White-Collar Crime

'Politics Is a Form of Violence'

The government shows no mercy with its pound of flesh, and that's a big problem.

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bonus-money-unhappy-sad-associate-300x199-2Here’s rare language in a D.C. Circuit opinion:

There is something very wrong with this picture — so wrong Stevie Wonder could see the flaw from a phone booth in Chicago. The fact that the government cannot is deeply disturbing.

The quote is from Judge Brown. I have to admit, I’m not really sure what it means. I mean, I get that it means that it’s really obvious that what happened is wrong. I just don’t know why. Clearly, Stevie Wonder is blind. But are Chicago phone booths so notoriously dirty so that they’re known as hard to see out of? Is it the distance from Washington, D.C. that makes Chicago relevant as a locus of opacity?

In any event, this case from the D.C. Circuit — United States v. Hughes — is a very nice example of one deeply messed up thing in our current federal system.

Hughes worked at Blackhawk, a government contractor. Blackhawk told her to falsify some records and she dutifully did. She was prosecuted, Blackhawk was not, but was fined $1 million. Hughes was ordered to pay about $400,000 in restitution.

The district court was of the opinion that Blackhawk should pay most of the money in restitution since it’s the entity that actually made the money from Hughes’ conduct — sort of an ad hoc indemnification via a fine.

Accordingly, at sentencing the district court told Hughes she wouldn’t be on the hook if Blackhawk paid the fine, but ordered the restitution anyway, probably because it was required to by statute.

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Hughes got out of prison. She started making $50 payments toward her restitution judgment. She had no money, and was in danger of losing her home to foreclosure. She did what she could.

The Department of Justice, showing the kind of nuance that only it can, referred the restitution award to the Treasury to collect from Hughes’s tax refunds. Hughes had her refunds taken from her by the Treasury to the tune of about $10,000. That’s enough money to hurt, especially if you just got out of prison and are unemployable.

Blackhawk, in the meantime, paid no fine and went bankrupt. Though it isn’t clear whether the government is trying to make a claim on the bankruptcy estate.

Hughes asked the district court for help by modifying her sentence — it did and vacated her restitution order. At least the government will stop taking its pound of flesh. But then the district court held three more hearings, and ultimately reinstated its original order, so the pound of flesh would continue to be taken. The district court also did not order the government to give the money back.

The D.C. Circuit undid all of that. Finding this an exceptionally sympathetic case, it ruled that the district court had the power to change the sentence and order the money returned. It’s an impressive remedy.

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Judge Brown wasn’t completely sold on the remedies, but was with them on the equities. In her concurrence, she writes this:

I am, nevertheless, completely in sympathy with the Court’s bold response. This is a case in which the government behaved badly and—even when the unpalatable implications of their actions became evident—exhibited neither remorse nor gallantry. Politics is a form of violence; and, in democracies, the monopoly on force is accorded to the electoral victors. Bureaucratic institutions are justified by their efficiency. That efficiency is enhanced because they may invoke the threat of force to deter non-compliance. Even so, an expectation remains that the resort to force will be neither gratuitous nor grossly disproportionate.

Why is this important? Because the Department of Justice is on a tear about collecting restitution and forfeiture judgments. They have, simply put, no judgment about it. Now, routinely, in cases where someone should be able to put their lives behind them, DOJ policies require that they be hit with judgments that will bankrupt them in years going forward.

Deal crack? They’ll hit you with a forfeiture judgment of the value of the crack you sold. Someone else made money off of a fraud you had a minor role in? You’ll be jointly and severally liable for the whole amount for forever. They don’t care that you can never pay it back, caring is not something they do.

We all, rightly, decry the petty fines that the Ferguson police levy on those citizens. DOJ is doing exactly the same thing. And its collections tactics would make a shady debt collector blush with embarrassment.

This DOJ abuse has been largely unreviewable. Perhaps it will be less so now.

Things worked out well for Hughes because, luckily, she had a fantastic lawyer in D.C.’s own Greg Smith. That guy is fearless and has the heart of lion. But not everyone is so lucky.

The government’s tactics here are no different than in thousands of cases across the country. As Judge Brown said, it’s a form of violence.

Matt Kaiser is a white-collar defense attorney at Kaiser, LeGrand & Dillon PLLC. He’s represented stockbrokers, tax preparers, doctors, drug dealers, and political appointees in federal investigations and indicted cases. Most of his clients come to the government’s attention because of some kind of misunderstanding. Matt writes the Federal Criminal Appeals Blog and has put together a webpage that’s meant to be the WebMD of federal criminal defense. His twitter handle is @mattkaiser. His email is mkaiser@kaiserlegrand.com He’d love to hear from you if you’re inclined to say something nice.

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