U.S.A v. Struckman

611 F.3d 560

UNITED STATES of America, Plaintiff-Appellee,v.David STRUCKMAN, Defendant-Appellant.

No. 08-30312.

United States Court of Appeals Ninth Circuit.

Argued and Submitted July 7, 2009.

Filed June 29, 2010.

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Robert G. Bernhoft, The Bernhoft Law Firm, S.C., Milwaukee, WI, for the defendant-appellant.

John Dicicco, Alan Hechtkopf, and Gregory Victor Davis, United States Department of Justice, Washington, D.C., for the plaintiff-appellee.

Appeal from the United States District Court for the Western District of Washington, Robert M. Takasugi, District Judge, Presiding. D.C. No. 2:04-CR-00229-RMT.

Before DIARMUID F. O'SCANNLAIN, ANDREW J. KLEINFELD and MARSHA S. BERZON, Circuit Judges.

BERZON, Circuit Judge:

David Struckman was indicted for massive tax fraud and was hiding out in Panama. United States agents helped arrange his expulsion from his chosen sanctuary, and he was handed over to federal officials for prosecution. Struckman maintains that the government's conduct, both in bringing him from abroad to stand trial in the United States and in its criminal investigation of him, warrants dismissal of the indictment with prejudice. In a painstakingly careful 83-page pretrial order, District Court Judge Takasugi ¹ determined that the government had engaged in misconduct with regard to the investigation but not the expulsion from Panama. The District Court suppressed a great deal of evidence as a result of its finding of misconduct but ruled that dismissal of the indictment against Struckman was not an appropriate remedy. We agree that the broad suppression of evidence before trial was an adequate remedy for the misconduct found, disturbing as some of it was, and therefore affirm.

I.

David Struckman was indicted in the Western District of Washington on May 11, 2004, for conspiracy to defraud the United States in violation of 18 U.S.C. § 371. The U.S. government later issued a superseding indictment, adding nine counts of tax evasion under 26 U.S.C. § 7201.

The superseding indictment alleged that Struckman was a co-founder of an organization called the Institute of Global Prosperity. From 1996 to 2002, Global Prosperity offered, for a fee and through middlemen called “Qualified Retailers,” an audiotape/CD series and seminars. These products advocated the use of illegal means to avoid paying income tax, including “voluntary withdrawal” from the United States' jurisdiction and the placement of assets in purported foreign or common law trusts without relinquishing control of them. The indictment alleged that Struckman purchased bogus trusts and fraudulently established bank accounts to receive profit distributions from Global Prosperity's more than $40 million in gross receipts, and that Global Prosperity and Struckman never reported these distributions to the Internal Revenue Service (“IRS”) as income.

At some point, Struckman, a U.S. citizen, went to the Republic of Panama on a tourist visa and stayed. The U.S. government vigorously sought Struckman's return to the United States to stand trial.

Before trial, Struckman filed motions to dismiss the indictment based on alleged due process violations or the district court's supervisory powers. The motions focused on asserted illegalities and misconduct during the government's efforts to secure his return from Panama but also relied on alleged misconduct during the criminal investigation in the United States. The district court held an evidentiary hearing on the motions and issued extensive factual findings, none of which is contested by the government on appeal. We begin by describing in detail the government's conduct as found by the district court.

A. Struckman's Departure from Panama

After Struckman went to Panama, U.S. government officials developed a plan for his return. Timothy O'Brien, at that time the regional security officer at the U.S. Embassy in Panama City, Panama, was the central person involved in the efforts to bring Struckman back to the United States for trial. In a 2004 e-mail to a Department of Justice (“DOJ”) trial attorney, O'Brien summed up the plan that had been developed:

What we're hoping to do is find [Struckman] and have him deported vice [sic] going the provisional arrest warrant route. The reasons for this are simple-a [provisional arrest warrant] will mean that extradition proceedings begin.... ² There's a Section of the [Code of Federal Regulations] ... that allows the [U.S. government] to revoke a passport of an individual who is the subject of an outstanding Federal Felony arrest warrant-which Struckman has. We know he's got a U.S. [passport], and if we revoke it he's undocumented. Which means he's immediately deportable.

There's also the possibility that the Panamanians can decide he's an undesirable and revoke his visa .... We just had a meeting with the Panamanian National Police ..., and provided information that we hope will assist them in finding him....

On August 25, 2004, Panama's National Director for Immigration and Naturalization (“the Director”) issued two resolutions regarding Struckman's immigration status. One resolution denied Struckman's pending request to obtain an immigrant visa. It stated that the Panamanian government had considered a “note” it received from the U.S. District Court regarding the charge for conspiracy to defraud the United States.³ The resolution gave Struckman thirty days to leave the country.

The companion resolution stated that Struckman was “wanted by the judicial authorities of the United States of America, in virtue of the fact that he ha [d] a warrant for his arrest pending for federal charges, being, as a result, a fugitive from United States justice.” Relying on Panamanian Law No. 16 of June 30, 1960, Article 37, the resolution stated that “[i]mmigration to the country of a foreign national is prohibited ... [for] all persons with criminal records, such as fugitives and those sentenced or defendant in common crimes.” The resolution ordered the arrest of Struckman “for reasons of security and public order.”

On June 23, 2005, O'Brien sent an e-mail to IRS Special Agent Michael D. Hardaway about how quickly Struckman could be obtained from Panama. He noted that Struckman “may be able to get a lawyer to slow things down (but that's a big reason we want to move quickly if we nab him-we don't want to give him that chance, especially with that much money available to him).” In a letter later that summer to Panamanian officials, O'Brien stated that Struckman was charged with “defrauding investors of over $50 million” and that he was attempting to perpetrate the “same kind of fraud scheme that he used with such success in the U.S.” in Panama. O'Brien had no factual basis for making this statement.

Shortly before Struckman was arrested by Panamanian authorities, O'Brien discussed the plan for the “expulsion” of Struckman with a DOJ trial attorney via e-mail. He stated that “[w]hat we have set up, and still in place, is a [passport] revocation letter to be served on Struckman whenever he gets arrested” and that “[w]e also have a deportation/expulsion letter from Panamanian Immigration ready to go.” As to the delay, O'Brien noted that the plan had been “in place for a while, it's just putting the habeas grabbus on [Struckman] that's holding up executing everything.”

On January 11, 2006, the Panamanian National Police contacted O'Brien to report that police officers had arrested a man who might be David Struckman. O'Brien responded that Struckman “[had been] sentenced and at this moment is a fugitive of the federal authorities and is [awaiting] to serve his sentence.” The statement was clearly not true; Struckman had not yet been tried.

As planned, that same day, the U.S. Department of State revoked Struckman's passport and a Panamanian arrest order issued for Struckman's failure to “maintain[ ] his legal documents in the national territory.” Struckman's counsel in Panama immediately filed a habeas corpus lawsuit in Panamanian court.

The following day, O'Brien sent a fax to Mark Odulio, a federal prosecutor involved in the Struckman case. He informed Odulio that “[a] lawyer for Struckman came sniffing around police [headquarters] this morning, the race has begun[.][T]he P[anamanian] N[ational] P[olice] ha[ve] turned Struckman over to immigration, so they'll refer the lawyer to them some time today.” One day later, the district court found, “Struckman was deported from Panama.”

Panama's Supreme Court of Justice issued an opinion in Struckman's habeas case several months after Struckman was removed from the country. The opinion set forth information from the Director, including that Struckman's “ deportation from the national territory [was] made effective on January 13, 2006.” (Emphasis in original.) The Panamanian Court held that it could “not pronounce regarding the legality of [Struckman's] arrest ... because [Struckman was then] outside the jurisdiction of Panama, due to the fact that he was deported in compliance” with a 2004 resolution providing for such measures.

B. The U.S. Government's Investigation of Struckman

The IRS's criminal investigation of Struckman dates at least to 2000. Struckman's claims of government investigatory misconduct focus on the actions of two IRS Special Agents, Keith L. Chinn and Michael D. Hardaway (the latter mentioned earlier in connection with Struckman's transfer from Panama), as discussed below.

(1) Confidential informant “Ted”

Chinn was assigned in 2000 “to do some background information on” Struckman for an investigation of the Global Prosperity program. He made rough notes in September of that year about a meeting with an anonymous informant he designated “Ted.” Chinn's notes indicate that “Ted” divulged personal information about Struckman, including addresses, marital history, a bank account number used by Struckman or his daughters, and other information about Struckman's...