United States of America, Plaintiff, v. Stephen
M. Kerr, Michael Quiel, Defendants.
No. CR-11-02385-PHX-JAT
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
ARIZONA
2015 U.S. Dist. LEXIS 92023
July 14, 2015, Decided
July 15, 2015, Filed
PRIOR HISTORY: United States
v. Quiel, 595 Fed. Appx. 692, 2014 U.S. App. LEXIS 24049 (9th Cir. Ariz., 2014)
CORE TERMS: new trial,
undisclosed, evidentiary hearing, impeachment evidence, materiality, newly
discovered, email, cumulative, leniency, newly, discovered evidence,
suppression, suppressed, false evidence, diligence, favorable, forged, illegal
activity, fraudulent, disclose, reasonable probability, impeaching, admissible,
post-trial, falsity, prong, essential element, cross-examination, prosecutor's,
discover
COUNSEL: [*1] For USA, Plaintiff: Monica B
Edelstein, LEAD ATTORNEY, US Attorneys Office - Phoenix, AZ, Phoenix, AZ;
Timothy J Stockwell, LEAD ATTORNEY, US Dept of Justice - Tax Division Criminal
Enforcement, Washington, DC.
JUDGES: James A.
Teilborg, Senior United States District Judge.
OPINION BY: James A.
Teilborg
OPINION
WO
ORDER
Pending
before the Court is Defendants' Joint Motion for New Trial or to Dismiss. (Doc. 454).
I. Background
On December
8, 2011, a grand jury indicted Michael Quiel ("Quiel") and Stephen
Kerr ("Kerr") on a variety of crimes concerning failure to pay taxes
on funds held in Swiss corporations. (Doc. 3). Each
Defendant was charged with one count of Conspiracy to Defraud the United
States, two counts of Willful Subscription to False Individual Income Tax
Returns, and two counts of Willful Failure to File Reports of Foreign Bank and
Financial Accounts ("FBAR"). (Id.).
Defendants
were not alone in the indictment. Christopher Rusch ("Rusch"),
Defendants' former attorney, was charged with one count of Conspiracy to
Defraud the United States. (Id.). An additional charge of failure to
file an FBAR was later added. (Doc. 331 at 1607).
Rusch entered into a plea agreement, which compelled him to testify at the
request [*2] of the United States. (Doc. 415).
A month-long
jury trial began in early March. (Doc. 221); (Doc. 281).
At trial, Rusch testified against Defendants. (Doc. 331).
On direct examination, he admitted to engaging in illegal activity by
improperly structuring the Swiss businesses controlled by Quiel and Kerr. (Id. at 1675). On cross-examination, Defendants
introduced evidence to impeach Rusch. (Doc. 454 at 5); (Doc.
457 at 2).
Both
Defendants were acquitted of Count One (Conspiracy to Defraud the United
States). Kerr was found guilty of Counts Two & Three (Willful Subscription
to False Individual Income Tax Returns for 2007 and 2008) and Counts Six &
Seven (Willful Failure to File FBARs for 2007 and 2008). (Doc. 281). Quiel was found guilty of Counts Four & Five
(Willful Subscription to False Individual Income Tax Returns for 2007 and
2008). (Id.). In addition, the jury hung as to Counts Eight & Nine
(Willful Failure to File FBARs for 2007 and 2008). (Id.).
Following the
verdict, Defendants were each sentenced to ten months in prison. (Doc. 373); (Doc. 376). Subsequently, Defendants moved for acquittal
or alternatively a new trial. (Doc. 299); (Doc. 300).
These motions were denied. (Doc. 345); (Doc. [*3] 346).
On appeal,
the Ninth Circuit Court of Appeals affirmed the convictions. United States
v. Quiel, 595 F. App'x 692 (9th Cir. 2014), cert. denied, 135 S. Ct.
2336, 191 L. Ed. 2d 982, 2015 WL 1692989 (2015). Now, Defendants request a new
trial or alternatively an evidentiary hearing, in light of allegedly newly
discovered evidence. (Doc. 454). Defendants have three
different pieces of allegedly newly discovered evidence.
A. Rusch's Alleged Fraud
First,
Defendants claim that evidence has emerged showing that Rusch engaged in
fraudulent activities, before and during the trial, under the alias Christian
Reeves. (Id. at 1-9). Defendants contend that
examples of this fraud include Rusch: blogging as Reeves in early 2013, (Id.
at 4); posting on ex-pat investing sites as Reeves starting in 2012, (Id.
at 6); giving tax advice as Reeves, (Id.); podcasting as Reeves, (Id.);
marketing himself as a rehabilitated lawyer, (Id.); and publishing an
offshore tax guide after pleading guilty, but before trial, (Id.).
Furthermore, Defendants allege that Rusch has admitted to being Reeves. (Doc. 459 at 3).
Defendants
argue that they could have used the evidence of Rusch's ongoing fraud to
impeach his testimony at trial. (Doc. 454 at 13).
Defendants further claim that if the Government was aware of Rusch's illegal
activity, but did not disclose [*4] this
information to Defendants, then a Brady violation has occurred,
justifying a new trial. (Id. at 12-14).
Defendants
further argue that even if the Government was not aware of this information,
the newly discovered evidence, of its own force, justifies a new trial. (Id. at 14).
B. Rusch's Alleged
Undisclosed Benefit
Second,
Defendants allege that the Government has agreed "to look the other way
while its witness commits additional crimes." (Id.
at 10). Defendants claim that the Government has given Rusch a
"fresh start" by allowing him to continue his allegedly fraudulent
activity. (Doc. 458 at 7). Defendants argue that this
"fresh start" is the product of an undisclosed agreement between
Rusch and the Government. (Id. at 7) ("Brady and due process
require that the Government turn over information about the full benefits and
promises that the witness received for his co-operation, to include
non-enforcement of civil penalties.") (citing United
States v. Shaffer, 789 F.2d 682 (9th Cir. 1986)).
C. Trial Exhibits 51 and
52
Third,
Defendants allege that Pierre Gabris, a Swiss-national and alleged participant
in the structuring of the Swiss accounts, would testify that "he did not
prepare or send trial exhibits 51 and 52," which were offered into
evidence on Rusch's re-direct. (Id. at 15 [*5] ). These exhibits contain emails
originally sent from Gabris to Rusch, who forwarded them to Defendants,
regarding accounting statements from Defendants' Swiss corporations. (Doc. 335 at 2533). Defendants argue that these allegedly
forged documents provide further support for a new trial. (Doc.
454 at 15-16).
II. Applicable Legal
Standards
Defendants
claim that their newly discovered evidence satisfies the Rule 33 new trial
test. (Id. at 14). This test requires
Defendants to show: (1) that the evidence is newly discovered; (2) that
Defendants' failure to discover the evidence sooner was not the result of a
lack of diligence; (3) that the evidence is material; (4) that the evidence is
neither cumulative nor merely impeaching; and (5) that a new trial would likely
result in acquittal. United States v. Kulczyk, 931
F.2d 542, 548 (9th Cir. 1991).
In addition,
Defendants argue that they are due a new trial under Brady v. Maryland.
(Doc. 454 at 12-14); Brady v. Maryland, 373 U.S. 83, 87, 83 S. Ct. 1194,
10 L. Ed. 2d 215 (1963). To prove a Brady violation, Defendants must
show that: (1) the evidence is newly discovered; (2) the
evidence was suppressed by the prosecution; and (3) the evidence was
material. United States v. Williams, 547 F.3d 1187,
1202 (9th Cir. 2008).
Finally,
Defendants allege that trial exhibits 51 and 52 are forgeries. (Doc. 454 at 15). While Defendants assert that these
forgeries [*6] entitle them to a new
trial under Brady, this evidence is properly considered under Napue
v. Illinois, because the evidence was not suppressed.1 Napue
v. Illinois, 360 U.S. 264, 79 S. Ct. 1173, 3 L. Ed. 2d 1217 (1959). To
establish a Napue violation, Defendants must prove that: (1) there was
false evidence; (2) the prosecution knew, or should have known that the
evidence was false; and (3) the evidence was material. Towery v. Schriro,
641 F.3d 300, 308 (9th Cir. 2010) (citing United States v. Zuno--Arce,
339 F.3d 886, 889 (9th Cir. 2003)).
1 The Court
notes that neither party cited the Napue test with regard to trial
exhibits 51 and 52. While Brady and Napue violations can overlap,
see Giglio v. United States, 405 U.S. 150, 92 S. Ct. 763, 31 L. Ed. 2d
104 (1972) (finding both violations where the prosecution did not disclose an
informant-witness's plea deal and did not correct the witness who committed
perjury by denying the existence of a plea deal while testifying), the essence
of Defendants' allegation is that this evidence was false; not that it was
suppressed. Therefore, this evidence is properly considered under Napue; not Brady.
Because both Brady
and Napue violations are implicated by Defendants' allegations, the
Court will use a two-step test described in further detail below, see supra
Part II.D, to determine materiality.
Finally, to
determine whether Defendants are entitled to an evidentiary hearing, the Court
will [*7] presume that their
allegations are true.
A. Rule 33 New Trial Test
Under Rule
33, a defendant may "move for a new trial on newly discovered
evidence" within three years of the verdict. Fed. R. Crim. P. 33. The
Court may "grant a new trial if the interest of justice so requires."
Id. These motions "are not favored by the courts and should be
viewed with great caution." United States v. Marcello, 568 F. Supp.
738, 740 (C.D. Cal. 1983), aff'd 731 F.2d 1354 (9th Cir. 1984) (citing 3
Charles Alan Wright, Federal Practice and Procedure: Criminal § 557 (2d
ed. 1982)). To obtain a new trial, Defendants must satisfy each prong of a
five-part test:
(1) the evidence must be newly discovered;
(2) the failure to discover the evidence sooner must not be the
result of a lack of diligence on . . . [Defendants'] part;
(3) the evidence must be material to the issues at trial;
(4) the evidence must be neither cumulative nor merely
impeaching; and
(5) the evidence must indicate that a new trial would probably
result in acquittal.
United States
v. Kulczyk,
931 F.2d 542, 548 (9th Cir. 1991).
The
materiality and probability prongs are essentially the same. United States
v. Krasny, 607 F.2d 840, 845 n.3 (9th Cir. 1979). Accordingly, they will be
treated concurrently.
1. Newly Discovered
Rule 33
requires that evidence be newly discovered. Kulczyk,
931 F.2d at 548. Evidence is not newly discovered if it "was known
to, or was in the possession of, the defense" before the trial concluded. United
States v. Hinkson, 585 F.3d 1247, 1284 (9th Cir. 2009) (en banc [*8] ) (Fletcher, J., dissenting).
a. Rusch's Alleged Fraud
and Rusch's Alleged Undisclosed Benefit
Defendants
allege that they discovered Rusch's fraudulent activities performed under the
Reeves alias after trial. (Doc. 454 at 4). Because
Defendants allegedly learned of this information after trial, the newly
discovered test is satisfied.
b. Trial Exhibits 51 and
52
Notwithstanding
the Reeves allegation, Defendants do not allege when they learned that Gabris
did not send the emails constituting trial exhibits 51 and 52. (Id. at 15). The heading above Defendants' claim
reads: "The Discovery of Allegedly Forged Documents Further Provides the
Basis for a New Trial." (Id.). This does not indicate when the
discovery occurred. Additionally, the evidence allegedly arose from
"conversations between Mr. Quiel's attorney, Mr. Gabris' attorney, and
conversations between Mr. Gabris and Mr. Quiel outside the presence of
Counsel"; there is no mention of when these conversations took place. (Id.).
Furthermore, the Government noted the temporal-vacancy of the allegation, (Doc.
457 at 8), but Defendants failed to address this concern in their Reply, (Doc.
458).
Consequently,
without a description of when this discovery [*9] was
made, the Court cannot find a concrete allegation that the evidence is newly
discovered. Therefore, because Defendants fail to meet their burden, the
alleged evidence regarding trial exhibits 51 and 52 cannot be considered newly
discovered.
2. Diligence
"Due
diligence means ordinary, rather than extraordinary, diligence." United States v. Walker, 546 F. Supp. 805, 811 (D. Haw.
1982). The trial judge "has a large discretion in . . . determining
what diligence is necessary." Prlia v. United States,
279 F.2d 407, 408 (9th Cir. 1960). In United States v. Harrington,
the court found that the movant was not diligent in obtaining photographs of
the crime scene and a map of the surrounding streets because this information
"could have been obtained at any time." United
States v. Harrington, 410 F.3d 598, 600 (9th Cir. 2005).
a. Rusch's Alleged Fraud
and Rusch's Alleged Undisclosed Benefit
While it is
possible that the evidence of Rusch's alleged out-of-court activities could
have been "discovered at any time" in the literal sense, this
situation is distinguishable from Harrington, as the evidence in that
case concerned the actual crime of which the defendant was convicted: selling
LSD in that area. Id. In the present case, the proposed evidence
concerns Rusch's conduct which was not associated with
the activity of which Defendants were convicted. Therefore, an
ordinarily-diligent [*10] defendant would not be
expected to discover this evidence. Accordingly, Defendants' failure to
discover this evidence in time for trial does not violate the diligence
standard.
3. Cumulative/Impeachment
Evidence
Generally,
impeachment evidence does not justify a new trial. United
States v. Davis, 960 F.2d 820, 825 (9th Cir. 1992). Nevertheless, a
new trial is warranted where "impeachment evidence [is] . . . so powerful
that, if it were to be believed by the trier of fact, it could render the
witness' testimony totally incredible." Id. In these situations,
the new evidence nullifies "an essential element of the government's
case." Id.
a. Rusch's Alleged Fraud
and Rusch's Alleged Undisclosed Benefit
While
Defendants do describe Rusch's allegedly impeaching activity, they do not show
how this evidence would negate an essential element of the Government's case. (Doc. 454). Therefore, because Defendants have not met their
burden, their allegations do not warrant a new trial under Rule 33.
4. Probability of
Acquittal and Materiality
Because
Defendants claims do not satisfy the prior elements of this test, materiality
and probability of acquittal will not be considered at this juncture.
B. Napue Test
Under Napue,
"[t]he knowing use of false evidence by the
state, [*11] or the failure
to correct false evidence, may violate due process." Towery v. Schriro,
641 F.3d 300, 308 (9th Cir. 2010) (citing Napue v. Illinois, 360 U.S.
264, 269, 79 S. Ct. 1173, 3 L. Ed. 2d 1217 (1959)). To demonstrate a Napue
violation, the movant must show that: "(1) the testimony (or evidence) was
actually false, (2) the prosecution knew or should have known that the testimony
was actually false, and (3) . . . the false testimony was material." Id.
(quoting United States v. Zuno--Arce, 339 F.3d 886, 889 (9th Cir.
2003)).
1. Falsity
a. Rusch's Alleged Fraud
and Rusch's Alleged Undisclosed Benefit
Defendants do
not allege that Rusch's illegal activity or the undisclosed leniency agreement
caused false evidence or perjury to be introduced at trial. (Doc.
454). Therefore, these claims do not satisfy Napue.
b. Trial Exhibits 51 and
52
In contrast,
Defendants do allege that trial exhibits 51 and 52 were falsified. (Doc. 454 at 15). Defendants claim that Gabris will testify
that he did not send the emails to Rusch that constitute trial exhibits 51 and
52. (Id.). However, even if true, this does not establish that the
evidence itself was false.
Allegedly,
trial exhibits 51 and 52 were used to "'prove' distributions that were
never made." (Doc. 454 at 15). Defendants claim
that this evidence "supported the 'nominee theory'" of structuring,
whereby an American [*12] impermissibly controls
a foreign company through a nominee without paying taxes on funds held in that
company. Defendants allege that had the jury known that the exhibits were
falsified, they may have "acquitted Quiel on the tax charges." (Id.
16-17). Exhibit 51 is an email from Gabris to Rusch containing an accounting
statement for the Swiss business accounts owned by Quiel. (Doc.
335 at 2534). This email was subsequently forwarded to Quiel. (Id.).
Exhibit 52 was not mentioned after it was introduced into evidence. (See id.).
When the
exhibits were introduced, defense counsel objected, arguing that "[t]hey're beyond the scope. And they're the hearsay
statements of Mr. Pierre Gabris, who [defense counsel] will not have an
opportunity to cross-examine." (Doc. 335 at 2534).
In response, the prosecutor argued that during cross-examination Rusch was
questioned "about providing information to the defendants. The implication
was [that] he did not actually provide anything to defendants. These are being
offered to rebut that. And they're not being offered for the truth of anything
in the document, but just to their existence." (Id.). After hearing
the explanation, the Court overruled the objection, and the [*13] evidence was admitted.
(Id.).
Defendants do
not contend that they were never forwarded the emails by
Rusch. (See Doc. 454). Therefore, the evidence,
which was used to establish that Rusch sent Quiel financial information
regarding Quiel's Swiss accounts, is not changed by the fact that Gabris
allegedly did not send the original emails to Rusch.
For evidence
to be false under Napue, the falsity must be material to the purpose for
which the evidence was used. Cf. United States v. Vozzella, 124 F.3d
389, 392 (2d Cir. 1997) (emphasis added) (finding falsity where "records
were known to be partially false and were presented to the jury in a fashion so
highly misleading as to amount to falsity regarding their veracity as a
whole."). Where evidence is partially false, but the false portion of
the evidence has no bearing on the purpose for which the evidence is used,
there is no risk that "a state has contrived a conviction through the
pretense of a trial which in truth is but used as a means of depriving a
defendant of liberty through a deliberate deception of court and jury." Mooney v. Holohan, 294 U.S. 103, 112, 55 S. Ct. 340, 79 L.
Ed. 791 (1935). Consequently, insofar as trial exhibit 51 was used to
support Rusch's testimony that he sent an email containing Swiss accounting
statements to Quiel, the evidence was not [*14] false.
2. Knowledge and
Materiality
Because
Defendants fail to show that any of the allegedly newly discovered evidence was
falsified, they fail to satisfy the Napue test. Therefore knowledge and
materiality do not need to be considered.
C. Brady Test
Under Brady,
"the suppression by the prosecution of evidence favorable to an accused
upon request violates due process where the evidence is material either to
guilt or to punishment, irrespective of the good faith or bad faith of the
prosecution." Brady v. Maryland, 373 U.S. 83, 87, 83 S. Ct. 1194,
10 L. Ed. 2d 215 (1963). For a Brady violation to occur, three elements
must be present: "(1) the evidence at issue must be favorable to the
accused, either because it is exculpatory, or because it is impeaching; (2)
that evidence must have been suppressed by the State, either willfully or
inadvertently; and (3) prejudice must have ensued." United States v.
Williams, 547 F.3d 1187, 1202 (9th Cir. 2008) (internal quotation marks
omitted) (quoting Strickler v. Greene, 527 U.S. 263, 281-82, 119 S. Ct.
1936, 144 L. Ed. 2d 286 (1999)). The Defendants have the burden of establishing
the presence of these elements. United States v. Lopez,
577 F.3d 1053, 1059 (9th Cir. 2009).
1. Favorable Evidence
Under Brady,
newly discovered evidence that is favorable to the defense must be admissible,
or must be able to impeach the Government's witness. United
States v. Kohring, 637 F.3d 895, 903 (9th Cir. 2010).
a. Rusch's Alleged Fraud
Defendants
wish to introduce evidence allegedly showing that Rusch [*15] engaged in fraudulent
activities before and during trial. (Doc. 454). This
evidence is both admissible and useful for impeachment. Fed. R. Evid. 608 (allowing in extrinsic evidence on cross-examination if it is
"probative of the character for truthfulness or untruthfulness of"
the witness). Therefore, because the evidence is admissible as
impeachment material, it is favorable under Brady.
b. Rusch's Alleged
Undisclosed Benefit
Defendants
further allege that the Government has made an undisclosed agreement for
leniency with Rusch. (Doc. 458 at 7). Such evidence
would be admissible at trial and would be useful for impeaching Rusch, therefore it is favorable under Brady.
c. Trial Exhibits 51 and
52
Finally,
Defendants claim that trial exhibits 51 and 52 were forged, and thus constitute
false evidence. (Doc. 454 at 15). Such evidence is
favorable because either Gabris's testimony that he did not send the emails
would be admissible or the emails themselves might be inadmissible.
2. Suppression
The
Government must disclose any exculpatory evidence within its possession,
regardless of whether Defendants requested such evidence. Kyles
v. Whitley, 514 U.S. 419, 433, 115 S. Ct. 1555, 131 L. Ed. 2d 490 (1995)
(citing United States v. Bagley, 473 U.S. 667, 682, 105 S. Ct. 3375, 87
L. Ed. 2d 481 (1985)). This duty applies even if those "acting on
the government's behalf" have [*16]
exculpatory evidence without the prosecutor's
knowledge. Id. at 437. A prosecutor's failure
to disclose an agreement with a coconspirator in exchange for their testimony
at trial constitutes suppression under Brady. Giglio v.
United States, 405 U.S. 150, 154-55, 92 S. Ct.
763, 31 L. Ed. 2d 104 (1972).
a. Rusch's Alleged Fraud
Defendants
assert that the Government may have known of Rusch's illegal activity, and that
this information was not disclosed to Defendants. (Doc. 454
at 9-10). They claim that without an evidentiary hearing the Court
cannot know whether the Government possessed, but did not disclose, this
evidence. (Id.). If Defendants allegations are true, the suppression
element of Brady is satisfied.
b. Rusch's Alleged
Undisclosed Benefit
Furthermore,
Defendants allege that the Government made an undisclosed agreement with Rusch
to treat him with leniency after trial. (Doc. 458 at 7).
Failure to disclose agreements of leniency satisfy the
suppression prong of Brady. Therefore, if true, this allegation
establishes suppression.
c. Trial Exhibits 51 and
52
Finally,
Defendants allege that the Government may have known that trial exhibits 51 and
52 were forged, and that by not disclosing this information, the Government
violated Brady. (Doc. 454 at 15-16). Defendants
are not alleging [*17] that the Government
suppressed the exhibits, by that the evidence was forged. Therefore, this
evidence does not satisfy the suppression prong of Brady.
3. Materiality
Evidence is
material "only if there is a reasonable probability that, had the evidence
been disclosed to the defense, the result of the proceeding would have been
different." Bagley, 473 U.S. at 682. The
reasonable probability standard does not require the defendant to prove by a
preponderance of the evidence that "disclosure of the suppressed evidence
would have resulted . . . in acquittal," but merely that suppression
"undermines confidence in the outcome of the trial." Kyles, 514 U.S. at 434. The Court "may find a
'reasonable probability' even where the remaining evidence would have been
sufficient to convict the defendant." Jackson v. Brown, 513 F.3d
1057, 1071 (9th Cir. 2008) (citing Strickler v. Greene, 527 U.S. 263,
290, 119 S. Ct. 1936, 144 L. Ed. 2d 286 (1999)).
Newly
discovered impeachment evidence is merely cumulative, and does not violate Brady,
where a witness's credibility was eroded by "significant impeachment
evidence" at trial. Morris v. Ylst, 447 F.3d 735, 741 (9th Cir.
2006); accord United States v. Endicott, 869 F.2d 452, 456 (9th Cir.
1989) (holding that newly discovered impeachment evidence "does not
warrant a new trial when the evidence would not have affected the jury's
assessment of the witness' credibility and when the witness was subjected to
vigorous cross-examination.") (citing [*18] United States v. Steel, 759 F.2d
706, 714 (9th Cir. 1985)). However, "impeachment evidence . . . [is] not
'merely cumulative' where the withheld evidence was of a different character
than evidence already known to the defense." United States v. Kohring,
637 F.3d 895, 904 (9th Cir. 2010) (quoting Banks v. Dretke, 540 U.S.
668, 702-03, 124 S. Ct. 1256, 157 L. Ed. 2d 1166 (2004)).
Brady claims are
considered "collectively, but . . . [the Court] 'must first evaluate the
tendency and force of each item of suppressed evidence and then evaluate its
cumulative effect at the end of the discussion.'" Id.
at 903 (quoting Barker v. Fleming, 423 F.3d 1085, 1094 (9th Cir. 2005)).
a. Rusch's Alleged Fraud
First,
Defendants claim that Rusch engaged in fraudulent activities before and during
the trial without Defendants' knowledge. (Doc. 454 at 6-9).
Allegedly, this evidence could have been used to impeach Rusch. (Id.)
The Government argues that Rusch was already subjected to significant
impeachment evidence at trial, including Defendants: "pointing out
inconsistencies in [Rusch's] prior statements," emphasizing Rusch's
"motives as a cooperator," extracting "concessions concerning
his violations of the ethical rules and rules of professional conduct,"
using "surreptitious recordings," and calling "a legal ethics
expert." (Doc. 457 at 5). As such, the Government
claims, further impeachment evidence would be merely cumulative. (Id.).
There is no
proposed evidence [*19] indicating that any of
Rusch's activities as Reeves before or during trial were criminal in nature.
While Defendants argue that Rusch has committed a felony by practicing law as a
disbarred attorney, and has committed fraud by holding himself out as a
rehabilitated attorney, (Doc. 454 at 11), neither of these activities occurred
before or during the trial. In fact, as Defendants note, Rusch was not
prohibited from practicing law until June 21, 2013, (Id. at 6), while
the verdict in this case was rendered on April 11, 2013, (Doc. 288); (Doc. 289). There is no indication that Rusch was doing
anything more under the Reeve's pseudonym than what he was doing prior to his involvement
with Defendants: providing tax advice for U.S. citizens seeking to do business
and bank overseas. Done properly, this activity is not illegal.
Additionally,
there is nothing inherently fraudulent with using a pseudonym. Therefore, it is
not clear in what manner Defendants wish to use Rusch's activities before and
during the trial as impeachment evidence. To the extent that they wish to
reinforce his engagement with offshore tax schemes, such evidence would be
merely cumulative, as he readily admitted to this sort of [*20] activity on direct. (Doc. 331 at 1613).
To the extent
that Defendants allege that Rusch's engaged in post-trial illegal activity,
such evidence is irrelevant for Brady purposes, because the Government
did not possess, at or before trial, evidence it could suppress.
b. Rusch's Alleged
Undisclosed Benefit
Second,
Defendants allege that the Government has allowed Rusch to engage in illegal
activity without consequence as the result of an undisclosed agreement that
prompted Rusch's trial testimony. (Doc. 458 at 7). The
Government argues that "at no time was the United
States aware of Rusch's post-trial conduct except with regard to the
information provided by the U.S. Probation Department." (Doc.
460 at 2). Given that the Government did not directly deny the existence
of an agreement, it is possible that there was an agreement for leniency, even
without the Government's present awareness of Rusch's post-trial activities.
Therefore, taking this allegation as true, a material violation under Brady
has occurred. Brady. Giglio v. United States, 405 U.S. 150, 155, 92 S. Ct. 763, 31 L. Ed. 2d 104
(1972) (finding that an undisclosed agreement for leniency with an important
witness violated Brady).
However, as will be discussed below, Defendants offer no evidence that such an
agreement [*21] actually exists.
D. Brady/Napue
Two-Step Materiality
While Brady
and Napue both have their own tests, they each require materiality. If Brady
and Napue violations are both alleged, their materiality should be
considered collectively. Jackson v. Brown, 513 F.3d
1057, 1076 (9th Cir. 2008). However, because Napue's materiality
test is easier to meet, Napue violations must be considered first, as
not to "overweight" the Brady violations. Id. This
process is performed in two steps.
First, the
Court weighs the Napue violations and asks whether there is "any
reasonable likelihood that the false testimony could have affected the
judgment of the jury." Id. If the answer is yes, then reversal of
judgment is the proper remedy. Id. If not, then the Napue and Brady
violations are considered collectively. Id. Under this second test, the
Court asks whether "there is a reasonable probability that, but for [the
prosecutor's] unprofessional errors, the result of the proceeding would
have been different." Id. If the answer to this question is yes,
the remedy is generally a new trial. Id.
While both
the allegedly forged trial exhibits and the allegations regarding Rusch
engaging in fraud do not satisfy the Napue and Brady tests, the
allegation regarding an [*22] undisclosed
agreement satisfies Brady. No weight can be given to the allegations
that do not satisfy either test. Therefore, the only question in this
consideration is whether there is a reasonable probability that, but for the
undisclosed agreement, the outcome of the trial would have been different. Because
the Supreme Court has determined that the nondisclosure of an agreement for
leniency with an important witness satisfies this test, Giglio v. United
States, 405 U.S. 150, 92 S. Ct. 763, 31 L. Ed. 2d 104 (1972), materiality
under the dual Brady/Giglio test would be satisfied if
Defendants' allegations are true. Again, however, Defendants offer no evidence
that such an agreement actually exists.
III. Evidentiary Hearing
Generally,
motions for a new trial are "decided solely upon affidavits." United
States v. Colacurcio, 499 F.2d 1401, 1406 n.7 (9th Cir. 1974). However,
"[t]he decision on whether to hold a hearing or
to proceed by affidavit is within the sound discretion of the trial
court." United States v. Nace, 561 F.2d 763, 772
(9th Cir. 1977). An evidentiary hearing should only be granted if the
facts alleged, taken as true, would constitute grounds for a new trial. See
United States v. Scott, 521 F.2d 1188, 1196 (9th Cir. 1975) (finding that
the trial judge did not abuse his discretion in denying an evidentiary hearing
where "there was nothing to be gained by such a hearing.").
"Evidentiary hearings . . . are not meant to be 'fishing expeditions [*23] for . . . [Defendants]
to explore their case in search of its existence.'" Morgan v. Gonzales,
495 F.3d 1084, 1091 (9th Cir. 2007) (quoting Rich v. Calderon, 187 F.3d
1064, 1067 (9th Cir. 1999)).
Defendants
provide no affidavit to bolster their allegation that the Government has made
an undisclosed agreement with Rusch. (Doc. 454). On
the other hand, the Government does not explicitly deny Defendants'
allegations, but rather sidesteps the issue by stating that they have not
monitored Rusch's post-trial conduct. (Doc. 460 at 1-2).
The Government's statements do not preclude the existence of an undisclosed
agreement.2 However, ultimately, absent an
affidavit, Defendants do nothing more than speculate.
2
Specifically, the Government does not expressly deny that the reason it has not
monitored Rusch's post-trial activity is because of an undisclosed agreement to
not monitor him and grant him leniency in his future dealings. For purposes of
this order, the Court has interpreted the Government's statements as a denial
of having any undisclosed agreement regarding future activities with Rusch. If
the Government actually has any such agreement, and has artfully worded its
representations to not directly address Defendants' allegations, the Government
is ordered to correct the Court's interpretation immediately [*24] and the Court would
deem any failure to correct the Court's understanding to be a fraud on the
Court and a Giglio violation.
Defendants'
failure to include an affidavit does not give the Court the choice between holding
an evidentiary hearing or making a decision based upon affidavits; it leaves
only one option. Allowing an evidentiary hearing in this case would encourage
Defendants in the future, uncertain of their case for newly discovered
evidence, to fail to include affidavits in an attempt to force the Court to
allow an evidentiary hearing. The Court does not wish to create such an
incentive. Therefore, Defendants' motion for an evidentiary hearing is denied,
because on this record it would be nothing more than a fishing expedition.
Thus,
although Defendants' claim that Rusch has an ongoing, undisclosed leniency
agreement with the Government would entitle Defendants to relief, because
Defendants offer no affidavit or other evidence showing that such an agreement
exists, and the Government has effectively denied the existence of an
agreement, the Court will not hold an evidentiary hearing or grant a new trial.
Indeed, Defendants do not even suggest what witnesses they would call [*25] or what evidence they
would produce at an evidentiary hearing that would substantiate the allegation
that Rusch has an agreement with the Government beyond the plea agreement
already disclosed. Thus, the Court will not allow a fishing expedition on this
topic.
IV. Conclusion
A. Rusch's Alleged Fraud
First, this
evidence does not satisfy the Rule 33 test, because it is impeachment evidence
that does not negate an essential element of the Government's case.
Second, this
Court already determined this evidence was immaterial under Brady,
because there is no alleged evidence regarding Rusch's conduct,
both before and during trial, that would constitute more than merely cumulative
impeachment material.
Third, this
evidence was determined to not satisfy the Napue test, because there is
no allegation that this evidence resulted in false evidence or perjured
testimony being introduced at trial.
B. Rusch's Alleged
Undisclosed Benefit
First, this
evidence fails the Rule 33 test because it is impeachment evidence
which does not negate an essential element of the Government's case.
Second, this
evidence, taken as true, satisfies the Brady test, because the existence
of an undisclosed agreement is material under Brady. Giglio
v. United States, 405 U.S. 150, 154-55, 92 S.
Ct. 763, 31 L. Ed. 2d 104 (1972). However, [*26] Defendants have
offered no evidence beyond their speculation that any such agreement exists;
therefore, Defendants are not entitled to relief as to this claim.
Third, this
evidence fails the Napue test, because there is no allegation that this
evidence resulted in false evidence or perjured testimony being introduced at
trial.
C. Trial Exhibits 51 and
52
First, the
allegations regarding trial exhibits 51 and 52 being forged do not satisfy the
Rule 33 test, because there is no allegation that this evidence is newly
discovered.
Second, this
evidence does not satisfy the Brady test, because there is no allegation
that this evidence was suppressed.
Third, this
evidence does not satisfy the Napue test. This evidence was introduced
for the purpose of supporting the proposition that Rusch sent an email
containing financial statements to Quiel. For this purpose, the evidence was
not false, and thus fails to satisfy the falsity prong of the Napue
test.
Accordingly,
IT IS ORDERED that Defendants
Joint Motion for New Trial or to Dismiss and Request for an Evidentiary
Hearing, (Doc. 454), is denied.
Dated this
14th day of July, 2015.
/s/ James A.
Teilborg
James A.
Teilborg
Senior United
States District Judge