Ed Sapone’s DECISIONS OF THE WEEK -June 7, 2019

by | Jun 7, 2019 | Ed Sapone’s Decisions of the Week

The mid-summer quiet broke this week with four precedential opinions from the Second Circuit and six reversals and a remittal from AD4.

Second Circuit

On Friday, in United States v. Lebedev, the Circuit affirmed defendants’ SDNY convictions for multiple counts arising from their roles in the operation of an illegal Bitcoin exchange and a scheme to defraud a federal credit union.

The Circuit rejected defendants’ claims, among others, that: (1) Judge Alison J. Nathan dropped the ball on evidentiary rulings, including improperly limiting the examination of a defense witness called to impeach a key government witness, (2) that the evidence presented at trial so differed from the allegations of the superseding indictment that the government constructively amended the indictment, and (3) that defendant Gross’s 60‐month sentence was unreasonable because the court misapplied enhancements that increased the Guidelines range.

By way of background, defendants were involved in an internet Bitcoin exchange located in Florida, known as “Coin.mx.” Coin.mx’s customers used the exchange to purchase Bitcoins, a digital currency, with traditional currency. Although the purpose of Coin.mx was to allow the purchase and sale of Bitcoins, Coin.mx concealed that fact from the banks and credit card companies processing its transactions. It also opened bank accounts in the name of “the Collectables Club,” which falsely purported to be a private members’ association dedicated to collecting and exchanging memorabilia. And Coin.mx processed credit card transactions listing the Collectables Club as the merchant. Neither Coin.mx, nor the Collectables Club, registered with federal regulators as a money‐transmitting entity or obtained state licensure for that purpose. Defendant Lebedev managed Coin.mx’s information technology systems. Eventually Coin.mx gained control of the HOPE credit union to process its transactions.

The Circuit found that the evidence was sufficient to support wire and bank fraud convictions against Lebedev. The Circuit rejected defendants’ challenges to the district court’s evidentiary rulings, in particular their contention that the court improperly restricted their examination of a defense witness, Special Agent Beyer of the Secret Service. The defense sought to impeach the testimony of a Coin.mx employee who’d testified as a cooperating witness, and had said, among other things, that Agent Beyer had told him that Coin.mx was going to be shut down and that he should withdraw his salary from a Coin.mx account and give himself a bonus. To show that the cooperator had testified falsely, the defense called Agent Beyer, who testified that,

while she did not recall the conversation, she would never have told the employee to take a salary or bonus to which he was not entitled. Defense counsel sought to ask Agent Beyer about a prior statement to the FBI, arguing that it contradicted her testimony, and to use the FBI report to refresh her recollection about whether Coin.mx was being shut down. The district court disallowed that questioning, finding no contradiction between Agent Beyer’s testimony and her prior statement and concluding that such questions would be irrelevant to whether the cooperator had lied in his testimony.

The Circuit also rejected defendant Gross’ contention that the indictment had been constructively amended. The jury instructions described a conspiracy substantially the same as the one charged in the indictment. The evidence at trial directly addressed the core of criminality charged in the indictment: Gross’s conspiracy with Coin.mx to transfer control of the credit union in exchange for bribes and to then evade scrutiny.

The Circuit also rejected defendant Gross’ sentencing challenge to the appropriateness of a four-level leadership enhancement, an enhancement for commercial bribery that substantially jeopardized the soundness of a financial institution, and a two-level enhancement for abusing a position of trust.

The Circuit’s decision can be found here.

On Tuesday, in United States v. DiTomasso, the Circuit affirmed defendant’s SDNY convictions for producing and transporting child pornography. The Circuit primarily found that then District Court judge Shira A. Scheindlin had properly denied defendant’s motion to suppress certain electronic communications found through searches by two internet service providers and by the National Center for Missing and Exploited Children, which defendant contended were government actors for Fourth Amendment purposes.

The evidence showed that law enforcement agents in Florida received a report from NCMEC, forwarding a complaint from Dropbox, an internet file-sharing service that allows users to store files in online data centers and allows anyone to access them on any computer by signing into the user’s account with the user’s password. Dropbox complained that someone at a specified IP address, using a specified email address and a specified pseudonym as a user name, had been uploading child pornography to the internet. Florida officers tracked the IP address to a home where a mother, her adult son, and her daughter resided. Authorities inferred that the daughter, 13 or 14 years old, had been uploading images of herself. The computer in the home contained Skype text logs between a person calling himself Frankiepthc and the daughter.

FBI agents in NY learned that defendant was a sex offender and that he resided at a NY apartment. They also learned that AOL had twice sent NCMEC complaints of child pornography to an email address associated with defendant. Warrants authorized the search of the contents of defendant’s AOL account, which were found to include chat logs for a user with an IP address associated with defendant’s residence. A search warrant executed at defendant’s home found

an Xbox that had been used to communicate with the daughter in Florida, as well as holiday decorations that were consistent with decorations described by Frankipthc.

In his motion to suppress, defendant contended that he had a reasonable expectation of privacy in the contents of the emails and chats he had sent or received over AOL; that the ISPs, through their respective monitoring systems, had conducted warrantless searches of his communications; and that, in so doing, AOL had acted as an agent of the government. He also sought suppression of any evidence obtained through subsequent FBI searches, as fruit of the poisonous tree.

The district court had refused to suppress, because AOL makes clear in its user agreement that it intends to actively assist law enforcement in rooting out child pornography, and that defendant, in using AOL’s services, voluntarily agreed to that practice. Accordingly, although finding that AOL’s searches constituted government searches, the court concluded that they did not violate defendant’s Fourth Amendment rights because he had consented. Finally, putting aside the AOL complaints to law enforcement, the evidence in support of the warrants was adequate to establish probable cause.

The Circuit’s decision can be found here.

On Thursday, in United States v. Sierra, the Circuit affirmed the life-without-parole sentences imposed on defendants by SDNY Judge Paul A. Engelmayer following their convictions for murder in aid of racketeering. The Circuit rejected the contention that these LWOP sentences violated the Eighth Amendment because defendants were between 18 and 22 years old at the time of the offenses. The Circuit also rejected Defendant Lopez’ contention that his mandatory life sentence was cruel and unusual because he did not kill, attempt to kill, or intend to kill the victims of his crimes.

Defendants—members of the Bronx Trinitarios street gang, a racketeering enterprise engaged in drug trafficking and violent crime—were convicted of multiple counts of murder involving several victims. Each defendant was between 18 and 22 years old at the times of the murders in aid of racketeering of which they were convicted. They argued on appeal that the mandatory minimum life sentences imposed for those convictions violate the Eighth Amendment. They relied on Miller v. Alabama, 567 U.S. 460 (2012), which held that mandatory life without parole for defendants under the age of 18 at the time of their crimes violates the Eighth Amendment’s prohibition on cruel and unusual punishments. According to Miller, a judge or jury must have the opportunity to consider mitigating circumstances before imposing the harshest possible penalty for juveniles.

The defendants argued that Miller’s holding should be extended to apply to them, because scientific research showed that the biological factors that reduce children’s “moral culpability” likewise affect individuals through their early 20s.

The Circuit rejected defendants’ Eighth Amendment claims, finding that, because the Supreme Court has chosen to draw the constitutional line at the age of 18 for mandatory minimum life sentences, that was where the line must stand unless and until it holds otherwise.

The convictions for which defendant Lopez was sentenced to a mandatory minimum life sentence were premised on Pinkerton liability. Lopez argued that his sentence violated the Eighth Amendment because he did not directly commit the murders. In support, he relied on Enmund v. Florida, which held that the Eighth Amendment categorically forbids “imposition of the death penalty on one . . . who aids and abets a felony in the course of which a murder is committed by others but who does not himself kill, attempt to kill, or intend that a killing take place.” 458 U.S. 782, 797 (1982).

His challenge combined two distinct arguments:

(1) The sentence was unconstitutional, because it was mandatory. Defendant contended that such a severe sentence imposed for Pinkerton liability is unconstitutional when it is made mandatory.

(2) Based on Enmund, a sentence as severe as this is unconstitutional when imposed for accessorial liability.

The Circuit, while seemingly receptive to Lopez’ arguments, found them both foreclosed by Harmelin v. Michigan, 501 U.S. 957 (1991). According to the Circuit, Harmelin provided a complete answer to defendant’s challenges: “There can be no serious contention . . . that a sentence which is not otherwise cruel and unusual becomes so simply because it is ‘mandatory.’” To the extent that Lopez seeks extension of Enmund to his non‐capital life sentence, Harmelin also provides a complete answer when it says that “death is different,” and that the Court’s death penalty jurisprudence “will not [be] extend[ed] . . . further.”

The Circuit’s decision can be found here. A summary order disposing of defendant’s non-sentencing claims can be found here.

In United States v. Boustani, the Circuit affirmed the decision of EDNY Judge William F. Kuntz, II, who denied defendant bail and ordered his pre-trial detention. The Circuit wrote to “explain and clarify” the circumstances under which the Bail Reform Act permits a district court to release a defendant pending trial pursuant to a condition under which the defendant would pay for private armed security guards.

Defendant, charged with conspiracies to commit wire fraud, securities fraud, and money laundering, filed an application for bail pending trial. He proposed a set of conditions that included home confinement under the supervision of private armed security guards, to be paid for by him. The Government opposed and argued that defendant should be detained pending trial because he was a flight risk.

The Circuit began by explaining that it had previously recognized that, in limited circumstances, a court may release a defendant subject to conditions of home confinement in which, among other things, the defendant pays for private armed security guards. The Circuit cited United States v. Sabhnani. Since Sabhnani, however, the Circuit had “highlighted” concerns regarding granting bail to defendants because of their wealth.

The Circuit held that the Bail Reform Act does not permit a two-tiered bail system in which defendants of lesser means are detained, and wealthy defendants are released to self‐funded private jails. According to the Circuit, it is a fundamental principle of fairness that the law protects “the interests of rich and poor criminals in equal scale, and its hand extends as far to each.”

But, a private-security condition may be appropriate where the defendant is deemed to be a flight risk primarily because of wealth. A defendant may be released on such a condition only where, but for his wealth, he would not have been detained.

In this case, because defendant was not detained because of this wealth, and instead because he was a flight risk for reasons unrelated to his wealth, pretrial detention was appropriate.

The Circuit’s decision can be found here.

Appellate Division, Second Department

On Wednesday, in People v. Campbell, and People v. Cato, AD2 reversed defendant’s Queens County conspiracy and criminal possession of stolen property convictions. AD2 found that, as it had this past January for a co-defendant in People v. Jones, Supreme Court had erred by permitting the introduction into evidence of out-of-court testimonial statements made by absent witnesses through the testimony of alleged NYPD gang experts, who were never subjected to cross-examination, and by permitting police experts to act as summation witnesses.

AD2’s decision in Campbell can be found here, and Cato, here.

In People v. Rodgers, AD2 reversed defendant’s Westchester County third-degree weapons possession conviction as against the weight of the evidence, finding that there was inadequate proof that a razor blade wrapped in black tape, with one corner exposed, was knowingly possessed as a weapon. The defendant, who was socializing in front of a building with two men, was not brandishing the instrument in a threatening manner, and made no attempt to flee the scene or discard the blade when approached by the detectives. The defendant did not tell the detectives that he possessed the blade for protection, and he made no statement and exhibited no behavior from which it could be inferred that he possessed the instrument with the intent to use it unlawfully against another.

AD2’s decision can be found here.

In People v. Smith, AD2 reversed defendant’s Kings County second