“US Supreme Court to consider Florida couple’s fight to use frozen assets for criminal defense”

July 1, 2013

The Washington Post on June 30, 2013 released the following:

“By Associated Press, Published: June 30

MIAMI — When Kerri and Brian Kaley came under federal investigation for allegedly stealing medical devices, they took out a $500,000 line of credit on their New York house to hire lawyers. Yet after their indictment in 2007, prosecutors sought to prevent the Kaleys from using the money because the government intended to seize the house.

The Kaleys insisted they were legally reselling the medical items. At the very least, they wanted a hearing to determine whether the government’s case was strong enough to justify freezing most of their assets and denying them the right to hire the attorney of their choice.

It’s an issue federal courts around the country are deeply divided over. Now, the U.S. Supreme Court has a chance to settle the matter after agreeing earlier this year to hear the Kaleys’ appeal.

The case involves both the Fifth Amendment’s due process clause and the Sixth Amendment’s right to counsel, and could potentially affect thousands of cases each year in which the Justice Department seeks to seize defendants’ property. Such cases typically range from alleged drug dealers and Mafia figures to Ponzi schemers and Medicare fraudsters, but also could ensnare people who are wrongly accused.

To property rights advocates, the Kaleys’ case is an opportunity for the court to tip the scales of justice slightly more in the favor of defendants who are routinely deprived of their assets without being convicted. The ruling would not directly impact state courts, which operate under their own forfeiture laws, but lawyers could cite the Supreme Court decision to help a client.

“People who are indicted on criminal charges in the United States are presumed innocent,” said Larry Salzman, an attorney with the Institute for Justice, an Alexandria, Va.-based nonprofit law firm involved in forfeiture and property seizure cases nationwide. “Seizing their assets on the basis of an indictment alone turns the presumption of innocence on its head. It follows the rule of punishment first, evidence later.”

Prosecutors, however, say a grand jury’s decision to bring criminal charges shows the case has enough merit to enable them to freeze assets that may have been obtained through illegal activity.

In fiscal 2012, more than $4.2 billion was deposited in the Justice Department’s asset forfeiture fund. That compares with about $1.6 billion in each of the two previous years.

Prosecutors say adding a hearing to allow a defendant to attack the validity of the grand jury’s indictment would force prosecutors to prematurely lay out their case and might even endanger witnesses.

“No reason exists to think that an extra layer of procedure on that score — one that could be undertaken only at significant cost — would be beneficial, much less that it is constitutionally mandated,” the U.S. solicitor general’s office wrote in Supreme Court papers.

The office, which represents the administration of President Barack Obama before the Supreme Court, also asked the justices to settle the question nationally so there would be a single standard in federal courts.

The Kaleys, who live in Cold Spring Harbor, N.Y., have been battling the government for more than six years. They declined an interview request through their Miami-based attorneys, Howard Srebnick and Richard Strafer.

It all started when the Food and Drug Administration began an investigation in 2005 into what appeared to be a highly lucrative but unregulated market of resale of various medical devices, from hardware to sutures. The probe led investigators to a Delray Beach middleman in South Florida who was buying the devices from the Kaleys and others and then selling them to other medical providers. He did some $10 million in business in one year.

At the time, Kerri Kaley was a sales representative for Ethicon Endosurgery, a subsidiary of medical supplies giant Johnson & Johnson. She and her lawyers insist that she was legally allowed to resell the medical items she was given because Johnson & Johnson would not accept them as returns after a certain date and because hospitals wanted to clear out space for newer products. Hospitals also traded the older items for newer, free devices from the sales force.

Another sales representative, Jennifer Gruenstrass, was charged along with the Kaleys but went to trial separately. She was acquitted in November 2007. Gruenstrass’s assets were not frozen before the trial.

“There is a vibrant trading culture that exists between reps and between hospitals,” Gruenstrass’ attorney Robert Casale said. “Nobody is reporting a theft at any of the hospitals. Nobody at Ethicon is saying, ‘We were missing stuff.’ No theft.”

The prosecutor, Assistant U.S. Attorney Thomas Watts-Fitzgerald, said there was evidence the Kaleys and Gruenstrass knew what they were doing was illegal. For example, he said, Brian Kaley set up two shell construction businesses that actually acted as only conduits for the checks his wife was getting through the device sales. And, he said, the Kaleys hastily cleaned out their garage of the devices when they were first contacted by the FDA.

“Those were stolen devices,” Watts-Fitzgerald said. “She had no right, title and interest in any of the equipment they were selling.”

Still, the acquittal of Gruenstrass could indicate the Kaleys have a point in questioning the strength of the federal case. What they want from the Supreme Court is a chance to show that weakness to a federal judge so they can win access to the money they need to pay the lawyers they choose.

The $500,000 line of credit the Kaleys took out on their house was based on their lawyers’ estimate of their fees and expenses to take the case all the way through trial.

The 11th U.S. Circuit Court of Appeals, which handles cases from South Florida, said the Kaleys were only entitled to a hearing on whether their frozen assets were connected to the alleged crimes. Three other circuits have similar standards, while five others do require prosecutors to show at least some evidence of guilt.

The Kaleys face an eight-count indictment on conspiracy, transportation of stolen property, money laundering and obstruction of justice charges that carry maximum combined penalties of 85 years in prison. If convicted, they would likely lose their New York house and the $500,000 line of credit.

“With so much at stake in a criminal case, we believe due process requires a pretrial hearing to determine the propriety of the restraint of assets needed to retain counsel of choice at trial,” said Srebnick, one of the Kaley attorneys.

The criminal prosecution is on hold in federal court in West Palm Beach until the Supreme Court makes its decision. Oral arguments are not expected until October, with a ruling likely in late 2013 or early 2014.”


Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Appeal


To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.

Review finds judge showed no bias

April 13, 2012

The Augusta Chronicle on April 12, 2012 released the following:

“By Greg Bluestein
Associated Press

ATLANTA — Prosecutors say they have found no evidence that mental impairment or racial bias affected any cases handled by a disgraced judge who was sent to prison for buying drugs with a stripper, ending the U.S. Attorney office’s review of the ex-jurist’s legal decisions.

U.S. Attorney Sally Quillian Yates said her office reached that conclusion after examining the cases of 29 defendants who asked for the review after former U.S. District Judge Jack Camp was arrested in October 2010. Camp, who resigned from the bench, was sentenced to 30 days in prison in March 2011 after pleading guilty to drug-related charges.

Yates called for the review after witnesses interviewed as part of the federal investigation into Camp suggested he had a racial bias, and Camp admitted in court filings that a 2000 bicycling accident caused brain damage and led him to use drugs.

“I hope that this demonstrates to citizens we serve that we are committed to justice, not to convictions,” Yates said this week. “When you have a situation that strikes at the heart of our justice system, we have to do everything we can to assure that the public has confidence in the system.”

Camp, who has been out of prison for about a year, said in a statement to The Associated Press that he felt vindicated by the review.

“Today, the U.S. Attorney has publicly confirmed what I never doubted throughout this ordeal,” he said. “I am pleased the report vindicates that my decisions were fair, impartial, and true to the law. Just as drug tests by the government had already shown no controlled substances, the report further confirms the fact that my work as a judge was never affected by drugs.”

Camp was 67 when he was arrested in a suburban Atlanta parking lot on Oct. 1 after he handed the stripper $160 to buy drugs from an undercover officer, according to court documents. The stripper was secretly cooperating with authorities.

The married judge, who has two grown children, pleaded guilty soon after his arrest to buying drugs for the stripper, possessing illegal drugs and giving the woman his $825 government-issued laptop. The former judge apologized at the March 2011 sentencing, saying he wanted to pay the debt he owed to society and rebuild his reputation.

Yates recused her office from the criminal case against Camp, but knew her office would need to deal with appeals filed by defendants who believed they were unfairly treated by the judge.

Yates said she decided her office would not object to any requests by any defendant sentenced by Camp between March 2010 and September 2010 — when Camp was believed to have been using drugs — for a new sentencing hearing with a different judge.

Of the 12 defendants who did so, six received the same sentence Camp had imposed, and five others’ sentences were reduced. Two of those were reduced when the new judge accepted a request from prosecutors that Camp had rejected to reduce the sentence because the defendants cooperated with authorities. One case is still pending.

It’s not unusual for a sentence to be reduced when the details of the case are heard by another judge.

In one case, U.S. District Judge Owen Forrester reduced Harold Wardlaw’s sentence for bank fraud from 145 months to 120 months. Wardlaw’s attorneys argued that his original sentence was “distorted” and failed to account for charitable giving in his past.

Another case involved former professional wrestler “Hardbody” Harrison Norris, who was initially sentenced to life in prison after he was convicted of leading a sex trafficking ring. His sentence was reduced to 35 years behind bars in December 2010 by another judge, after he argued the sentence was “grossly disproportionate” to those convicted of other crimes.

As more details of the Camp investigation surfaced, Yates had to consider expanding her office’s review.

Court filings in the case outlined Camp’s decades-long battle with depression and he blamed brain damage he suffered after the 2000 accident for his eventual dalliance with the stripper. Yates also said the investigation uncovered evidence of a possible bias: One witness told investigators Camp said it was difficult sentencing black men because they reminded him of someone he didn’t like, and another witness said Camp once used a racial slur to describe the same man.

Because of those two factors, Yates decided her office would consider reviews for the hundreds of cases that Camp heard during his 22-year career on the bench.

“We recognize that feelings of racial bias don’t arise overnight,” she said. “We felt it was important to tell any defendant who went before Camp that we would hear their case regardless of when it happened.”

Twenty-nine defendants made the request, and Yates assigned a team of 25 attorneys to review the cases. They spent hundreds of hours reading the trial transcripts, vetting motions and reviewing court filings. Each filled out a nine-page form with details about the case, detailing any potential problems with Camp’s decisions and issues regarding the “fairness or integrity of the judicial process.”

The attorneys went to great lengths to document anything out of the ordinary involving each case, even noting when Camp, who was known as a temperamental jurist, became cranky, lost his train of thought or forgot the name of an attorney trying the case.

“We wanted to go beyond that to see if something had gone amiss here — was there anything that would reflect a racial bias or that he was impaired?” Yates said. “Did anything look out of whack to us, even if it was legally defensible?”

Prosecutors found that of the 23 black defendants who requested the review, 10 received sentences at the lower end of the guideline range, eight were near the middle to high end and three more defendants were actually sentenced below what the range suggested. One other defendant was given life in prison because the law required it based on his prior convictions. The last case, involving a 1993 bank robbery conviction, fell within the guideline range but records didn’t indicate where.

Of the six remaining cases, five involved white defendants and one involved a Hispanic defendant. The review found that Camp sentenced two of those defendants to stiffer sentences than the guidelines suggested, one was sentenced near the middle of the guideline range, one was sentenced below the range and one is still pending. The records from the final case, which took place in 1996, haven’t arrived at the office yet.

Yates said the review brings an end to her office’s vetting of the case.

“This closes this chapter. It’s been a very difficult and troubling chapter for everyone,” she said. “But it’s something for us to be mindful of to make sure that the public be treated fairly.”

Meanwhile, other cases involving Camp are still pending.

The 11th U.S. Circuit Court of Appeals is considering an appeal by Rolando Martinez. He wants the court to review his drug trafficking conviction on grounds that prosecutors shouldn’t have allowed his case to be tried before Camp because they knew he was using illegal drugs. Camp declared a mistrial in Martinez’s case a day before his arrest because of a hung jury, and the defendant was later convicted in a trial before another judge.

And several civil cases are pending, too, including a lawsuit filed by attorneys from a now-shuttered strip club. They contend Camp should have recused himself from the club’s case because his personal experience put him too close to the debate.

But it won’t be easy to persuade the judges to overturn Camp’s decisions. At the March hearing involving the strip club’s challenge, a veteran judge suggested Camp’s out-of-court activities don’t necessarily merit a do-over.

“We have an unusual circumstance and we are very concerned,” said Circuit Judge J.L. Edmondson. “But we haven’t just canceled out what Judge Camp has done for months and months nor do we see a reason to do so.”

Camp, for his part, said he’s moving on from the “dark chapter” in his life.

“I deeply appreciate the encouragement offered by friends both near and far as I have come to terms with my mistakes, learned to manage my condition, and begun to forge a meaningful path toward the future,” he said in the statement.”


To find additional federal criminal news, please read Federal Crimes Watch Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition and OFAC SDN Sanctions Removal.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.

Forcing Defendant to Decrypt Hard Drive Is Unconstitutional, Appeals Court Rules

February 25, 2012

Wired on February 24, 2012 released the following:

“By David Kravets

Forcing a criminal suspect to decrypt hard drives so their contents can be used by prosecutors is a breach of the Fifth Amendment right against compelled self-incrimination, a federal appeals court ruled Thursday.

It was the nation’s first appellate court to issue such a finding. And the outcome comes a day after a different federal appeals court refused to entertain an appeal from another defendant ordered by a lower federal court to decrypt a hard drive by month’s end.

Thursday’s decision by the 11th U.S. Circuit Court of Appeals said that an encrypted hard drive is akin to a combination to a safe, and is off limits, because compelling the unlocking of either of them is the equivalent of forcing testimony.

The case at hand concerns an unidentified “Doe” defendant believed to be in possession of child pornography on 5 terabytes of data on several drives and laptops seized in a California motel with valid court warrants.

The Atlanta-based circuit held:

First, the decryption and production of the hard drives would require the use of the contents of Doe’s mind and could not be fairly characterized to a physical act that would be non-testimonial in nature. We conclude that the decryption and production would be tantamount to testimony by Doe of his knowledge of the existence and location of potentially incriminating files; of his possession, control and access to the encrypted portions of the drives; and of his capability to decrypt the files.

The court added: “Requiring Does to use a decryption password is most certainly more akin to requiring the production of a combination because both demand the use of the contents of the mind, and the production is accompanied by the implied factual statements noted above that could prove to be incriminatory.”

The defendant in April had refused to comport with a Florida federal grand jury’s orders that he decrypt the data, which was encrypted with TrueCrypt. A judge held him in contempt and jailed him until December 15, when the circuit court released him ahead of Thursday’s ruling.

“The government’s attempt to force this man to decrypt his data put him in the Catch-22 the Fifth Amendment was designed to prevent — having to choose between self-incrimination or risking contempt of court,” said EFF senior staff attorney Marcia Hofmann, who had filed an amicus brief in the case.

In the other decryption case, the Denver-based 10th U.S. Circuit Court of Appeals on Wednesday sided with the government’s contention that Colorado bank-fraud defendant Ramona Fricosu must be convicted before the circuit court would entertain an appeal of a decryption order.

The court did not address the 5th Amendment arguments and instead said the case was not procedurally ripe for appeal.

Fricosu’s attorney, Philip Dubois, said in a telephone interview Friday that new developments in the case may moot the constitutional showdown in his client’s case.

He said a co-defendant, Scott Whatcott, has forwarded passwords to the authorities.

Dubios said it was not immediately known whether those passwords would unlock the hard drive in the Toshiba laptop seized from Fricosu with valid warrants in 2010. If they do, then the 5th Amendment issue is off the table, Dubois said.

If the passwords don’t work, Dubois said, Fricosu “will definitely make her best effort” to decrypt the laptop, although she may have forgotten the password.

U.S. District Judge Robert Blackburn has ordered Fricosu to decrypt the laptop by month’s end.

Dubois said that, on Monday, he would provide Judge Blackburn with the 11th Circuit’s opinion in the child pornography case as part of a last-ditch effort to halt the decryption order.

That said, Blackburn is not bound by the 11th Circuit decision because his court is in the 10th Circuit.”


Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

Federal Mail Fraud Crimes

Federal Crimes – Appeal


To find additional federal criminal news, please read Federal Crimes Watch Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition and OFAC SDN Sanctions Removal.

The author of this blog is Douglas McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.