , ‘the [AO’s] usual remedies, such as recoupment of distributed
funds, are more consistent with the CJA’s objectives because they mitigate the disruption
to the existing attorney-client relationships.’ [Citation.] Allowing the Commonwealth to
attach consequences to the Federal Community Defender’s relationship with the AO
would ‘exert an extraneous pull on the scheme established by Congress’ in a manner that
conflicts with federal objectives. Buckman, 531 U.S. at 353.” (Commonwealth’s Motion,
supra, 790 F.3d at p. 477.) Similarly, the AFI Act provides that if a grantee is not
operating its AFI project in compliance with the Act and its grant, HHS may recommend
corrective measures and, if those are not implemented, terminate the project. (AFI Act,
§ 413(a).) HHS can take additional sanction measures, including debarment or
recommending federal criminal prosecution. If states could initiate their own criminal
prosecutions, HHS “could be hindered in its ability to craft an appropriate response.”
(Commonwealth’s Motion, at p. 477.)
Significantly, the Act depends on grantees’ interest in participating in the AFI
program. The threat of state criminal prosecution could deter potential grantees from
applying for an AFI grant. (See Buckman, supra, 531 U.S. at p. 350 [“Would-be
applicants may be discouraged from seeking [FDA] approval of devices with potentially
beneficial off-label uses for fear that such use might expose the manufacturer or its
associates (such as petitioner) to unpredictable civil liability.”].) We note that the HHS
employees testified at trial that the process of applying for an AFI grant was “extensive,”
“not easy,” and “takes resources of the agency.” They testified the AFI program was
difficult to administer and involved unique, confusing rules. The asset-building work of
an AFI program “is not very easy. Even if you have the money, doing it is not that easy”
and requires a lot of hard work.
18
We find it notable that the only sanction for noncompliance set forth in the AFI
Act itself is termination of the grantee’s authority to conduct the demonstration project.
(AFI Act, § 413(a).) It is also notable that the section of the Act setting forth sanctions
includes detailed requirements that HHS attempt to identify another entity to operate the
project and transfer the project to that entity. (AFI Act, § 413(b)(1)–(5).) This
underscores Congress’s purpose in enacting the AFI Act to conduct and support asset-
building demonstration projects, and suggests Congress believed that punitive measures
for noncompliance might often conflict with that purpose.11
Indeed, HHS’s response to grantee noncompliance has conformed to this
understanding. HHS employee Yeoman testified that when HHS becomes aware of
problems with a grantee’s administration of an AFI grant, “generally speaking, we sort of
take the position of go and sin no more. That is, okay, you screwed up. . . . Here’s how
you need to do it. Do it right from now on. . . . [¶] We don’t want to stop a program and
stop the individuals from getting the benefit of it if we can find another way to get it
right.” If AFI grant money had been spent inappropriately, Yeoman testified, “[w]e
would first figure out can we, can we make this right? It might, it might involve the
grantee paying back funds, paying back money, into the grant from some other source
. . . .” Morgan similarly testified that if HHS learned a grantee drew down federal AFI
grant money without matching nonfederal funds on deposit, “we would try our best to
work with the grantee to help them be successful in correcting such a problem without
having to do some disciplinary action. So, we would probably try and we would, you
know, talk to our legal counsel, again, in the office of general counsel for HHS, and try to
work it out with them, if we could,” although “once a grant project period is over, . . . it
really would be difficult to pursue any type of correction to that type of thing without a
11
The People argue that state theft prosecutions “can deter misuse of federal funds” and
thus further the purpose of the AFI Act, but appellants were acquitted of misusing the
AFI funds. The challenged prosecutions were based solely on appellants’
misrepresentations to HHS.
19
disallowance.” While this testimony is not indicative of Congress’s intent at the time the
AFI Act was enacted, it lends supports to our assessment of that intent.
This obstacle—the potential of the state law to deter applicants critical to the
federal law’s purpose—was entirely absent in Quesada, where the California Supreme
Court found that “permitting state consumer fraud actions would advance, not impair” the
goals of federal statutes. (Quesada, supra, 62 Cal.4th at p. 316 [establishing national
marketing standards for organic food and increase consumer confidence in organically-
labeled food].)
The People cite several cases rejecting preemption challenges to state criminal
prosecutions for fraud against the federal government. We find these cases
distinguishable. Three involve prosecutions based on the defendants’ theft of federal
benefits. (State v. Jones (Utah Ct.App. 1998) 958 P.2d 938, 939 [federal disability
retirement benefits]; People v. Lewis (Ill.App.Ct. 1998) 693 N.E.2d 916, 917 [federal
unemployment benefits for railroad employees]; Commonwealth v. Morris (Pa.Super.Ct.
1990) 575 A.2d 582, 583 [Social Security benefit checks].) The cases describe no
Congressional purpose that would be hindered by state prosecutions. (Jones, at p. 943
[the defendant “concedes that the State’s prosecution creates no actual conflict with the
administration of [the federal law]”]; Lewis, at p. 920 [“we are confident that the State’s
prosecution of defendant for theft of federal unemployment benefits does not operate as
an impediment to Congress’s purposes and objectives in prohibiting benefits fraud”];
Morris, at p. 586 [“We conclude that the Social Security Act itself as well as its
legislative history make clear that the federal government did not intend to dominate the
field of public welfare to the exclusion of the states.”].) Similarly, in a fourth case
involving a state prosecution for forgery of federal income tax documents, “the defendant
has not pointed to any actual conflict with federal law.” (State v. Radzvilowicz
(Conn.App.Ct. 1997) 703 A.2d 767, 788.)
In the two remaining cases relied on by the People, the defendants argued their
state prosecutions were preempted by federal criminal statutes penalizing the same
conduct. (Carter v. Commonwealth (Va.Ct.App. 1997) 492 S.E.2d 480, 480–481
20
[defendant convicted of cable television fraud; federal statute criminalized unauthorized
reception of cable television service]; State v. McMurry (Ariz.Ct.App. 1995) 909 P.2d
1084, 1085–1086 [defendant convicted of forgery for possessing counterfeit $20 bills;
federal statute criminalized possession of counterfeit tender].) Again, there was no
indication of a Congressional purpose that would be hindered by the state prosecution; to
the contrary, in both cases an express savings clause preserved the states’ authority.
(Carter, at pp. 481–482 [savings clause encompassed state laws “ ‘regarding the
unauthorized interception or reception of any cable service,’ ” and the state law “stands
not as an obstacle to the accomplishment and execution of the full objectives of
Congress, but as a supplement”]; McMurry, at p. 1086 [“Nothing in the federal statutes
regarding counterfeiting . . . indicates, much less expresses, an intent by the federal
government to legislatively occupy the field as to the punishment of those who possess
counterfeit tender, with an intent to defraud. In fact, 18 [United States Code section]
3231 declares a contrary intent by stating that ‘[n]othing in this title [18] shall be held to
take away or impair the jurisdiction of the courts of the several States under the laws
thereof.’ ”].)
Finally, the People rely on remarks by the bill’s author that the bill “recognizes the
limits of government and the fact that many of our worst social problems will never be
solved by government alone.” (Remarks of Sen. Coats, 144 Cong. Rec. S11868 (Oct. 8,
1998).) The People argue this indicates Congress’s intent to delegate responsibility to the
local level and “permits no implication” that state prosecutions of grantees could be
preempted. However, the remark was not limited to the federal government, and appears
to be directed at local government as well. Moreover, the sentence quoted by the People
was immediately followed by: “We are beginning to recognize that there are people and
institutions, families, churches, synagogues, parishes, community volunteer
organizations, faith-based charities, that are able to communicate societal ideals and
restore individual hope, and we need to allow those organizations to compete to provide
services, and we have done so in each of the programs I have described.” (Ibid.) The full
statement thus underscores a Congressional understanding that the success of the AFI Act
21
depends on the willingness of organizations and entities to apply for AFI grants and
become grantee organizations. The threat of state criminal prosecution could
significantly dampen this willingness, thereby posing an obstacle to the objectives of the
AFI Act. (See Buckman, supra, 531 U.S. at p. 350.)12
We conclude the prosecutions of counts 2 and 3 were preempted by federal law.
We emphasize the narrowness of our holding, which is limited to state law liability for
grantees’ representations to HHS made pursuant to the AFI Act. This holding does not
extend to criminal liability for conduct by savers participating in the AFI program. It also
does not include theft prosecutions where an employee of the grantee took the federal
AFI funds for their own personal use (a circumstance not alleged here), as such a
prosecution would not arise from the relationship between the grantee and HHS as
governed by federal law.
E. Forfeiture of Preemption Claim as to Count 3
Finally, we turn to the People’s argument that appellants forfeited their preemption
claim as to count 3. Appellants concede they raised this argument in the trial court only
as to counts 1 and 2, but contend preemption is not forfeitable.
We need not decide whether appellants’ preemption argument can be forfeited
because we exercise our discretion to excuse any forfeiture. The issue is one of law and
does not involve any disputed facts. (People v. Rosas (2010) 191 Cal. App. 4th 107, 115
[“appellate courts regularly use their discretion to entertain issues not raised at the trial
level when those issues involve only questions of law based on undisputed facts” (italics
omitted)].) Moreover, the People were not prejudiced by any forfeiture: appellants
preserved the identical claim as to other counts and the People point to no difference in
12
The People also point to the AFI Act’s section entitled “Local Control Over
Demonstration Projects” (AFI Act, § 411), and argue it would be “incongruous to
mandate local control but preclude local response to malfeasance.” However, the local
control referred to in the Act is the control of grantee organizations—not local
government—and is expressly subject to HHS’s sanction authority provided for in the
Act. (AFI Act, § 411 [“A qualified entity [grantee] . . . shall, subject to the [sanctions
provision of the Act], have sole authority over the administration of the project.”].)
22
the analysis involving count 3. (See People v. Yeoman (2003) 31 Cal. 4th 93, 118 [“[T]o
consider the [forfeited] claim entails no unfairness to the parties, who had an opportunity
to litigate the relevant facts and to apply the relevant legal standard in the trial court [on a
properly raised and effectively identical claim]. Nor does it impose any additional
burden on us, as the reviewing court.” (fn. omitted)].) Accordingly, we excuse any
forfeiture on this issue as to count 3.
F. Conclusion
In sum, we find the prosecution of counts 2 and 3 preempted by federal law. We
will reverse the convictions on those counts. This conclusion renders moot a number of
appellants’ additional arguments, which we need not and do not resolve. However, it
does not impact Dillard’s conviction on count 6, preparing false documentary evidence,
and we consider Dillard’s remaining arguments relevant to that count.
II. Conflict of Interest
Appellants argue the trial court erred in denying their motion asserting the district
attorney’s office had a conflict of interest. We affirm.
A. Background
In October 2011, the County submitted a claim under its crime insurance policy
with AIG for the Agency’s remaining liability to HHS of approximately $317,000 in AFI
funds.
In February 2012, the Alameda County District Attorney filed criminal charges
against appellants. At the November 2012 preliminary hearing, one of the witnesses was
the interim executive director of the Agency appointed to oversee its dissolution after
appellants’ termination. During cross-examination, the witness testified that the County
had filed a claim with its crime insurance policy for the AFI funds.
In March 2013, AIG sent a letter to the County with a “preliminary assessment” of
the claim. The letter stated “it does not appear likely that the County will be able to
establish that it has incurred an actual net loss covered under [the relevant policies]
resulting directly from the alleged acts of Ms. Dillard. Any payment which the County
might be required to make to the Federal Government is a return of funds to which it was
23
not otherwise entitled and thus . . . . an indirect loss, not covered under these insuring
agreements.” In addition, “our investigation thus far do[es] not show that [the Agency]
suffered an actual net loss with respect to the use of the grant funds. . . . [T]he funds in
question were used to fund the ongoing operations of [the Agency]. . . . Such losses are in
the nature of bookkeeping losses that do not otherwise result in an actual net diminution
of assets of the insured” and “accordingly are not generally covered under the [applicable
policy].” AIG underscored, however, that it “has not reached a final conclusion” as to
coverage. The People did not produce this letter to appellants.
In September 2013, counsel for Daniels sent a letter to the People asking for
discovery of “[the Agency’s] crime insurance policy and all documents related to any
claims made on that policy.” The People again did not produce the March 2013 AIG
letter, subsequently representing they did not possess it, but appellants apparently
obtained it through a third-party subpoena on the Agency’s custodian of records (one of
the constituent cities). Appellants claimed they did not receive the letter until after the
start of trial, although before the presentation of evidence.
After the jury was sworn but before the presentation of evidence, Daniels filed a
motion, later joined by Dillard, seeking dismissal of the charges due to prosecutorial
misconduct of failing to produce the AIG letter.13 Appellants argued the People
intentionally failed to disclose the letter because it “demonstrates an unavoidable conflict
of interest for the District Attorney,” namely, that because the claim is still pending, the
County “is trying this criminal case on a contingency basis . . . .” Although the AIG
letter itself makes no reference to the then-pending criminal charges, Daniels’s trial
counsel represented that he spoke to an AIG representative who stated AIG was awaiting
the outcome of the criminal trial. The motion continued: “Had defense counsel been
timely provided with documentation demonstrating this obvious financial conflict of
13
Appellants also argued the People’s failure to disclose the AIG letter constituted a
Brady violation because the letter was exculpatory. (Brady v. Maryland (1963) 373 U.S.
83.) They do not pursue this challenge on appeal.
24
interest, they would have filed a motion to recuse the district attorney in this case under
[section] 1424 . . . . Due to the concealment of that information, however, it is impossible
to substitute in new counsel after the start of trial.” The motion cited no authority for the
assertion that filing the recusal motion was now “impossible.”
At the hearing on the motion, the trial court began by summarizing appellants’
argument: “had the insurance records been timely provided, that they might well have
demonstrated a conflict of interest on the part of the District Attorney, which would have
grounded a motion pursuant to [section] 1424, to recuse, but which at this late date
cannot be brought because I think basically jeopardy has already attached.” Appellants
agreed with this statement of the issue. Following argument, the trial court denied the
motion to dismiss “for the reasons implied by my questioning in court.” The court’s
questioning indicated its skepticism that the letter demonstrated a conflict of interest
rendering it unlikely appellants would receive a fair trial.
B. Legal Standard
“[D]ismissal is an appropriate sanction for government misconduct that is
egregious enough to prejudice a defendant’s constitutional rights.” (People v. Velasco-
Palacios (2015) 235 Cal. App. 4th 439, 446 (Velasco-Palacios).) Here, appellants argued
below the alleged prosecutorial misconduct prevented them from filing a timely section
1424 motion to disqualify the district attorney. The trial court’s denial appears to have
rested on a conclusion that any section 1424 motion would not have been successful.
Section 1424 provides that a motion to disqualify a district attorney “may not be
granted unless the evidence shows that a conflict of interest exists that would render it
unlikely that the defendant would receive a fair trial.” “The statute demands a showing
of a real, not merely apparent, potential for unfair treatment, and further requires that that
potential ‘rise to the level of a likelihood of unfairness.’ [Citation.] Although the statute
refers to a ‘fair trial,’ we have recognized that many of the prosecutor’s critical
discretionary choices are made before or after trial and have hence interpreted section
1424 as requiring recusal on a showing of a conflict of interest ‘ “so grave as to render it
unlikely that defendant will receive fair treatment during all portions of the criminal
25
proceedings.” ’ [Citation.] [¶] On review of the trial court’s denial of a recusal motion,
‘[o]ur role is to determine whether there is substantial evidence to support the [trial
court’s factual] findings [citation], and, based on those findings, whether the trial court
abused its discretion in denying the motion.’ ” (People v. Vasquez (2006) 39 Cal. 4th 47,
56 (Vasquez).)
C. Analysis
As an initial matter, appellants’ argument on appeal suggests their motion below
was a “recusal motion” which the trial court denied because it was untimely. Appellants
argue this denial was in error because there is no time limit for filing a recusal motion. In
fact, as set forth above, appellants filed a motion to dismiss in which they asserted that a
disqualification motion would be untimely. The People argue appellants’ failure to
accurately characterize the proceedings below or to present appellate argument on
prosecutorial misconduct (as opposed to conflict of interest) forfeits this issue. We need
not decide whether any forfeiture occurred because, as we explain below, we affirm the
trial court’s ruling.
First, assuming (without deciding) the People’s failure to produce the AIG letter
was misconduct, appellants’ argument on appeal refutes their claim of prejudice below.
In the trial court, appellants argued they were prejudiced because the People’s failure to
provide the letter sooner precluded appellants from filing a timely section 1424 motion.
On appeal, appellants argue there are no time limits in which such a motion must be filed.
Because, according to appellants’ own argument (on which we express no opinion), they
were not precluded from filing a section 1424 motion after receiving the AIG letter, any
prosecutorial misconduct in failing to provide the letter earlier did not cause prejudice.
Second, assuming that a section 1424 motion would have been untimely and that
appellants have not forfeited this claim, dismissal is only appropriate if any prosecutorial
misconduct prejudices appellants’ constitutional rights. (See Velasco-Palacios, supra,
235 Cal.App.4th at p. 446.) The only prejudice relied on by appellants below was their
purported inability to file a section 1424 motion to disqualify the district attorney.
However, an inability to file a section 1424 motion—even assuming the motion would
26
have been granted—does not alone constitute a violation of constitutional rights. “[T]rial
courts’ statutory power under section 1424 . . . allow[s] recusal whenever a conflict
creates a likelihood of unfair treatment. This standard serves to prevent potential
constitutional violations from occurring. Thus, the failure to recuse when required under
section 1424 may lead to the denial of a fair trial or other unfair treatment, but does not
necessarily do so.” (Vasquez, supra, 39 Cal.4th at p. 59.)
Finally, the trial court did not abuse its discretion in concluding that a section 1424
motion based on the AIG letter would be unsuccessful.14 We note that the original
charges against appellants were brought more than a year before the AIG letter issued and
therefore any conflict of interest resulting from the letter could not exist at that time.
Although, as appellants note, conflicts of interest can cause unfairness in other phases of
criminal proceedings, appellants fail to identify any unfairness other than the fact of the
prosecution itself, nor do they identify any changes in the prosecution’s approach taking
place after the letter issued. Moreover, it is unclear how the prosecution would impact
AIG’s coverage decision in light of the People’s concession that they were not alleging
appellants used AFI funds for their own personal use. Most significantly, appellants fail
to provide authority that the potential for a criminal conviction to financially impact a
county renders that county’s district attorney’s office conflicted. Cases involving the
direct financial interest of a district attorney’s office are inapposite. (See County of Santa
Clara v. Superior Court (2010) 50 Cal. 4th 35, 51 [“giving a public prosecutor a direct
pecuniary interest in the outcome of a case that he or she is prosecuting ‘would render it
unlikely that the defendant would receive a fair trial’ ”]; People v. Eubanks (1996) 14
Cal. 4th 580, 595–596 [“a scheme that provides monetary rewards to a prosecutorial
office might carry the potential impermissibly to skew a prosecutor’s exercise of the
charging and plea bargaining functions”]; Eubanks, at p. 598 [conflict of interest present
14
Appellants contend our review is de novo because the trial court’s ruling was based on
a legal error, to wit, that the recusal motion was untimely. As explained above, we reject
this characterization of the basis for the trial court’s ruling.
27
where corporate crime victim paid a “ ‘substantial’ ” debt incurred by the district attorney
in investigating the case].) Although a district attorney’s budget may be impacted by a
county’s overall financial health, appellant cites no authority that such an attenuated
impact can render it unlikely that a defendant will receive a fair trial. We affirm the trial
court’s denial of appellants’ motion to dismiss.15
III. Vindictive and Retributive Prosecution
Appellants next argue the trial court erred by refusing to let them “submit
evidence and argument to convince the jury that the prosecution was vindictive and
retributive,” in violation of their right to due process and a fair trial. We disagree.
During in limine motions, the People sought to exclude evidence of (1) the
County’s insurance claim, and (2) a lawsuit brought by Dillard against the County
alleging her termination proceedings violated public meetings laws, and the parties’
subsequent settlement. The People argued such evidence was irrelevant or, to the extent
there was some relevance, should be excluded pursuant to Evidence Code section 352.
The trial court denied the motion, finding both sets of evidence relevant “to establish
bias, interest or motive of at least one or some of the witnesses.” However, during
argument on the motion, the court noted appellants “are alleging[] a discriminatory
prosecution motion in the guise of what you wish to bring in front of a jury.”
During trial, the court permitted testimony that Dillard sued the County, claiming
her termination violated the Brown Act; that the lawsuit settled and pursuant to that
settlement the County paid Dillard $219,000 plus $100,000 in attorney fees; that the
County filed a claim for approximately $318,000 on its crime insurance policy based on
HHS’s disallowance of AFI funds; that AIG issued a “soft denial” of the claim; and that
the Agency’s member municipalities had not yet paid back the disallowed AFI funds
because the repayment was “pending insurance claims.” However, the court excluded
15
Appellants also rely on evidence elicited at trial that they claim shows the district
attorney “commenced this prosecution at the behest of Ms. Dillard’s political enemies.”
This was not the basis of appellants’ dismissal motion below and we decline to consider
it.
28
under Evidence Code section 352 the settlement agreement for Dillard’s termination
lawsuit and the County’s insurance claim form.16 The court also sustained prosecution
objections to statements during closing arguments about the civil settlement agreement
and the People’s motives in prosecuting the case. The court instructed the jury, in the
course of sustaining these objections, that “the purpose of [evidence about the County’s
crime insurance claim] is for you to assess any bias that witnesses might have because of
that outstanding crime insurance policy and for no other reason,” and “[t]he reason why
cases are filed are not a matter for your consideration.”
Appellants argue the trial court’s rulings violated their constitutional right to
present evidence in their defense. Appellants’ “attempt to inflate garden-variety
evidentiary questions into constitutional ones is unpersuasive. ‘As a general matter, the
“[a]pplication of the ordinary rules of evidence . . . does not impermissibly infringe on a
defendant’s right to present a defense.” ’ ” (People v. Boyette (2002) 29 Cal. 4th 381,
427–428.) Appellants also claim a violation of their right to present closing argument.
“It is firmly established that a criminal defendant has a constitutional right to have
counsel present closing argument to the trier of fact. [Citations.] Nonetheless, it is
equally settled that a judge in a criminal case ‘must be and is given great latitude in
controlling the duration and limiting the scope of closing summations.’ ” (People v.
Rodrigues (1994) 8 Cal. 4th 1060, 1184.)
The trial court did not abuse its discretion in excluding evidence and limiting
argument. “To be relevant, evidence must have some ‘tendency in reason to prove or
disprove any disputed fact that is of consequence to the determination of the action.’
(Evid.Code, § 210.)” (People v. Contreras (2013) 58 Cal. 4th 123, 152.) Appellants
argue the evidence was relevant to show the prosecution’s motive in pursuing criminal
charges. “[E]vidence of a prosecutor’s subjective motivations when prosecuting a case is
16
Although appellants claim the trial court also excluded the March 2013 AIG letter, the
provided record cite does not support this claim. Because the March 2013 AIG letter
does not appear on appellants’ exhibit list, it appears appellants did not seek admission of
this document at trial.
29
not relevant . . . .” (People v. Seumanu (2015) 61 Cal. 4th 1293, 1329.) Appellants argue
Seumanu involved a claim of prosecutorial vouching and is therefore inapplicable. We
disagree. A prosecutor’s subjective motivation is not relevant to any issue before the
jury, regardless of which side tries to use it to their advantage.
Appellants contend prosecutorial motive is relevant for claims of vindictive or
retaliatory prosecution, but such claims are properly argued to the court, not the jury—the
basis for the claim is that vindictive prosecutions violate a defendant’s constitutional
rights, not that they constitute evidence of innocence. (See People v. Valli (2010) 187
Cal. App. 4th 786, 802 [“The gravamen of a vindictive prosecution is the increase in
charges or a new prosecution brought in retaliation for the exercise of constitutional
rights. [Citation.] It is ‘patently unconstitutional’ to ‘chill the assertion of constitutional
rights by penalizing those who choose to exercise them.’ ”].) To the extent evidence
regarding Dillard’s lawsuit and the County’s insurance claim were relevant to the jury’s
assessment of a witness’s credibility, the court permitted the evidence and argument. In
sum, the challenged rulings regarding evidence and argument were proper and did not
violate appellants’ constitutional rights.
IV. Substantial Evidence (Count 6)
Finally, Dillard argues the guilty verdict on count 6 (preparing false documentary
evidence; § 134) lacks substantial evidence. We disagree.
Section 134 prohibits “preparing any false or antedated book, paper, record,
instrument in writing, or other matter or thing, with intent to produce it, or allow it to be
produced for any fraudulent or deceitful purpose, as genuine or true, upon any trial,
proceeding, or inquiry whatever, authorized by law . . . .” Dillard concedes there is
substantial evidence that she prepared two ante-dated documents: the agenda for the hotel
meeting and the memorandum regarding the residential status of two CREW members.
She argues there is no substantial evidence that she prepared either document with the
intent that it be produced for any proceeding authorized by law or that she intended their
production for a fraudulent or deceitful purpose.
30
First, Dillard prepared the ante-dated documents within two days after she was
placed on administrative leave. Second, she asked her former assistant to place the ante-
dated documents in the Agency’s files. Third, when she asked her former assistant to
send her the files regarding the CREW employees, she expressly stated her intent to
“review them in order to prepare any defense I might need.” This evidence, taken
together, provides substantial evidence that Dillard prepared the documents with the
intent that they be used in some proceeding involving her performance while employed at
the Agency. That they were never so used is immaterial: “There is no requirement that
the evidence actually be produced at all, only that the defendant intended it to be
produced at any trial, proceeding, or inquiry, whatever, authorized by law.” (People v.
Morrison (2011) 191 Cal. App. 4th 1551, 1556.)
As Dillard argues, the contemplated proceeding must be “authorized by law.”
(See People v. Clark (1977) 72 Cal. App. 3d 80, 83–84 [administrative grievance board
proceedings instituted pursuant to the Education Code are a “ ‘proceeding . . . authorized
by law’ ” for purposes of § 134].) In closing arguments, the prosecution identified as
possible proceedings a civil lawsuit filed by Dillard challenging any adverse employment
action,17 an investigation by the Board, and an audit. Dillard does not dispute that civil
litigation challenging adverse employment action is a proceeding authorized by law, but
argues the ante-dated documents were not relevant to the action she ultimately filed.
Again, that the documents were not ultimately used is immaterial; there was substantial
evidence for the jury to find that Dillard intended their use at the time she prepared them.
With respect to an investigation or audit by the Board, Dillard argues there is no evidence
such an inquiry was authorized by law or the Agency’s by-laws. To the contrary, the
17
We reject Dillard’s suggestion that the prosecutor committed misconduct by suggesting
during rebuttal argument that the documents were intended for use in Dillard’s civil suit
against the County. Dillard failed to object to the statement and has therefore forfeited
the argument. (People v. Bonilla (2007) 41 Cal. 4th 313, 336 [“To preserve a claim of
prosecutorial misconduct during argument, a defendant must contemporaneously object
and seek a jury admonition.”].)
31
Agency’s joint powers agreement admitted into evidence at trial provides for an annual
audit conducted by a certified public accountant “[p]ursuant to Section 6505 of the
California Government Code . . . .” Government Code section 6505, subdivision (b),
requires “an annual audit of the accounts and records of every agency or entity” created
by a joint powers agreement. Such a proceeding is thus authorized by law.
Finally, the ante-dating of the documents provides substantial evidence that
Dillard intended they be used for a fraudulent or deceitful purpose, namely, as documents
purporting to record contemporaneous events. Substantial evidence supports the jury
verdict on count 6.
DISPOSITION
Appellants’ convictions on counts 2 and 3 are reversed. The matter is remanded to
the trial court for resentencing. The judgments are otherwise affirmed.
32
SIMONS, J.
We concur.
JONES, P.J.
NEEDHAM, J.
(A141998)
33
Superior Court of Alameda County, Nos. CH-53179A & CH-53179B, Hon. Allan
Hymer, Judge.
John Doyle, under appointment by the Court of Appeal, for Defendant and Appellant
Paul Daniels.
Violet Elizabeth Grayson, for Defendant and Appellant Nanette Sheree Dillard.
Kamala D. Harris and Xavier Becerra, Attorneys General, Gerald A. Engler, Chief
Assistant Attorney General, Jeffrey M. Laurence, Senior Assistant Attorney General,
René A. Chacón and J. Michael Chamberlain, Deputy Attorneys General, for Plaintiff
and Respondent.
34