Bail for White-Collar Defendants

The primary purpose of the BRA, 18 U.S.C. ' 3142 et seq., was to establish that when considering whether to release defendants pre-trial, federal judges were not limited to weighing their risk of flight, but could also consider their dangerousness. Accordingly, the statute states no less than 10 times that more restrictive conditions of release or outright detention are authorized in cases where personal recognizance or an unsecured appearance bond will not reasonably assure “the safety of any other person or the community.” Moreover, the BRA's legislative history clearly spelled out that “safety of ' the community” was to be broadly construed: “The Committee intends that the concern about safety be given a broader construction than merely danger of harm involving physical violence.” S. Rep. No. 225, 98th Cong., 2d Sess., at 13, reprinted in U.S. Code Cong. & Adm. News 3187, 3196 (1984).

'Danger to the Community'

The language concerning “the safety of any other person or the community” was drawn from the previous federal post-conviction bail statute (18 U.S.C. ' 3148) passed in 1966. The courts had consistently recognized that this language encompassed not only physical violence, but also economic harms. Judges had found that defendants constituted a “danger to the community” under the old ' 3148 where they “operated as a confidence man over a period of years,” United States v. Louie, 289 F. Supp. 850 (N.D. Cal. 1968); engaged in labor union corruption, United States v. Provenzano, 605 F.2d 85 (3d Cir. 1979); refused to file tax returns, United States v. Karmann, 471 F. Supp. 1021 (C.D. Cal. 1979); carried out a fraudulent check-cashing scheme while on parole for another offense, United States v. Moss, 522 F. Supp. 1033 (E.D. Pa. 1981); or misappropriated public funds and the services of public employees, United States v. Parr, 399 F. Supp. 883 (W.D. Tex. 1975). Thus, when Congress made the language of the former ' 3148 the new standard for pretrial release determinations, the old case law interpreting this provision to require judges to consider economic dangerousness should naturally have been adopted as well. The legislative history indicates that this was in fact Congress's intention.

Accordingly, subsection (e) of ' 3142 , which establishes the general standard for detention decisions, expressly states that a judicial officer can detain a defendant if necessary to safeguard “the safety of ' the community,” and ' 3142(g), which lists factors courts should consider in making release determinations, again instructs the court to consider “the nature and seriousness of the danger to ' the community” posed by the defendant's release. But certain language in ' 3142(f), which simply specifies the procedural rules governing detention hearings, has been interpreted by First, Second, Third, and Fifth Circuits to hold that dangerousness alone cannot be a basis for pretrial detention unless a defendant is charged with an offense enumerated in ' 3142(f)(1); has at least two prior convictions of such offenses; or unless there is evidence of risk of flight or obstruction of justice. United States v. Byrd, 969 F.2d 106 (5th Cir. 1992); United States v. Ploof, 851 F.2d 7 (1st Cir. 1988); United States v. Friedman, 837 F.2d 48 (2d Cir. 1988); United States v. Himler, 797 F.2d 156 (3d Cir. 1986).

On the other hand, the Ninth Circuit has held that “danger to the community” “may, at least in some cases, encompass pecuniary or economic harm,” United States v. Reynolds, 956 F.2d 192 (9th Cir. 1992), and the Federal Judicial Center's 1993 monograph on the BRA stated flatly that defendants “may be detained because of the risk of danger to the community even where there is no showing that they are likely to engage in physical violence.” Numerous lower courts have reached the same conclusion, although often when passing on motions for post-conviction release (where the same language is used, but the burdens of proof are different) or where finding that a defendant presented both a risk of flight and an economic danger.

The Madoff Case

In Madoff, Magistrate Judge Ronald Ellis took note of the Second Circuit's longstanding position that the BRA “does not permit detention on the basis of dangerousness in the absence of risk of flight, obstruction of justice or an indictment for the offenses enumerated” in ' 3142(f)(1) and the defense's argument that the cases treating economic dangerousness as grounds for detention should be limited to the post-conviction context. Nevertheless, he concluded that “the Court accepts that in certain circumstances an economic or pecuniary harm may give rise to a consideration of danger for purposes of detention, either prior to trial or where the convicted awaits appeal,” although he added that “the scope of this factor remains uncertain.” 586 F. Supp.2d 240, 253 & n.11 (S.D.N.Y. 2009). He found, however, that the known and possible future dissipation of assets by Madoff did not reach the level necessary to constitute an economic danger to the community, and that there were other possible conditions of release that could reasonably assure the preservation of his remaining wealth.

Perhaps equally striking was the Second Circuit's subsequent resolution of Madoff's challenge to the detention order issued by the district court following his guilty plea. After first finding that Madoff presented enough of a risk of flight to sustain the district court's order, the Second Circuit panel went further and noted that there was in any case substantial evidence to support Madoff's detention on the ground that he constituted a danger to the pecuniary safety of other persons or the community if released, 2009 WL 728379 (2d Cir. Mar. 20, 2009) (unpublished), quoting the Ninth Circuit's decision in Reynolds for support. These statements in the district court's and Second Circuit's decisions in Madoff will likely be cited by federal prosecutors in the future when advancing arguments for pretrial detention based in whole or in part on a defendant's potential economic dangerousness.

The Situation Today

As things stand today, the BRA's legislative history, its text, and the case law developed over the past 25 years can perhaps best be reconciled by reasoning that while a defendant's likelihood of causing further economic harm can be considered in assessing “danger to the community,” that consideration can only figure into the detention decision if there is also a serious risk of flight or of obstruction of justice. But that approach to interpreting the BRA appears to conflict with the original intention of the statute's drafters, and it is also is at variance with common sense and the best interests of the public.

Given that the statute's authors clearly intended dangerousness other than physical violence to receive serious consideration in pretrial release decisions, there is no logical reason why it should only be allowed to be a factor where there is also a risk of flight or obstruction of justice. The harm caused by a defendant who continues to carry out acts of fraud while awaiting trial is the same, regardless of whether he or she also engages in obstruction of justice or makes plans to abscond. (Indeed, if a defendant is thinking seriously about hopping the next flight to Rio or Geneva, there may be less reason to worry about a continuing economic danger to the community.) Holding that economic dangerousness cannot be considered unless it is linked to a showing of risk of flight or obstruction of justice may also tempt prosecutors and judges to overemphasize these risks in cases where their central concern is that the defendant will commit other economic crimes if released.

The BRA's problems could be remedied by adding a subparagraph (C) to ' 3142(f)(2), providing that the court or the government may move for a detention hearing in a case that involves “a serious risk that such person will present a danger to the community if released.” Absent such legislative clarification, however, the prospects are for continued confusion and inconsistency in the application of the BRA to cases where defendants arguably present a continuing economic danger.

Jefferson M. Gray, a member of this newsletter's Board of Editors, is an Assistant U.S. Attorney in the District of Maryland. This article reflects only his individual analysis and conclusions and does not purport to speak for the Department of Justice or any of its divisions.

In the May 2009 issue of this newsletter, Steven F. Reich and Arunabha Bhoumik discussed the government's failure to persuade a district judge to jail Bernard Madoff pending trial so that he couldn't deplete assets, as well as the court's requirement that Madoff's wife hire private around-the-clock security to ensure that Madoff didn't flee. (“Pre-Trial Detention and White-Collar Defendants,” May 2009, page 1; http://www.ljnonline.com/issues/ljn_buscrimes/16_9/news/ 152029-1.html.)

Beyond these two unusual aspects, however, the Madoff detention litigation has revived longstanding questions about whether pretrial detention can ever be based solely on economic dangerousness. This issue has caused confusion throughout the quarter-century since the Bail Reform Act of 1984 (BRA) took effect. And given that Eric Holder, the new Attorney General, plans to allocate additional resources to investigating white-collar crime, prosecutors and defense counsel may square off frequently over this question in the years to come.

The Issue of Pretrial Detention

The primary purpose of the BRA, 18 U.S.C. ' 3142 et seq., was to establish that when considering whether to release defendants pre-trial, federal judges were not limited to weighing their risk of flight, but could also consider their dangerousness. Accordingly, the statute states no less than 10 times that more restrictive conditions of release or outright detention are authorized in cases where personal recognizance or an unsecured appearance bond will not reasonably assure “the safety of any other person or the community.” Moreover, the BRA's legislative history clearly spelled out that “safety of ' the community” was to be broadly construed: “The Committee intends that the concern about safety be given a broader construction than merely danger of harm involving physical violence.” S. Rep. No. 225, 98th Cong., 2d Sess., at 13, reprinted in U.S. Code Cong. & Adm. News 3187, 3196 (1984).

'Danger to the Community'

The language concerning “the safety of any other person or the community” was drawn from the previous federal post-conviction bail statute (18 U.S.C. ' 3148) passed in 1966. The courts had consistently recognized that this language encompassed not only physical violence, but also economic harms. Judges had found that defendants constituted a “danger to the community” under the old ' 3148 where they “operated as a confidence man over a period of years,” United States v. Louie , 289 F. Supp. 850 (N.D. Cal. 1968); engaged in labor union corruption, United States v. Provenzano , 605 F.2d 85 (3d Cir. 1979); refused to file tax returns, United States v. Karmann , 471 F. Supp. 1021 (C.D. Cal. 1979); carried out a fraudulent check-cashing scheme while on parole for another offense, United States v. Moss , 522 F. Supp. 1033 (E.D. Pa. 1981); or misappropriated public funds and the services of public employees, United States v. Parr , 399 F. Supp. 883 (W.D. Tex. 1975). Thus, when Congress made the language of the former ' 3148 the new standard for pretrial release determinations, the old case law interpreting this provision to require judges to consider economic dangerousness should naturally have been adopted as well. The legislative history indicates that this was in fact Congress's intention.

Accordingly, subsection (e) of ' 3142 , which establishes the general standard for detention decisions, expressly states that a judicial officer can detain a defendant if necessary to safeguard “the safety of ' the community,” and ' 3142(g), which lists factors courts should consider in making release determinations, again instructs the court to consider “the nature and seriousness of the danger to ' the community” posed by the defendant's release. But certain language in ' 3142(f), which simply specifies the procedural rules governing detention hearings, has been interpreted by First, Second, Third, and Fifth Circuits to hold that dangerousness alone cannot be a basis for pretrial detention unless a defendant is charged with an offense enumerated in ' 3142(f)(1); has at least two prior convictions of such offenses; or unless there is evidence of risk of flight or obstruction of justice. United States v. Byrd , 969 F.2d 106 (5th Cir. 1992); United States v. Ploof , 851 F.2d 7 (1st Cir. 1988); United States v. Friedman , 837 F.2d 48 (2d Cir. 1988); United States v. Himler , 797 F.2d 156 (3d Cir. 1986).

On the other hand, the Ninth Circuit has held that “danger to the community” “may, at least in some cases, encompass pecuniary or economic harm,” United States v. Reynolds , 956 F.2d 192 (9th Cir. 1992), and the Federal Judicial Center's 1993 monograph on the BRA stated flatly that defendants “may be detained because of the risk of danger to the community even where there is no showing that they are likely to engage in physical violence.” Numerous lower courts have reached the same conclusion, although often when passing on motions for post-conviction release (where the same language is used, but the burdens of proof are different) or where finding that a defendant presented both a risk of flight and an economic danger.

The Madoff Case

In Madoff, Magistrate Judge Ronald Ellis took note of the Second Circuit's longstanding position that the BRA “does not permit detention on the basis of dangerousness in the absence of risk of flight, obstruction of justice or an indictment for the offenses enumerated” in ' 3142(f)(1) and the defense's argument that the cases treating economic dangerousness as grounds for detention should be limited to the post-conviction context. Nevertheless, he concluded that “the Court accepts that in certain circumstances an economic or pecuniary harm may give rise to a consideration of danger for purposes of detention, either prior to trial or where the convicted awaits appeal,” although he added that “the scope of this factor remains uncertain.” 586 F. Supp.2d 240, 253 & n.11 (S.D.N.Y. 2009). He found, however, that the known and possible future dissipation of assets by Madoff did not reach the level necessary to constitute an economic danger to the community, and that there were other possible conditions of release that could reasonably assure the preservation of his remaining wealth.

Perhaps equally striking was the Second Circuit's subsequent resolution of Madoff's challenge to the detention order issued by the district court following his guilty plea. After first finding that Madoff presented enough of a risk of flight to sustain the district court's order, the Second Circuit panel went further and noted that there was in any case substantial evidence to support Madoff's detention on the ground that he constituted a danger to the pecuniary safety of other persons or the community if released, 2009 WL 728379 (2d Cir. Mar. 20, 2009) (unpublished), quoting the Ninth Circuit's decision in Reynolds for support. These statements in the district court's and Second Circuit's decisions in Madoff will likely be cited by federal prosecutors in the future when advancing arguments for pretrial detention based in whole or in part on a defendant's potential economic dangerousness.

The Situation Today

As things stand today, the BRA's legislative history, its text, and the case law developed over the past 25 years can perhaps best be reconciled by reasoning that while a defendant's likelihood of causing further economic harm can be considered in assessing “danger to the community,” that consideration can only figure into the detention decision if there is also a serious risk of flight or of obstruction of justice. But that approach to interpreting the BRA appears to conflict with the original intention of the statute's drafters, and it is also is at variance with common sense and the best interests of the public.

Given that the statute's authors clearly intended dangerousness other than physical violence to receive serious consideration in pretrial release decisions, there is no logical reason why it should only be allowed to be a factor where there is also a risk of flight or obstruction of justice. The harm caused by a defendant who continues to carry out acts of fraud while awaiting trial is the same, regardless of whether he or she also engages in obstruction of justice or makes plans to abscond. (Indeed, if a defendant is thinking seriously about hopping the next flight to Rio or Geneva, there may be less reason to worry about a continuing economic danger to the community.) Holding that economic dangerousness cannot be considered unless it is linked to a showing of risk of flight or obstruction of justice may also tempt prosecutors and judges to overemphasize these risks in cases where their central concern is that the defendant will commit other economic crimes if released.

The BRA's problems could be remedied by adding a subparagraph (C) to ' 3142(f)(2), providing that the court or the government may move for a detention hearing in a case that involves “a serious risk that such person will present a danger to the community if released.” Absent such legislative clarification, however, the prospects are for continued confusion and inconsistency in the application of the BRA to cases where defendants arguably present a continuing economic danger.

Jefferson M. Gray, a member of this newsletter's Board of Editors, is an Assistant U.S. Attorney in the District of Maryland. This article reflects only his individual analysis and conclusions and does not purport to speak for the Department of Justice or any of its divisions.