In the Courts

District Court for the District of Columbia: Criminal Contempt Proceedings Not Appropriate

On Nov. 21, 2011, Judge Emmet G. Sullivan of the United States District Court for the District of Columbia announced the highly anticipated results of a special investigation into prosecutorial misconduct during the trial of the late Sen. Theodore F. Stevens (R-AK). In Re Special Proceedings, — F.Supp.2d—, 2011 WL 5828550 (D.D.C. Nov. 21, 2011). In 2008, Sen. Stevens was found guilty of making false statements in violation of 18 U.S.C. ' 1001(a)(1) and for failing to make required disclosures of gifts in Senate Financial Disclosures ' 1001(a)(2). Id. at *1. Following his trial and conviction, the Department of Justice (DOJ) acknowledged prosecutorial misconduct, including instances of failure to provide exculpatory evidence to the defense in violation of the government's obligations under Brady v Maryland, 373 U.S. 83 (1963) and Giglio v. United States, 405 U.S. 150 (1972). Id. In April 2009, the DOJ moved to set aside the verdict and dismiss the indictment.

The court granted the government's motion and appointed Henry F. Schuelke, III to conduct a special investigation into misconduct by the six DOJ attorneys on the prosecution team and, if appropriate, to prosecute those attorneys in criminal contempt proceedings. See Order Appointing Henry F. Schuelke, United States v. Stevens, No. 08-cr-231 (D.D.C. Apr. 7, 2009). In November 2011, Schuelke presented his findings to the court in a 500-page report submitted for in-camera review. In Re Special Proceedings, 2011 WL 5828550, *1. The court described the investigation as consisting of numerous interviews, including 12 depositions, along with review of more than 150,000 pages of documentary evidence. Id. The Schuelke report concluded that the prosecution of Sen. Stevens was “permeated by the systematic concealment of significant exculpatory evidence,” at least some of which was willful and intentional. Id. at *2.

However, Schuelke ultimately did not recommend prosecution of any of the DOJ attorneys involved, finding that the court had not issued a sufficiently “clear and unequivocal” order regarding the attorneys' discovery obligations to support a conviction of criminal contempt.

Under 18 U.S.C. ' 401(3), conviction of criminal contempt requires a finding that the defendant disobeyed a “clear and unequivocal” court order. During Sen. Stevens' prosecution, the court accepted the prosecutors' repeated assertions that they understood and were complying with their discovery obligations, but refused to issue a written order detailing those obligations. Id. Despite finding willful violation of the prosecutors' constitutional discovery obligations, Schuelke concluded that criminal contempt proceedings would not be appropriate in the absence of such an order. Id.

The Schuelke report was not immediately released to the public, though Judge Sullivan repeatedly emphasized his desire to disclose the results. Id. at *3. Judge Sullivan ordered that the results of the report not be disclosed during the pendency of proceedings, except to five representatives of the DOJ and two of Sen. Stevens' attorneys, so that the parties could review those materials and make any appropriate arguments concerning withholding the report or any portion of the report from public disclosure. Id. at 3-4. In so ordering, Judge Sullivan admonished the DOJ in particular to consider in its arguments the “very significant public interest in these proceedings” and the “benefit of promptly bringing these regrettable events to closure.” Id. at 4.

Fourth Circuit Upholds 100-Year Sentence

On Nov. 17, 2011, the United States Court of Appeals for the Fourth Circuit upheld the conviction of Edward H. Okun and affirmed a 100-year sentence for mail and wire fraud, money laundering, bulk cash smuggling and false declarations related to the operation of a “Ponziesque” scheme resulting in investor losses of more than $125 million. United States v. Okun, No. 09-4743, 2011 WL 5588837 (4th Cir. Nov. 17, 2011). Okun's conviction was based on the fraudulent operation of a commercial real estate investment and management company based in Richmond, VA, as well as an affiliated investment holding company, 1031 Tax Group. Id. at *1. Between 2005 and 2006, Okun created a network of subsidiary companies to 1031 Tax Group, which held proceeds of sale relating to certain assets on which clients wished to defer the payment of capital gains through “like kind” exchanges permitted under 26 U.S.C. 1031. Id. Okun then fraudulently withdrew funds from these companies for both personal use and use by his real estate investment company. In May 2007, 1031 Tax Group filed for bankruptcy, resulting in the loss of more than $125 million belonging to clients of the company and its subsidiaries. Appealing his conviction, Okun made several arguments regarding sufficiency of the indictment as well as failures to grant a requested evidentiary hearing and denial of a continuance requested two weeks prior to trial. Id. Okun also argued that the district court abused its discretion in imposing a sentence of 1,200 months, a sentence 3,600 months below the applicable advisory Sentencing Guidelines. Id. Reviewing the sentence under an abuse-of-discretion standard, the court held that the sentence was “both procedurally and substantively reasonable,” despite Okun's age, lack of criminal history and heart condition. Id. at 7-8. In upholding the reasonableness of the sentence, the court noted the district court's consideration of “the extensive harm caused by Okun's conduct, and the need for adequate deterrence and to protect the public from further crimes by Okun.” Notably, the court devoted a relatively small portion of its opinion to the sentencing challenge, emphasizing that district courts are not required to consider factors under the sentencing guidelines in a “checklist fashion” and are given wide latitude to exercise decision-making authority in sentencing. Id. at 8.

District Court for the District of Columbia: Criminal Contempt Proceedings Not Appropriate

On Nov. 21, 2011, Judge Emmet G. Sullivan of the United States District Court for the District of Columbia announced the highly anticipated results of a special investigation into prosecutorial misconduct during the trial of the late Sen. Theodore F. Stevens (R-AK). In Re Special Proceedings, — F.Supp.2d—, 2011 WL 5828550 (D.D.C. Nov. 21, 2011). In 2008, Sen. Stevens was found guilty of making false statements in violation of 18 U.S.C. ' 1001(a)(1) and for failing to make required disclosures of gifts in Senate Financial Disclosures ' 1001(a)(2). Id. at *1. Following his trial and conviction, the Department of Justice (DOJ) acknowledged prosecutorial misconduct, including instances of failure to provide exculpatory evidence to the defense in violation of the government's obligations under Brady v Maryland , 373 U.S. 83 (1963) and Giglio v. United States , 405 U.S. 150 (1972). Id. In April 2009, the DOJ moved to set aside the verdict and dismiss the indictment.

The court granted the government's motion and appointed Henry F. Schuelke, III to conduct a special investigation into misconduct by the six DOJ attorneys on the prosecution team and, if appropriate, to prosecute those attorneys in criminal contempt proceedings. See Order Appointing Henry F. Schuelke, United States v. Stevens, No. 08-cr-231 (D.D.C. Apr. 7, 2009). In November 2011, Schuelke presented his findings to the court in a 500-page report submitted for in-camera review. In Re Special Proceedings, 2011 WL 5828550, *1. The court described the investigation as consisting of numerous interviews, including 12 depositions, along with review of more than 150,000 pages of documentary evidence. Id. The Schuelke report concluded that the prosecution of Sen. Stevens was “permeated by the systematic concealment of significant exculpatory evidence,” at least some of which was willful and intentional. Id. at *2.

However, Schuelke ultimately did not recommend prosecution of any of the DOJ attorneys involved, finding that the court had not issued a sufficiently “clear and unequivocal” order regarding the attorneys' discovery obligations to support a conviction of criminal contempt.

Under 18 U.S.C. ' 401(3), conviction of criminal contempt requires a finding that the defendant disobeyed a “clear and unequivocal” court order. During Sen. Stevens' prosecution, the court accepted the prosecutors' repeated assertions that they understood and were complying with their discovery obligations, but refused to issue a written order detailing those obligations. Id. Despite finding willful violation of the prosecutors' constitutional discovery obligations, Schuelke concluded that criminal contempt proceedings would not be appropriate in the absence of such an order. Id.

The Schuelke report was not immediately released to the public, though Judge Sullivan repeatedly emphasized his desire to disclose the results. Id. at *3. Judge Sullivan ordered that the results of the report not be disclosed during the pendency of proceedings, except to five representatives of the DOJ and two of Sen. Stevens' attorneys, so that the parties could review those materials and make any appropriate arguments concerning withholding the report or any portion of the report from public disclosure. Id. at 3-4. In so ordering, Judge Sullivan admonished the DOJ in particular to consider in its arguments the “very significant public interest in these proceedings” and the “benefit of promptly bringing these regrettable events to closure.” Id. at 4.

Fourth Circuit Upholds 100-Year Sentence

On Nov. 17, 2011, the United States Court of Appeals for the Fourth Circuit upheld the conviction of Edward H. Okun and affirmed a 100-year sentence for mail and wire fraud, money laundering, bulk cash smuggling and false declarations related to the operation of a “Ponziesque” scheme resulting in investor losses of more than $125 million. United States v. Okun, No. 09-4743, 2011 WL 5588837 (4th Cir. Nov. 17, 2011). Okun's conviction was based on the fraudulent operation of a commercial real estate investment and management company based in Richmond, VA, as well as an affiliated investment holding company, 1031 Tax Group. Id. at *1. Between 2005 and 2006, Okun created a network of subsidiary companies to 1031 Tax Group, which held proceeds of sale relating to certain assets on which clients wished to defer the payment of capital gains through “like kind” exchanges permitted under 26 U.S.C. 1031. Id. Okun then fraudulently withdrew funds from these companies for both personal use and use by his real estate investment company. In May 2007, 1031 Tax Group filed for bankruptcy, resulting in the loss of more than $125 million belonging to clients of the company and its subsidiaries. Appealing his conviction, Okun made several arguments regarding sufficiency of the indictment as well as failures to grant a requested evidentiary hearing and denial of a continuance requested two weeks prior to trial. Id. Okun also argued that the district court abused its discretion in imposing a sentence of 1,200 months, a sentence 3,600 months below the applicable advisory Sentencing Guidelines. Id. Reviewing the sentence under an abuse-of-discretion standard, the court held that the sentence was “both procedurally and substantively reasonable,” despite Okun's age, lack of criminal history and heart condition. Id. at 7-8. In upholding the reasonableness of the sentence, the court noted the district court's consideration of “the extensive harm caused by Okun's conduct, and the need for adequate deterrence and to protect the public from further crimes by Okun.” Notably, the court devoted a relatively small portion of its opinion to the sentencing challenge, emphasizing that district courts are not required to consider factors under the sentencing guidelines in a “checklist fashion” and are given wide latitude to exercise decision-making authority in sentencing. Id. at 8.