In United States vs Hickey, the 9th Circuit Court of Appeals affirms the conviction of another real estate developer who made big promises to investors but failed to deliver.  Defendants Hickey and Tang induced over 700 investors to invest over $20 million in two real estate developments.  The plan was straight forward enough – you give me money, we buy land and develop it for resale at a profit. You profit too – just trust us. As I mentioned, investors dumped money into the "development" as they often do, even in Idaho. As the Ninth notes: 

As it turned out, however, the investors were duped by false representations regarding land title, guarantees, and securitization of the funds. Forensic accounting also showed that Hickey and Tang appropriated money from the funds for personal use.

What a shock!  Real estate developers who made false representations about owning the land, "guaranteed" returns to investors and security of the investments? And then they used some of that $20 million for themselves? The scheme ultimately turned into the classic Ponzi scheme, leaving later investors empty.  OK – enough of my shock and horror. 

The interesting issue for me was the Court’s holdings concerning the use of an expert witness to testify that all of this was reasonable and the standard course of such proceedings.  He wanted to go further and testify that if Defendants had not been stopped, their efforts would have produced a return for investors. To that the Court said "NO."  Here is the part that I do so love:

To begin, loss to investors is not an element of either mail fraud or securities fraud, nor is an intent to cause loss. See United States v. Utz, 886 F.2d 1148, 1151 (9th Cir. 1989) (for mail fraud, “[i]t is enough . . . that the government charge and the jury find either that the victim was actu- ally deprived of money or property or that the defendant intended to defraud the victim of same.”) (emphasis in original); United States v. Benny, 786 F.2d 1410, 1417 (9th Cir. 1986) (actual loss is not an element of securities fraud). Although Hickey is entitled to advance the claim that he did not intend to defraud the victims, his argument misunderstands the relevant intent—“[w]hile an honest, good-faith belief in the truth of the misrepresentations may negate intent to defraud, a good-faith belief that the victim will be repaid and will sustain no loss is no defense at all.” Benny, 786 F.2d at 1417. In other words, even if Hickey genuinely believed his investment scheme would be profitable and would result in gains for his investors, he would still be guilty of securities fraud and mail fraud if he knowingly lied to investors about the risks associated with his plan.

What this means to you as an investor is simple – it is not a defense that the defendant thought ultimately his lies to others would produce profits for you and others.  It’s the lies, half-truths and omissions that make it fraud. That someone actually lost money is relevant, not the half-hearted and misguided attempt to prove the defendants "might" have made the money they promised as guaranteed returns.  

That this is a criminal case changes nothing – the basic elements of fraud (civil or criminal, securities or otherwise) are essentially the same.  This is a very important case for a plaintiff or a defendant in a civil or criminal case. These situations almost always ultimately involve both civil and criminal liability. 

So if you think you have been defrauded, or if someone (like a government agency or prosecutor) says that he or she is charging you with fraud, get some good legal help and get it quick.  Last week a guy called me to talk about a federal indictment which he claimed was "no big deal – I have been talking to the feds about this for the past year."  Another excellent idea – after you commit the fraud, spend a lot of time with the feds trying to talk your way out of it. 

No Mr. Defendant, this is no big deal alright – if you like tan jumpsuits, Club Fed accommodations, dark dank holes and lots of time to read the classics while carefully watching your cellie’s next moves!  No big deal at all – number 7651991!

No big deal either "Ms. Moneybags are now empty." Not if you don’t mind giving back everything you own and want to spend the rest of your life working to pay off that non-dischargable debt for a couple cool million dollars.

No big deal at all.

 First the disclosure – I have known John Tiemann for twenty years and when he was involved in an automobile accident several weeks ago he called me.  I represent him.  If he is ever charged with a crime as a result of the accident, I will be there beside him as his lawyer.  The accident happened on August 19th, and two equally wonderful people were killed.  John was driving his car to work at the same time James and Mary Woychick were on their way home from Mass.  They were well known and loved by the community and their deaths were tragic.  While I did not know them personally, I had seen Jim at the YMCA as I tried to learn to swim.  He slid through the water without effort.

So when I opened the Idaho Statesman this Sunday to read the report that John had tested positive for alcohol and drugs, I knew there had to be something wrong.  John had assured me that he had nothing to drink that morning, and the idea that this gentle man was under the influence of drugs was equally ridiculous.  I knew that if he had failed the field sobriety tests or the breathalyzer he would have been arrested on the scene.  He did not fail either and he was not arrested.  

So I wondered about the basis for the claim by the Statesman – their answer – the Idaho Vehicle Collision Report.  

The problem is the Report does NOT say John was positive for either alcohol or drugs.  It says that he was given a blood and urine test and that the results of NEITHER is known.  In other words – the story is false. The Report does NOT say that John Tiemann tested positive for anything. The reporter, Cathy Sewell, did not apparently understand the Report.  When it said "-U indicates Unknown" she apparently thought that meant "-U indicates he was drunk and on drugs!"

In fairness to her, the report contains a "block" for "Alcohol / Drug Involvement" that indicated both blood and urine tests had been done.  The results are not back from the lab – but I am convinced that John was not operating the car under the influence of either drugs or alcohol.

I have asked the Statesman editors to correct the story.  Some of John’s closest supporters had doubts.  Had the Statesman simply waited for the results, the truth would have been known and not misreported.  They say they want to make it right.  I hope they do. I have simply asked them to do what is right – admit you got it wrong. 

It must have been even more terrible to be in the Woychicks’ family, which has endured so much with the loss of James and Mary, to read that story on Sunday that the driver had both drugs and alcohol in his system at the time of the accident. Someone last week told me that the Woychicks’ children were trying to not hate the man who collided with their parents.  

The Statesman undoubtedly made that worse without any reason to do so. 

Like I said, I have known John Tiemann for twenty years. He says the lab results will prove he had neither drugs nor alcohol influencing his driving that terrible morning.  Even if I did not believe him I would wait to see the test results.  The Statesman should have done the same.  But I do believe him, and I want to believe the Statesman will correct the story.  

 About a year ago when I started this blog, I had to come up with information to put in the "About" tab. I have been extremely lucky in my work life to have been part of some big trials – two of the biggest are mentioned there – Ruby Ridge and Al-Hussayen. To try and give credit where it was truly deserved, I added the names of the lead counsel in each of those cases; Gerry Spence and David Nevin. 

I wondered, how long would it take "Nevinite" Scott McKay to see that section and realize that he had been "slighted" by my not having mentioned him. Scott is David Nevin’s partner and a great trial lawyer in his own right (truly). And McKay is also a Gonzaga grad with a young son who follows the "Dawgs" basketball team as they make their traditional march to the Sweet 16.  But how long would it take Scott to find the blog and then realize I had NOT named him in Al Hussayen? Answer: better than a year! But he has found me out today and I am making it right – I am proud to have assisted Nevin AND McKay in Al Hussayen, and Scott is (as I said above) a great trial lawyer.  

OK Scott – you can send me the jersey now!

 Back in June I had been asked about the seizure of data from a computer in a post which set out that most basic of problems – suspects PROVIDING their computers to the cops for use AGAINST them or their spouse. My advice then was simple – don’t do that! Why make it easier on the authorities to search the totality of a hard drive for evidence of some crime – either real or imagined?You cannot expect to complain later about the illegal images found on your computer that you have voluntarily provided to the police because that consent to search is not specific or limited. It is more like a license to find that hidden treasure you thought you had deleted – but which still resides on your hard drive.

So what about the other problem posed by the use of a warrant to obtain the data from a computer? When the government seeks a warrant to examine a computer or other electronic storage device, the NInth Circuit recently held that the magistrate judge must be vigilant in protecting the owner’s rights.  In a case entitled "In Re: Search Warrants Executed On April 8, 2004" and docketed as CV-04-02887-FMC, out of Pasadena, California, Chief Judge Kozinski pointed out the need for magistrates to safeguard the information that might be inadvertently seized when agents "examine" the contents of the hard drive.  In other words – the review of the computer is not a fishing expedition for whatever information is there.  Rather, the search must be conducted and limited by the magistrate’s finding of probable cause.

For our purposes, the decision reminds me that under our constitution, the government can not simply seize everything and then "discover" the crime. A search warrant must describe the evidence that is authorized to be seized and the search itself limited to the authority granted by the warrant.

If you have a search issue to discuss – send me an email and we can help you determine the nature and extent of the authority to search and your potential response to the examination of your private records.

 Late breaking news – although it seemed so likely that the term NEWS may not get us there – Robert Manwill’s mother Melissa Jenkins and her boyfriend Daniel Ehrlick have been charged with First Degree Murder.  First Degree Murder carries with it the possibility of the death penalty – an issue which is more complex than it seems whenever we talk about it in the abstract. Idaho law requires not only premeditation, but some other aggravating circumstance to take a killing out of the "ordinary" murder setting. So time will tell whether that is an issue – for now – check out coverage at ktvb.com and the Idaho Statesman. 

 

 Way, Way, Way off topic – my daughter and baby lawyer is in Kentucky looking for work. If you are a Kentucky lawyer and need cheap help, this might be an opportunity. Her position as a City Prosecutor ended last month as Nampa outsourced the work to a county prosecutor. The love of her life raises horses in Versailles, so she is headed out this fall to prepare and take the Kentucky bar exam. Until then, it’s another Mac loving lawyer looking for work. She can be reached here for now – unless she comes to her senses.

Now that’s off topic!

 Check out the article at law.com about the Justice Department’s search for a new lead attorney and ten new trial lawyers to fill out the fraud section.  White collar crime – including securities, bank, wire and mail fraud – is where the action is if you are a government attorney looking to make your mark in the Department. The cases are extremely complex and the targets have lots of money but white collar crime is still crime – so the lawyers involved will need to be top cop types with an interest in bringing down the greedy.

This is bad news if you find yourself at the opposing end of an indictment for a federal fraud crime. The emphasis on these cases means the government will allocate resources – men and money – to fight fraud. It is very expensive to prosecute the cases and very difficult to defend.  So if the man is after you – get ready for the fight of your life.

And they don’t always get it right! This last year I represented a man charged with financial fraud (the always popular "Ponzi" scheme) who was a VICTIM, and should never have even been charged. In the end we got it right – but his life and liberty were on the line and a loss would have meant time away from his life and wife and kids; time in the can.  You can always make more money but you never get back time spent away from your LIFE!

So – as my friend always tells me – fly right. And if you have questions about your circumstances – give me a call.

You may recall that I recently wrote about an incident involving a Boise man who was Tasered against Boise Police Department policy and the City Ombudsman’s decision that the officers had violated their policy and his rights.  He planned to sue for damages while local officials could not find a criminal charge to use against the officer.  Today we have a reminder of just how much danger a Taser may pose to each of us if not used "correctly."

The Charlotte Observer reports that city will pay the family of a 17-year-old who died after being shocked by a Taser, $625,000.  The paper reports that the officer kept pulling the Taser trigger for 37 seconds – while the boy collapsed and ultimately died.  

Power – again the power we give the police requires them to act reasonably, so says the Constitution.  

And most officers do act reasonably. But when they do not – a victim has a cause of action for the damages caused by the officer’s actions.  I know that Tasers are supposed to be safe when properly used, but the safety of the device depends on the person using it.  You know – sort of that "Tasers (guns) don’t kill people, people kill people."  Let’s hope this never happens in Boise – and that the officers we count on for protection will act reasonably.

 In an article appearing online in the Statesman it appears that DBSI president Douglas Swenson will have to answer questions under oath in the DBSI Bankruptcy case now pending.  Here is the classic dilemma – answer the questions and face the use of your testimony in an all but certain criminal case, or refuse to answer and invoke the constitutional protections afforded against self incrimination and watch the civil case wilt on the vine.  The law is difficult in such cases because DBSI has sought PROTECTION against its investors through the use of the bankruptcy courts. But should it lose the protections afforded there because its president wants to shield himself personally from a potential criminal case?

You can smell the blood in the water here – just look at some of the comments added to the Statesman story.  Many in the community have tried and condemned DBSI and its officers without having any real knowledge of what went on in the business.  And of course DBSI has added to the problem by appearing to run from its losses without giving a full accounting of what happened, under oath.

If DBSI wants the protection of the bankruptcy law, it must likely play according to the rules, but can the judge FORCE Swenson to testify under oath? I doubt it.  The remedy here may be that the bankruptcy petition is dismissed or the case converted to a liquidation, thereby depriving the company of the protection of the courts because its president cannot or will not answer the questions.

Learning point – if it looks like you are about to be charged with a crime, you only want to tell your story once. If Swenson is indicted his statements in the bankruptcy would certainly be used against him at a criminal proceeding. So why should he waive his 5th amendment rights now? 

Second learning point – when in trouble, get a good lawyer.  Swenson has Angelo Calfo – great lawyer and a great choice in this case.  We shall watch this one as it progresses. There is still that "ponzi scheme" claim underlying the entire DBSI mess.  Millions of investor dollars are gone and in today’s climate that can only lead to more scrutiny.

 Yesterday I wrote about an article in the Idaho Statesman concerning a finding by the Ombudsman that the Boise Police had gone too far when they tased a man – on the "buttocks."  Today the Statesman reports that man has hired a lawyer to file a lawsuit.  As telling – here is what the Murphy had to say:

Murphy concluded that the officer who Tased the man violated the Boise Police Department’s use-of-force policy. He said evidence showed the man was shocked once in the back before he was handcuffed, and once in the buttocks after he was cuffed, and threatened with further shocks to the anus and genitalia.

"This clearly was excessive force. It’s just not defensible. It’s very troubling," Murphy said.

The Ada County Prosecutor has declined to prosecute this case because the conduct was not, in its opinion, illegal.  Or, if it was illegal, the office does not think a jury would convict.  Isn’t that what we have juries for?  To make those decisions?  

An average citizen who pulled this crap would be prosecuted – and the smart folks at the Ada County Prosecutor’s Office seldom have difficulty in finding a charge.  How about assault, battery, aggravated assault, disturbing the peace – just for starters.  Of course the United States Attorney’s Office may still charge someone – one of these unidentified officers who still has his job.  But isn’t it a little too cozy to have our lawyers at Ada County make this call since every day they need Boise City Police Officers to testify in the cases they do prosecute?

When I was in the Army there was a new commander who noticed that the NCOs in his new unit had "staffs" or "walking sticks" they carried.  The "sticks" were not standard issue – they served only to remind the troops who had the power.  Shortly the commander announced to the unit in formation:  "On the subject of ‘walking sticks,’ if you are an NCO who NEEDS one, carry it."  His message was received and the ridiculous practice ended.  

Power does not come at the end of the stick – it comes when the people you lead respect you enough to en-power you.  

Cops do not need Tasers when they have an overweight man on the ground and under the control of two or three uniformed officers.  Using that Taser (stick) was just a reminder of who had the power – not the guy on the ground.

I only wish the Ada County Prosecutor had shown us that it understands who really has the power here – the people’s lawyers.  They represent us – you and me – especially when police officers go too far.

By the way – that 18 year veteran officer who ERASED an audio interview of the man on the receiving end of the taser understood who had the power and who might use it to prosecute a fellow officer.  Simply hit "erase" and make that evidence go away.  No crime there either?  Right – no crime.