United States v. Daryl G. Bank

965 F.3d 287

UNITED STATES of America, Plaintiff - Appellee,

v.Daryl G. BANK, Defendant - Appellant.

No. 19-4356

United States Court of Appeals, Fourth Circuit.

Argued: April 30, 2020

Decided: July 14, 2020

ARGUED: James O. Broccoletti, ZOBY & BROCCOLETTI, PC, Norfolk, Virginia, for Appellant. Andrew Curtis Bosse, OFFICE OF THE UNITED STATES ATTORNEY, Norfolk, Virginia, for Appellee. ON BRIEF: G. Zachary Terwilliger, United States Attorney, Alexandria, Virginia, Melissa E. O'Boyle, Assistant United States Attorney, Elizabeth M. Yusi, Assistant United States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Norfolk, Virginia, for Appellee.

Before GREGORY, Chief Judge, and DIAZ and THACKER, Circuit Judges.

Affirmed by published opinion. Judge Thacker wrote the opinion, in which Chief Judge Gregory joined. Judge Diaz wrote an opinion concurring in the judgment.

THACKER, Circuit Judge:

This appeal presents the purely legal issue of whether disgorgement ordered in a civil Securities and Exchange Commission ("SEC") proceeding constitutes a "criminal penalty" for purposes of the Double Jeopardy Clause, such that an individual cannot be later prosecuted for the conduct underlying the disgorgement.

In April 2015, the SEC initiated enforcement proceedings in the District of Arizona against Daryl G. Bank ("Appellant") for illegitimate investment activities. In 2017, Appellant entered into a consent agreement with the SEC, and the United States District Court for the District of Arizona ultimately held Appellant liable for disgorgement in the amount of $4,494,900.

Shortly thereafter, a grand jury in the Eastern District of Virginia returned an indictment charging Appellant with, inter alia, securities fraud and unlawful sale of securities, based in part on the same conduct underlying the SEC proceeding. Appellant filed a motion to dismiss the indictment, arguing that, pursuant to the Double Jeopardy Clause, he could not be prosecuted for that conduct, as he had already been punished for it. The district court denied the motion.

We join with every other circuit to have decided the issue in holding that disgorgement in an SEC proceeding is not a criminal penalty pursuant to the Double Jeopardy Clause. Therefore, we affirm.

I.

On April 6, 2015, the SEC initiated a civil enforcement action against Appellant and others in the United States District Court for the District of Arizona (the "SEC Action"). The complaint alleged, inter alia, that Appellant, through fundraising entities that he owned and operated, offered and sold securities "purporting to raise funds to apply for F[ederal] C[ommunications] C[ommission] licenses." J.A. 21.¹ According to the complaint, Appellant and others misled investors, assuring them their investment would yield high returns when they sold the Federal Communications Commission licenses to major cellular wireless carriers such as Sprint, but in reality, Appellant and his cohorts knew, or should have known, the licenses could never be sold or leased to any major wireless carriers. See id.

In January 2017, Appellant entered into an agreement with the SEC (the "Consent Agreement"), consenting to judgment being entered against him "[w]ithout admitting or denying the allegations of the [SEC] complaint." J.A. 135. The Consent Agreement also contained a clause stating that Appellant "waives any claim of Double Jeopardy based upon the settlement of this proceeding, including the imposition of any remedy or civil penalty herein." Id. at 137.

On February 7, 2018, the United States District Court for the District of Arizona entered a final judgment against Appellant in the SEC Action, holding Appellant civilly liable for a disgorgement of $4,494,900, representing profits gained as a result of the conduct alleged in the SEC complaint; pre-judgment interest in the amount of $802,553; and a civil penalty of $4,494,900, all pursuant to 15 U.S.C. §§ 77t(d), 78u(d)(3). See J.A. 148. Three months later, on May 25, 2018, a grand jury in the Eastern District of Virginia returned the operative second superseding indictment² against Appellant and his codefendants, charging 28 counts of mail fraud, wire fraud, and violations of securities laws.

Appellant filed a motion to dismiss the second superseding indictment. He argued that a recent Supreme Court case, Kokesh v. Securities and Exchange Commission , ––– U.S. ––––, 137 S. Ct. 1635, 1639, 198 L.Ed.2d 86 (2017), which held that disgorgement is a "penalty" for purposes of a statute of limitations, rendered his disgorgement a "criminal sanction" for purposes of the Double Jeopardy Clause. J.A. 110. The Government responded that Kokesh did not address the precise issue at hand, and in any event, Appellant waived his ability to challenge the indictment by agreeing to the Consent Agreement's waiver clause in the SEC Action.

The district court denied the motion to dismiss. It first concluded the evidence was insufficient to demonstrate that Appellant relinquished a known right in agreeing to the waiver clause in the Consent Agreement. The district court then held Appellant's disgorgement in the SEC Action did not bar subsequent criminal prosecution for purposes of the Double Jeopardy Clause.

Appellant filed a timely notice of appeal, and we possess jurisdiction pursuant to 28 U.S.C. § 1291 and the collateral order doctrine. See Abney v. United States , 431 U.S. 651, 662, 97 S.Ct. 2034, 52 L.Ed.2d 651 (1977) (concluding, pursuant to the collateral order doctrine, "the courts of appeals may exercise jurisdiction over an appeal from a pretrial order denying a motion to dismiss an indictment on double jeopardy grounds").

II.

We review de novo whether a waiver of one's constitutional rights is valid. See United States v. Robinson , 744 F.3d 293, 298 (4th Cir. 2014). We also review de novo questions concerning the Double Jeopardy Clause. See United States v. Schnittker , 807 F.3d 77, 81 (4th Cir. 2015).

III.

A.Waiver

The Government contends that Appellant, in signing the Consent Agreement in the SEC Action, effected a knowing and intelligent waiver of his right to contest a future prosecution on Double Jeopardy grounds. The Consent Agreement provided the following:

Consistent with 17 C.F.R. § 202.5(f), this Consent resolves only the claims asserted against Defendant in this civil proceeding. Defendant acknowledges that no promise or representation has been made by the SEC ... with regard to any criminal liability that may have arisen or may arise from the facts underlying this action or immunity from any such criminal liability. Defendant waives any claim of Double Jeopardy based upon the settlement of this proceeding, including the imposition of any remedy or civil penalty herein.

J.A. 137 (emphasis supplied).

Defendants are permitted to waive their constitutional right to assert a Double Jeopardy claim. See Menna v. New York , 423 U.S. 61, 62–63 n.2, 96 S.Ct. 241, 46 L.Ed.2d 195 (1975) (per curiam). However, "[a] waiver is ordinarily an intentional relinquishment or abandonment of a known right or privilege," and courts should "indulge every reasonable presumption against waiver of fundamental constitutional rights," rather than "presume acquiescence in the loss" of such rights. Johnson v. Zerbst , 304 U.S. 458, 464, 58 S.Ct. 1019, 82 L.Ed. 1461 (1938) (internal quotation marks omitted); see also United States v. Morgan , 51 F.3d 1105, 1110 (2d Cir. 1995) ("In examining a purported waiver of the double jeopardy right, we must draw all reasonable presumptions against the loss of such a right."). Moreover, the language of the waiver must be "crystal clear." United States v. Van Waeyenberghe , 481 F.3d 951, 957 (7th Cir. 2007) (declining to decide Double Jeopardy challenge based on waiver alone, where "the language [in the waiver] does not specifically bar double jeopardy claims in future criminal proceedings" (emphasis in original)).

Like the district court, we decline to rely on waiver to dispose of this matter. To begin, here, the waiver does not specifically bar double jeopardy claims in future proceedings, or in criminal proceedings. See Van Waeyenberghe , 481 F.3d at 957. Moreover, the waiver clause in the Consent Agreement purports to waive a challenge to "the imposition of any remedy or civil penalty." J.A. 137. At the time Appellant signed the Consent Agreement, the Supreme Court had not considered disgorgement to be a penalty. But as explained further below, Kokesh did just that. Thus, what Appellant's waiver represented at the time of the Consent Agreement changed after Kokesh . For these reasons, and because we draw all reasonable presumptions against a waiver of one's constitutional rights, we decline to rely on the waiver in the Consent Agreement in disposing of this appeal.

B.Disgorgement as a Civil or Criminal Penalty

Appellant argues he "was subjected to the penalty of disgorgement of millions of dollars for violations of securities laws. The government now seeks to punish him again for the very same conduct. This is the very essence of Double Jeopardy." Appellant's Br. 13 (citations omitted).

The Double Jeopardy Clause provides that no person "shall be ... subject for the same offence to be twice put in jeopardy of life or limb." U.S. Const. amend. V. It "prohibits successive governmental criminal prosecutions and successive governmental punishments for the same conduct." Jones v. Secs. & Exch. Comm'n , 115 F.3d 1173, 1183 (4th Cir. 1997) (emphasis supplied). However, the doctrine "does not prohibit the imposition of all additional sanctions that could, in common parlance, be described as punishment. [It] protects only against the imposition of multiple criminal punishments for the same offense." Hudson v. United States , 522 U.S. 93, 98–99, 118 S.Ct. 488, 139 L.Ed.2d 450 (1997) (emphasis in original) (alterations, citations, and internal quotation marks omitted). See also Breed v. Jones , 421 U.S. 519, 528, 95 S.Ct. 1779, 44 L.Ed.2d 346 (1975) ("In the constitutional sense,...