You are on page 1of 17

Case4:94-cr-00276-PJH Document611 Filed09/16/11 Page1 of 10

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

MELINDA HAAG (CABN 132612) United States Attorney MIRANDA KANE (CABN 150630) Chief, Criminal Division JONATHAN SCHMIDT (CABN 230646) Assistant United States Attorney 450 Golden Gate Ave., Box 36055 San Francisco, California 94102 Telephone: (415) 436-7200 Fax: (415) 436-7234 E-Mail: jonathandschmidt@usdoj.gov

Attorneys for Plaintiff UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION

UNITED STATES OF AMERICA, Plaintiff, v. CONNIE ARMSTRONG, Defendant. I. INTRODUCTION

) ) ) ) ) ) ) ) ) )

No. CR 94 276 PJH UNITED STATES’ ADDITIONAL BRIEFING RE CONNIE ARMSTRONG’S § 2255 MOTION

In a July 22, 2011, Order, the Court asked for further briefing on Connie Armstrong’s § 2255 motion. There has already been extensive briefing in this case and the Court asked for succinct briefing in a specific format. In particular, the Court asked for briefing that sets forth Armstrong’s (1) claims, (2) arguments regarding procedural default or bar issues, and (3) arguments regarding the merits. II. LEGAL STANDARDS Claims are procedurally barred if they were not raised on direct appeal or if they were presented and rejected on direct appeal. “Where a defendant has procedurally defaulted a claim by failing to raise it on direct review, the claim may be raised in habeas only if the defendant can

U.S. Additional Briefing re: § 2255 Motion [CR 94 276 PJH]

1

Case4:94-cr-00276-PJH Document611 Filed09/16/11 Page2 of 10

first demonstrate either ‘cause’ and actual ‘prejudice,’ or that he is ‘actually innocent.’” Bousley 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
U.S. Additional Briefing re: § 2255 Motion [CR 94 276 PJH]

v. United States, 523 U.S. 614 (1998) (citations omitted). Armstrong does not argue actual innocence. Rather, he argues cause and prejudice. A. Cause The “cause” standard requires a petitioner to show that “some objective factor external to the defense” impeded his efforts to construct or raise the claim. Murray v. Carrier, 477 U.S. 478, 488 (1986). Such “objective impediments to compliance with a procedural rule” include a showing that the factual or legal basis for a claim was not reasonably available at the time of direct appeal or that interference by officials might have made compliance with the procedural rule impracticable or prevented the claim from being brought earlier. Murray, 477 U.S. at 488. B. Prejudice If a petitioner succeeds in showing cause, the prejudice prong of the test requires demonstrating “not merely that the errors at . . . trial created a possibility of prejudice, but that they worked to his actual and substantial disadvantage, infecting his entire trial with error of constitutional dimensions.” United States v. Braswell, 501 F.3d 1147 (9th Cir. 2007)(citing United States v. Frady, 456 U.S. 152, 170, (1982)). If a claim has no merit is does not meet the prejudice prong. III. ARMSTRONG’S FIRST ISSUE – FAILURE TO DISCLOSE A PRIOR INVESTIGATION A. Failure to Disclose a Prior Investigation The first issue raised by Armstrong is whether there was a Brady violation when the United States failed to disclose a prior investigation and outside pressure to indict and thereby hid the fact that initially the investigation was declined for lack of evidence. “The most significant Brady violation in this case arises from the government’s failure to disclose the existence of a recent, prior investigation . . . that closed upon lack of evidence of a federal crime.” Armstrong’s August 18, 2011, Brief (hereafter Brief) at 9. Armstrong’s claim is based on two documents he received after his appeal through a FOIA request. These documents are a September 23, 1988, letter from the FBI to the United States Attorney’s Office and a February 8, 1991, letter from the FBI to the United States Attorney’s

2

Case4:94-cr-00276-PJH Document611 Filed09/16/11 Page3 of 10

Office. Brief, Exhibits A and B. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
U.S. Additional Briefing re: § 2255 Motion [CR 94 276 PJH]

In the 1988 letter, the FBI confirms that the United States Attorney’s Office declined prosecution of a case involving Hamilton Taft and Company, but would reconsider its opinion if “further information could be obtained.” The letter contains no information about the substance of the allegation or the information gathered at that point. In the 1991 letter, the FBI refers a case involving Chip Armstrong and Hamilton Taft and Company to the United States Attorney’s Office for possible prosecutions. The letter details the earlier investigation, notes the United States Attorney’s Office earlier declination and provides new information of criminal activity. These two documents suggest that the United States Attorney’s Office reopened the investigation after getting this new information. According to Armstrong “[t]he prior Hamilton Taft investigation was clearly exculpatory” and “obviously implicates Brady.” Brief at 10. Armstrong also claims that the government should have disclosed the “high level of political involvement at the onset of the 1991 inquiry.” Brief at 11-12. And that the “political influence both underscores and explains the government’s reversal on the question of criminal culpability, which found no violation of federal law in 1988 but commenced a public prosecution 30 months later.” Brief at 14. Put succinctly, Armstrong asserts that there was a Brady violation because the government did not reveal and thus he could not argue that the government had declined the case in 1988 because of insufficient evidence. B. Cause Armstrong contends and the government does not dispute that he could not have raised this claim on direct appeal because he learned the information through a FOIA request after the direct appeal. C. Prejudice and Merit The failure to disclose the prior investigation was not a Brady violation. Under Brady, the prosecution violates a defendant's due process rights if it fails to turn over evidence that is “material either to guilt or to punishment.” Raly v. Ylst, 470 F.3d 792, 804 (9th Cir.2006)

3

Case4:94-cr-00276-PJH Document611 Filed09/16/11 Page4 of 10

(quoting Brady, 373 U.S. at 87) (internal quotation marks omitted). “To prevail on a Brady 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Political pressure is generally not an impermissible grounds for bringing charges. So long as the prosecutor has probable cause that a defendant committed a crime, “the decision whether or not to prosecute, and what charge to file or bring before a grand jury, generally rests entirely in [a prosecutor’s ] discretion.” Bordenkircher v. Hayes, 434 U.S. 357, 364 (1978).
U.S. Additional Briefing re: § 2255 Motion [CR 94 276 PJH]
1

claim, a defendant must demonstrate that: (1) the evidence at issue is favorable, either because it is exculpatory or because it is impeaching; (2) such evidence was suppressed by the State, either willfully or inadvertently; and (3) prejudice resulted.” Id. at 804. Armstrong argues that the failure to disclose the prior investigation was a Brady violation because it had an “exculpatory conclusion.” Brief at 11. He cites United States v. Fernandez 559 F.3d 303 (5th Cir. 2009) to support his conclusion. Brief at 10. Fernandez supports the opposite conclusion. Fernandez found that there was no Brady violation when the government failed to turn over an earlier IRS internal report that apparently closed a criminal investigation. 559 F.3d at 319. The Fernandez court discussing whether the report was exculpatory noted that “[o]ther courts have held that the subjective opinion of a non-witness agent as to the quantity or quality of evidence is not relevant to this question.” Id. (citations omitted). Here too, an earlier judgement about the quality or quantity of the evidence is not exculpatory. Moreover the earlier judgement was superseded when the FBI developed new evidence. Armstrong further suggests that the alleged political pressure to reopen the investigation is exculpatory because it explains why the government went back on its initial judgement about the insufficiency of the evidence. Armstrong does not argue that the prosecution was brought for impermissible reasons, rather Armstrong claims that the failure to disclose political pressure is significant because it would “explain[] the government’s reversal on the question of criminal culpability.” Brief at 14.1 As preliminary matter, Armstrong has failed to show that there was any political pressure to investigate or charge the case or that the alleged pressure led to a reversal of an earlier decision about the quantum of evidence. Armstrong supports his argument by pointing to an FBI memorandum, a lawsuit, a Wall Street Journal Article, and an FBI letter. Brief at 12 and

4

Case4:94-cr-00276-PJH Document611 Filed09/16/11 Page5 of 10

Exhibits D, F, G and H. These documents when read together or individually do not establish 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
U.S. Additional Briefing re: § 2255 Motion [CR 94 276 PJH]

any pressure on the FBI or the United States Attorney’s Office to investigate or prosecute Mr. Armstrong. However even if Armstrong’s theory is correct that political pressure explains the decision to reopen an investigation that earlier the government declined to prosecute, there is no exculpatory information or Brady violation. A prosecutor’s assessment early in the investigation that there was insufficient evidence is not exculpatory. There is no merit to Armstrong’s claim that the failure to disclose the earlier investigation or the alleged political pressure was a Brady violation. Hence Armstrong has failed to show prejudice. Accordingly this claim is both procedurally barred and fails on the merits. IV. ARMSTRONG’S SECOND ISSUE – FALSE STATEMENTS MADE TO OPPOSE A CONTINUANCE A. False Statement to Oppose a Continuance The second issue Armstrong raises is whether alleged false statements made by the government to oppose a continuance was fraud on the court such that the judgment should be set aside. Brief at 17. Armstrong distinguishes this issue from the issue he failed to raise on direct appeal: whether the “the trial court abused its discretion in denying a continuance to allow review of the tape.” Brief at 16. According to Armstrong, when opposing a continuance because of the late disclosure of the tape, the government falsely represented that the tapes were made as part of the Dallas, Comp-UCheck investigation and that investigation was unrelated to the San Francisco, Hamilton Taft investigation. Brief at 16 referencing Exhibit I p. 53 and Exhibit J p. 55. B. Cause Armstrong contends and the government does not dispute that he could not have raised this claim on direct appeal because he learned the information through a FOIA request after the direct appeal. C. Prejudice and Merit Armstrong argues that he was prejudiced, because had he known about the alleged false statements he would have requested and the Court would have granted a motion to set aside the

5

Case4:94-cr-00276-PJH Document611 Filed09/16/11 Page6 of 10

judgment because of fraud on the court. Brief at 17. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
U.S. Additional Briefing re: § 2255 Motion [CR 94 276 PJH]

Armstrong’s argument fails. First Armstrong cannot establish that the government lied to the Court. In a January 24, 1977, affidavit FBI SA Hatcher told the Court that the two case agents: knew of the existence of the Dallas FBI’s investigation of Armstrong’s activities at Comp-U-Check. We understood that this investigation related to conduct that occurred well after the bankruptcy of Hamilton Taft. To our knowledge this investigation was unrelated to Hamilton Taft except for the common involvement of Armstrong. Brief, Exhibit J p. 55 par 4. Armstrong argues that this statement is false because “the tapes were actually prepared by the Dallas FBI office at the express request of AUSA Yamaguchi in support of his prosecution of the instant [SF Hamilton Taft] case.” Brief at 16. Armstrong cites to Exhibit K for this assertion. Exhibit K is an August 4, 1993, communication from the San Francisco FBI office to the Dallas FBI office regarding Connie Chip Armstrong, Jr. The communication states that SA Hatcher “has obtained verbal authorization from United States Attorney, MICHAEL YAMAGUCHI for . . . confidential source to record conversations with subjects of this case.” The communication is unclear about the San Francisco United States Attorney’s office’s role in the taping. Authorizing or allowing recorded conversations is not the same as requesting recorded conversations to support a prosecution. It appears that because of the overlapping investigations, the Dallas FBI sought San Francisco’s approval before recording conversations with Armstrong. This communication does not establish that the tapes were made to support the Taft prosecution. Even assuming that the tapes were made for the Taft prosecution and some of the government statements opposing a continuance were false, there are no grounds to set aside Armstrong’s conviction because of fraud on the court. Fraud on the court is a civil concept. The cases Armstrong cites in his motions are civil cases applying Federal Rule of Civil Procedure, Rule 60(b), which allows a court to set aside a civil judgement for fraud on the court. This civil remedy cannot be used to collaterally attack a criminal conviction. The Federal Rules of Civil Procedure, by their own terms, apply only to

6

Case4:94-cr-00276-PJH Document611 Filed09/16/11 Page7 of 10

civil actions. See Fed.R.Civ.P. 1 (stating that “these rules govern the procedure . . . in all suits 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
U.S. Additional Briefing re: § 2255 Motion [CR 94 276 PJH]

of a civil nature”). The few circuits that have addressed the question have found that a defendant may not bring an action for fraud upon the court to collaterally attack a criminal conviction. See United States v. O'Keefe, 169 F.3d 281, 285 (5th Cir.1999) (noting that Supreme Court precedent “certainly does not require or contemplate that Rule 60(b)(6) [for fraud upon the court] . . . be applied in criminal cases”); United States v. Mosavi, 138 F.3d 1365, 1366 (11th Cir.1998) (“We hold that the defendant cannot challenge the criminal forfeiture orders at issue under the Federal Rules of Civil Procedure . . . Rule 60(b) simply does not provide for relief from judgment in a criminal case . . . ”). Even if one could collaterally attack a criminal conviction based on fraud on the court, here there was no fraud on the court. In re Levander, 180 F.3d 1114 (9th Cir. 1999) the Ninth Circuit explained that not all fraud is fraud on the court: A court must exercise its inherent powers with restraint and discretion in light of their potency. Although the term “fraud on the court” remains a “nebulous concept,” that phrase “should be read narrowly, in the interest of preserving the finality of judgments.” Simply put, not all fraud is fraud on the court. To constitute fraud on the court, the alleged misconduct must “harm[ ] the integrity of the judicial process.” To determine whether there has been fraud on the court, this circuit and others apply Professor Moore's definition: “Fraud upon the court” should, we believe, embrace only that species of fraud which does or attempts to, defile the court itself, or is a fraud perpetrated by officers of the court so that the judicial machinery can not perform in the usual manner its impartial task of adjudging cases that are presented for adjudication. At 1119 (internal citations omitted). Here, the alleged falsehood did not rise to this level. The issue of whether the tapes were made for the San Francisco or Dallas investigation, while noted by the trial court, was tangential to its decision regarding the continuance. The trial court’s analysis of whether to grant a continuance was primarily based on the fact that the government was not offering the tapes into evidence. The trial court explained: “[w]e’re not talking about evidence that the government or that the defense is going to be presented with having been put on by the government. So I think we’re down to really a Brady question.” See Reporter’s Transcript, January 29, 2007, hearing pp. 3736-3742, at 3740, attached as Exhibit 1. The Brady question referenced by the trial court had to do with the contents of the tape not the impetus for their creation, and so the court

7

Case4:94-cr-00276-PJH Document611 Filed09/16/11 Page8 of 10

suggested appointing a special master to review the tapes. Id. at 3742. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Thus whether the tapes were made in connection to the San Francisco or Dallas investigation was of little relevance to the trial court’s continuance decision and to the trial as a whole. And, even if fraud on the court applied in a criminal context, here there was no fraud on the court. There is no merit to Armstrong’s claim that the conviction should be set aside because of the alleged false statements to obtain a continuance was fraud on the court. Hence Armstrong has failed to show prejudice. Accordingly this claim is both procedurally barred and fails on the merits. V. ARMSTRONG’S THIRD ISSUE – THE GOVERNMENT’S FAILURE TO DISCLOSE ITS MATERIAL PARTICIPATION IN A COLLATERAL PROCEEDING A. Failure to Disclose Material Participation in a Collateral Proceeding The third issue raised by Armstrong is “the government’s failure to disclose its material participation in a collateral proceeding.” Brief at 18. According to Armstrong, the failure to disclose the government’s participation in the bankruptcy proceeding prevented him from arguing collateral estoppel “to preclude the government’s ability to argue a legal theory in his criminal trial.” Brief at 18. Armstrong distinguishes this issue from the law of the case issue, which was raised and rejected on direct appeal. Brief at 17. Armstrong argues that the government took contrary legal positions in the bankruptcy proceeding and the criminal proceeding – arguing that the money was the property of Hamilton Taft in the bankruptcy proceeding and arguing that the money was the property of Hamilton Taft’s clients in the criminal proceeding. Brief at 19. Armstrong further states that because of the “close alignment between the prosecution team and the bankruptcy team . . . the two are in privity for purposes of collateral estoppel.” Brief at 21. Armstrong concludes that had he known of this close alignment he could have argued that the government was bound by the holding in In re Hamilton Taft & Co., 53 F.3d 285 (1995) that the property was “not held in trust and was the property of Armstrong’s company.” Brief at 19. B Cause Armstrong contends and the government does not dispute that he could not have raised this claim on direct appeal because he learned the information through a FOIA request after the
U.S. Additional Briefing re: § 2255 Motion [CR 94 276 PJH]

8

Case4:94-cr-00276-PJH Document611 Filed09/16/11 Page9 of 10

direct appeal. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
U.S. Additional Briefing re: § 2255 Motion [CR 94 276 PJH]

C. Prejudice and Merit Armstrong’s arguments fail because he could not have argued collateral estoppel in the criminal proceeding. Collateral estoppel applies to preclude an issue adjudicated in an earlier proceeding if: (1) the issue was necessarily decided at the previous proceeding and is identical to the one which is sought to be relitigated; (2) the first proceeding ended with a final judgment on the merits; and (3) the party against whom collateral estoppel is asserted was a party or in privity with a party at the first proceeding. Reyn's Pasta Bella, LLC v. Visa USA, Inc,. 442 F.3d 741 (9th Cir.2006). Armstrong cannot meet any of these conditions. First, the issue decided in the bankruptcy proceeding was not identical to one in the criminal proceeding. The issue In re Hamilton Taft was whether the funds used to pay the IRS were property of the debtor under 11 U.S.C. § 547(b). See 53 F.3d 285, 287. The issue in the criminal trial was whether the funds, whether property of the debtor or not, were also client funds. As the Ninth Circuit noted in Armstrong’s direct appeal, the holding “in In re Hamilton Taft that Hamilton Taft does not hold client funds in trust for the IRS-is inapplicable to the issue of what obligations existed between the company and its clients.” United States v. C. Armstrong, 216 F.3d 1084, * 1 Ftnt 2 (9th Cir. 2000) (emphasis in original). Second there was no final judgement on the merits. As Armstrong acknowledges the decision In re Hamilton Taft & Co. was vacated. Brief at 23, see also United States v. C. Armstrong, 216 F.3d 1084,* 1 Ftnt 2 (9th Cir. 2000) (“In re Hamilton Taft has been vacated as moot, and thus is no longer binding precedent”). Citing Bancorp Mortgage Company v. Bonner Mall Partnership, 513 U.S. 18 (1994) Armstrong argues that the Ninth Circuit lacked the power to vacate its own opinion. Brief at 23. Bonner Mall is not on point. The issue in Bonner Mall was whether an appellate court can vacate a judgement brought before it for review under 28 U.S.C. § 2106. Here the Ninth Circuit vacated its own opinion, not a lower court decision brought before it for review. See In re Hamilton Taft & Co., 53 F.3d 285 (9th Cir.1995), opinion vacated, 68 F.3d 337 (9th

9

Case4:94-cr-00276-PJH Document611 Filed09/16/11 Page10 of 10

Cir.1995). Hence Bonner Mall does not apply. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
U.S. Additional Briefing re: § 2255 Motion [CR 94 276 PJH]

Third, Armstrong had not established that the government and the bankruptcy trustee were t a party in privity. A privity finding “necessitates a showing that control was exercised over the litigation by the party alleged to be in privity.” Troy Co. v. Prods. Research Co., 339 F.2d 364, 367 (9th Cir.1964). Privity “is a legal conclusion designating a person so identified in interest with a party to former litigation that he represents precisely the same right in respect to the subject matter involved.” United States v. Schimmels, 127 F.3d 875, 881(9th Cir.1997) (citations and internal quotations omitted). Even if Armstrong’s allegation that the government and the bankruptcy trustee had a “close alignment,” is correct (Brief at 21), this does not establish that the government controlled the litigation in the bankruptcy proceeding. See United States v. Bhatia, 545 F.3d 757 (9th Cir 2008) (There was no privity between United States and borrower in borrower's prior civil breach of contract suit against lender, and thus borrower's dismissal of suit with prejudice did not bar, under doctrines of res judicata or collateral estoppel, lender's prosecution for wire fraud and money laundering arising from same facts, even if fruits of government's parallel criminal investigation of lender may have aided borrower). There is no merit to Armstrong’s claim that had he known about the alleged close alignment between the government and the bankruptcy trustee he could have precluded the government from arguing at trial that the Hamilton Taft funds were client funds. Hence Armstrong has failed to show prejudice. Accordingly this claim is both procedurally barred and fails on the merits. VI. CONCLUSION Armstrong’s §2255 motion should be denied because (a) he cannot establish prejudice and (2) his claims lack merit. DATED: September 16, 2011 Respectfully submitted, MELINDA HAAG United States Attorney _______/s/_________________________ JONATHAN SCHMIDT Assistant United States Attorney

10

Case4:94-cr-00276-PJH Document611-1 Filed09/16/11 Page1 of 7

Case4:94-cr-00276-PJH Document611-1 Filed09/16/11 Page2 of 7

Case4:94-cr-00276-PJH Document611-1 Filed09/16/11 Page3 of 7

Case4:94-cr-00276-PJH Document611-1 Filed09/16/11 Page4 of 7

Case4:94-cr-00276-PJH Document611-1 Filed09/16/11 Page5 of 7

Case4:94-cr-00276-PJH Document611-1 Filed09/16/11 Page6 of 7

Case4:94-cr-00276-PJH Document611-1 Filed09/16/11 Page7 of 7