U.S. v. Ponds

• Citation: 290 F.Supp.2d 71
• Decision Date: 28 October 2003
• Docket Number: No. CR. A. 02-0495(JDB).,CR. A. 02-0495(JDB).
• Parties: UNITED STATES of America v. Navron PONDS, Defendant.
• Court: U.S. District Court — District of Columbia

290 F.Supp.2d 71

UNITED STATES of America v. Navron PONDS, Defendant.

No. CR. A. 02-0495(JDB).

United States District Court, District of Columbia.

October 28, 2003.

Preston Burton, Caplin & Drysdale, Chartered, Washington.

Mark Dubester, Assistant United States Attorney, Washington.

MEMORANDUM OPINION

BATES, District Judge.

Defendant Navron Ponds was indicted on December 10, 2002, in a seven count indictment charging him with five counts of tax evasion in violation of 26 U.S.C. § 7201, felony fraud under D.C.Code §§ 22-3821 and -3822, and wire fraud in violation of 18 U.S.C. § 1343, all relating to a multi-year scheme involving the non-payment of personal income taxes. On July 7, 2003, defendant was also charged in a parallel information with five counts of failure to pay income taxes or file income tax returns in violation of 26 U.S.C. § 7203. Following a seven-day trial, on July 16, 2003, a jury returned a verdict convicting defendant on all counts.¹

Prior to trial, defendant moved pursuant to Kastigar v. U.S., 406 U.S. 441, 92 S.Ct. 1653, 32 L.Ed.2d 212 (1972), and United States v. Hubbell, 530 U.S. 27, 120 S.Ct. 2037, 147 L.Ed.2d 24 (2000), for a hearing to determine whether the government's case was improperly tainted by defendant's prior production of documents and grand jury testimony under a grant of immunity and, based on that alleged taint, for dismissal of all charges. On June 3, 2003, the Court granted defendant's request for a Kastigar hearing, and thereafter held a two-day evidentiary hearing to determine whether the government's case was tainted by defendant's prior production of documents and grand jury testimony under a grant of use immunity pursuant to 18 U.S.C. § 6002. See Mem. Op. (June 3, 2003) at 7. The Court concluded that such a hearing was warranted because the government conceded awareness during the course of its investigation that a Kastigar/Hubbell issue was looming, because the documents and information produced under "act of production" immunity in an earlier Maryland federal proceeding may have been known to Internal Revenue agents or prosecutors involved in this case, and because it was not a demonstrably "foregone conclusion" that the records produced by defendant under immunity existed and were in his possession. Id. at 7-8. Accordingly, the Court was concerned that defendant's act of production of documents to the Maryland grand jury might have contained implicit testimonial representations or acknowledgments that were previously unknown to the government, and therefore "this case on the surface would seem to involve implicit, and potentially incriminating, testimonial statements through the production of documents in response to a subpoena." Id. at 8 (citing Hubbell, 530 U.S. at 44-45, 120 S.Ct. 2037, and Fisher v. United States, 425 U.S. 391, 411, 96 S.Ct. 1569, 48 L.Ed.2d 39 (1976)).

An evidentiary hearing commenced on June 5, 2003. The Court required that the hearing focus on the facts, circumstances and decisions regarding the grand jury subpoena to defendant, the acquisition of an ex parte order to obtain defendant's tax records, and the acquisition of search warrants for defendant's business and residence. As noted in the Court's June 3, 2003, decision, the hearing was conducted under certain legal ground rules: the government was required to show that its evidence in this case was derived from sources independent of the testimony and documents compelled in Maryland under a grant of immunity, see United States v. Kilroy, 27 F.3d 679, 683 (D.C.Cir.1994), and the evidentiary burden on the government to establish an independent source was by a preponderance of the evidence, see United States v. Montoya, 45 F.3d 1286, 1292 (9th Cir.1995); United States v. North, 910 F.2d 843, 854, opinion withdrawn and superseded in part, 920 F.2d 940 (D.C.Cir.1990) (en banc).

Subsequently, the Court informed the parties prior to trial that it would deny defendant's request to dismiss the indictment under Hubbell and Kastigar. The Court explained that, on the basis of the record created, there had not been the type of use of defendant's immunized production of documents that would require dismissal of the indictment in light of several factors: (1) the proper focus must be on the testimonial aspects of defendant's immunized production (for example, the existence and location of the documents produced) rather than on the contents of the documents; (2) the relevant issue is the direct or derivative use by the government of the immunized testimony or conduct, not the mere exposure of prosecutors or agents to immunized material; (3) the existence of legitimate and wholly independent sources for the evidence the government relied on in obtaining the search warrants of defendant's business and residence and in obtaining the indictment; (4) the absence of any use of immunized testimony or conduct in obtaining the indictment or the search warrants, or in preparing witnesses; (5) the inevitability of the discovery of certain disputed information by the government during the course of its investigation of defendant; and (6) the fact that any minimal direct or derivative use that might have occurred would be "harmless error beyond a reasonable doubt."

Following trial and his conviction, defendant has now renewed his motion to suppress evidence and dismiss the charges against him under Kastigar and Hubbell; alternatively, he requests a new trial pursuant to Fed.R.Crim.P. 33. This opinion provides a further explanation of the Court's decision denying defendant's original request to dismiss the indictment following the Kastigar hearing, and explains the basis for denial of defendant's renewed motion for suppression of evidence and dismissal of charges or, alternatively, for a new trial.

BACKGROUND

I. Facts and Proceedings

The basic background of this matter is not in dispute. Defendant, a criminal defense attorney, had been representing Jerome Harris in a criminal proceeding in the District of Maryland. In the summer of 2000, defendant came under investigation by the United States Attorney's Office and the Drug Enforcement Administration for possible money laundering, contempt or obstruction of justice relating to defendant's receipt of a 1991 Mercedes Benz as a fee from Mr. Harris, and the failure of defendant to disclose that transfer to the District Court in the context of an assessment of Harris's assets for sentencing and forfeiture purposes.

In August 2000, a grand jury subpoena duces tecum was issued to defendant requiring the production of six categories of documents relating to

• the use, ownership, possession, custody or control of the 1991 Mercedes Benz;

• the payment of legal fees by Harris to defendant;

• any vehicles in Harris's custody (if defendant had access to them);

• Laura P. Pelzer (defendant's sister) or two other individuals who were on the title of the Mercedes;

• correspondence between defendant and the government in the underlying criminal case concerning Mr. Harris; and

• employees in defendant's law office.

When defendant asserted his Fifth Amendment privilege against self incrimination, an Order was issued by the District Court pursuant to 18 U.S.C. §§ 6002 and 6003 providing "act of production" immunity as to the subpoenaed documents, but expressly limited "only to the testimonial aspects of [defendant's] production of these items to the grand jury." Defendant's testimony to the grand jury on August 9, 2000, in connection with the production of responsive documents was narrow and entailed only the assertion of his Fifth Amendment privilege, a review of the District Court's immunity order, and review of the approximately 300 pages of documents produced. Among the documents produced were some of relevance to the tax evasion and fraud charges in this case, including documents relating to a Georgia rental property showing joint ownership by defendant and his sister; documents relating to the Mercedes showing it registered to defendant's sister; documents relating to a Citibank account held jointly with his sister; documents relating to a Porsche demonstrating it was registered to his sister; documents showing the use of money orders by defendant to pay for parts and service on the Mercedes and Porsche; documents relating to other usage of money orders by defendant; and documents identifying Maggie Alexander as defendant's legal secretary.

Thereafter, the United States Attorney in Maryland requested defendant's tax records from the IRS through an ex parte application for a judicial order. In seeking the immunity order from the District Court, the prosecutors represented that they would obtain defendant's tax records from the IRS through an ex parte order. The prosecutors had earlier included a provision for business and personal tax returns in the draft grand jury subpoena, but deleted that item after defendant indicated he would impose a Fifth Amendment objection. When the IRS responded to the ex parte order for defendant's tax records with information that defendant had not filed tax returns for 1996 and 1997, the prosecutors in Maryland recognized that defendant might have committed tax offenses, which would have to be prosecuted in the District of Columbia.

In late 2000, the tax investigation matter was referred to the United States Attorney in the District of Columbia, and the IRS commenced an investigation, which was formally opened by the IRS as a tax investigation in March 2001. Affidavits in support of search warrants for defendant's residence and business were prepared by IRS agents in early 2001. The review and approval process required for the search of an attorney's office took considerable time. The government concedes that, to a limited extent, the IRS made use of some documents that defendant had produced to the grand jury to support the search warrant affidavits, but contends that no use was made of any evidence relating to defendan...