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
2016 U.S. Dist. LEXIS 95897
July 22, 2016, Decided
July 22, 2016, 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, newly discovered, impeachment evidence,
materiality, email, cumulative, leniency, newly, discovered evidence,
suppression, suppressed, forged, new evidence, false evidence, diligence,
favorable, illegal activity, fraudulent, admissible, disclose, reasonable
probability, impeaching, falsity, prong, essential element, cross-examination,
prosecutor's, post-trial
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
On July 14,
2015, this Court issued an Order denying Defendant Kerr's and Defendant Quiel's
(Defendants) motion for new trial. Defendants appealed that Order. Defendants
now ask this Court to accept remand from the Court of Appeals to consider what
Defendants claim is even more evidence in support of the previous motion for
new trial (which itself was supplemented). The Court's prior Order stated as
follows:1
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 [*2] 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 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 [*3] 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.
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 [*4] 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 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 [*5] 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). 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 [*6]
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 entitle them to a new trial
under Brady, this evidence is properly considered under Napue v.
Illinois, because the evidence was not suppressed.2 [footnote
numbered 1 in the original order] 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)).
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 presume that their allegations are true.
A. Rule 33
New Trial Test
Under Rule
33, a defendant may "move for a [*7] 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) (Fletcher,
J., dissenting).
a. Rusch's
Alleged Fraud and Rusch's Alleged Undisclosed Benefit
[*8] 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 was made, the Court cannot find a
concrete allegation that the evidence is newly discovered. [*9] 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 defendant would
not be expected to discover this evidence. Accordingly, Defendants' [*10] 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, 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 [*11] 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
impermissibly controls a foreign company through a nominee without paying taxes
on funds held [*12] 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 evidence was admitted. (Id.).
Defendants do
not contend that they were never forwarded the emails [*13] 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 false.
2. Knowledge
and Materiality
Because
Defendants fail to show that any of the allegedly newly [*14] 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 engaged in fraudulent
activities before and during trial. (Doc. 454). This evidence is both
admissible [*15] 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 exculpatory evidence without the prosecutor's knowledge. Id.
at 437. A prosecutor's failure to disclose an agreement [*16] 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 that
the Government suppressed the exhibits, by that the evidence was forged.
Therefore, this evidence does [*17]
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 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 [*18] 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 indicating that any of Rusch's activities as Reeves before or
during trial were criminal in nature. While [*19] 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 activity on
direct. (Doc. 331 at 1613). To the extent that Defendants allege that Rusch's
engaged in posttrial [*20]
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 actually
exists.
D. Brady/Napue
Two-Step Materiality
While Brady
and Napue both have their own tests, they each [*21] 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 undisclosed agreement satisfies Brady. No weight
can be given to the allegations that do not satisfy either test. [*22] 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 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 [*23] 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.3 [footnote numbered 2 in the original order]
However, ultimately, absent an affidavit, Defendants do nothing more than
speculate.
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 [*24] 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 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 [*25] 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,
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 [*26] 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.
Doc. 463.
1 The Court
acknowledges that block quoting a 17-page Order is generally unnecessary.
However, Defendants' currently pending request to accept remand retreads so
much of the exact same ground, the totality of the prior order is relevant.
2 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.
3
Specifically, the Government does not expressly deny that the reason it has not
monitored Rusch's post-trial activity is because [*27] 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 and the Court
would deem any failure to correct the Court's understanding to be a fraud on
the Court and a Giglio violation.
In their
currently pending motion, Defendants seek remand for the Court to consider
"new evidence and new argument." Doc. 471 at 9. Defendants recount
the legal standard for receiving a new trial under Rule 33, Napue, and Brady.
Id. at 10-12. However, Defendants fail to argue which (if any) of these
tests their "new evidence" falls under. Nonetheless, the Court will
consider the evidence under all 3 tests.
Defendants'
first piece of "new evidence" is the affidavit of Jerome Perucchi
that was signed on June 4, 2015, as part of a civil lawsuit with Defendant
Quiel. Id. at 12. As stated above, this Court issued its prior Order [*28] denying new trial on July 14, 2015;
thus, the affidavit is not "newly discovered" for purposes of remand
and could have been filed with the prior motion. Additionally, it fails to fall
within the time limits of Rule 33.4 As for Napue and Brady,
it does not appear the government ever had access to Mr. Perucchi or his
testimony; therefore Defendants have failed to show any knowledge on the part
of the government. Accordingly, remand to consider this evidence is denied.5
4 If the
Court of Appeals remands this case at some point in the future, it is now more
than three years since the April 11, 2013 verdict.
5 Moreover,
the Court has reviewed the affidavit (Doc. 471-2 at 2-5) and none of the
allegations made by Defendants in their motion (specifically that Defendant
Rusch forged Mr. Perucchi's signature) are in Mr. Perucchi's affidavit. Thus,
Defendants have no admissible evidence in support of their allegations against
Mr. Rusch.
Defendants'
second piece of "new evidence" is further evidence that Defendant
Rusch (acting under a pseudonym) is continuing to engage in the behavior that
was the crime in Defendants' trial. Id. at 12-14. Even if Mr. Rusch is
committing on-going, future criminal behavior, such behavior [*29] would not satisfy Rule 33, Napue,
or Brady for purposes of Defendants being entitled to a new trial.
Further, there is no evidence that the government has a secret immunity
agreement with Mr. Rusch; and indeed the Government has now twice (Docs. 464
and 472) expressly denied the existence of any such agreement. Accordingly,
remand to consider this evidence is denied.
Because the
Court has addressed the only allegedly "new" evidence identified by
Defendants and has denied remand to consider such evidence,
IT IS ORDERED that the
Motion to Accept Remand to Consider New Evidence for a New Trial (Doc. 471) is
denied.
Dated this
22nd day of July, 2016.
/s/ James A.
Teilborg
James A.
Teilborg
Senior United
States District Judge