524 F.3d 1073 (9th Cir. 2008), 06-10316, United States v. Chapman

Docket Nº:06-10316, 06-10610.
Citation:524 F.3d 1073
Party Name:UNITED STATES of America, Plaintiff-Appellant, v. Daniel CHAPMAN; Sean Flanagan; Herbert Jacobi, Defendants-Appellees. United States of America, Plaintiff-Appellee, v. Daniel Chapman; Sean Flanagan; Herbert Jacobi, Defendants-Appellants.
Case Date:May 06, 2008
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 1073

524 F.3d 1073 (9th Cir. 2008)

UNITED STATES of America, Plaintiff-Appellant,

v.

Daniel CHAPMAN; Sean Flanagan; Herbert Jacobi, Defendants-Appellees.

United States of America, Plaintiff-Appellee,

v.

Daniel Chapman; Sean Flanagan; Herbert Jacobi, Defendants-Appellants.

Nos. 06-10316, 06-10610.

United States Court of Appeals, Ninth Circuit.

May 6, 2008

Argued and Submitted August 13, 2007.

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Steven W. Myhre, Acting United States Attorney; Robert L. Ellman, Appellate Chief and Assistant United States Attorney, District of NV, for the government-appellant-cross-appellee.

Daniel G. Chapman, Las Vegas, Nevada (pro se); Sean P. Flanagan, Las Vegas, Nevada (pro se); James L. Sanders, McDermott Will & Emery LLP, Los Angeles, CA; and Maranda E. Fritz, Hinshaw & Culbertson LLP, New York, NY, for the defendants-appellees-cross-appellants.

Appeal from the United States District Court for the District of Nevada; James C. Mahan, District Judge, Presiding. D.C. No. CR-03-00347-JCM.

Before: DIARMUID F. O'SCANNLAIN, HAWKINS, and KIM McLANE WARDLAW, Circuit Judges.

WARDLAW, Circuit Judge:

The district court dismissed an indictment against Daniel Chapman, Sean Flanagan, and Herbert Jacobi (collectively "Defendants") after the prosecution admitted that it had failed to meet its obligations to disclose over 650 pages of documents to the defense. We must decide whether the government's appeal of the dismissal is precluded by the Double Jeopardy Clause of the Fifth Amendment, see 18 U.S.C. § 3731, whether the dismissal was proper, and whether Defendants are entitled to fees and costs under the Hyde Amendment, Pub. L. No. 105-119, § 617, 111 Stat. 2440, 2519 (1997) (codified at 18 U.S.C. § 3006A Note). We conclude that the Double Jeopardy Clause does not bar the government's appeal under the circumstances presented here, and we affirm as to both the dismissal of the indictment and the denial of fees and costs.

I. FACTUAL AND PROCEDURAL BACKGROUND

On August 8, 2003, a grand jury in the District of Nevada returned a sixty-four-count indictment charging that Defendants, along with Shawn Hackman and James Farrell (who both pled guilty before trial), concocted a complex securities trading scheme known as a "box job," where a small number of individuals secretly control a corporation's shares and manipulate the stock price through strawmen officers, directors, and shareholders.1In this box job, Defendants allegedly created multiple shell corporations, back-dated corporate records to make their activities appear lawful, and named dummy directors and officers who had no actual control over the corporations and in some cases did not even know of their existence. According to the government, Defendants duped the National Association of Securities Dealers ("NASD") and the Securities and Exchange Commission ("SEC") into approving their corporations for listing on the Over-the-Counter Bulletin Board ("OTCBB") stock exchange. OTCBB listing is a valuable asset, and these newly approved shell corporations could be merged with third-party business enterprises to create a public market in the shares of those enterprises. By selling

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and merging these shell corporations, Defendants allegedly made over $12 million, which they laundered through Flanagan and Chapman's law firm and various corporations that Jacobi had registered in the Bahamas.

A. Events Leading up to the Mistrial Ruling

On April 9, 2004, the government agreed that it would disclose various documents prior to trial, including (1) all "criminal history and other background information regarding Government witnesses that is material and reasonable," (2) any evidence favorable to Defendants material to their guilt or innocence, as required by Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963), (3) any promises, inducements, or threats made to witnesses to gain cooperation in the investigation or prosecution, as required by Giglio v. United States, 405 U.S. 150, 92 S.Ct. 763, 31 L.Ed.2d 104 (1972), and (4) any witness statements required to be disclosed under Jencks v. United States, 353 U.S. 657, 77 S.Ct. 1007, 1 L.Ed.2d 1103 (1957), and 18 U.S.C. § 3500. Over the next 22 months, the government claims to have turned over close to 400,000 pages of documents.

There were, however, early indications that the government had not fully complied with its discovery obligations. On January 23, 2006, one day before the trial was set to begin, the government announced that it would present its case agent, Michael Payne, to testify. Defendants objected that Payne was not on the witness list and that none of his statements, memoranda, or notes has been disclosed, as required by Jencks, 353 U.S. 657, 77 S.Ct. 1007, and 18 U.S.C. § 3500. The lead Assistant United States Attorney ("AUSA") disagreed and represented to the court that all materials relating to Payne had been turned over. Over the defense's continued protestations, the district judge stated that the AUSA "says that he's done it." In the end, the court noted that if Payne "tries to testify, and there's material that [the prosecution] hasn't turned over, then his testimony will be stricken."

Other hints of discovery violations surfaced. On February 3, the AUSA elicited testimony from a prosecution witness, Lewis Eslick, about a prior conviction. Defendants objected that they had not received information from the government about that conviction and that this was the second time this had occurred (the day before, the AUSA had attempted to elicit information about a prior conviction from Doug Ansell on redirect examination, but the court sustained an objection that it was beyond the scope of the cross-examination). The district court struck the questioning as unduly prejudicial and reminded the AUSA of his obligation to disclose such material.

On February 6, in the trial's third week, matters came to a head. While the government's twenty-fifth witness, Michael Haynes, was testifying for the prosecution, the AUSA inquired about a prior conviction. Defendants again objected, claiming they had not been provided with the relevant material under Brady and Giglio. The AUSA originally responded that he did not believe the defense objection was "accurate." However, when the district court asked for proof and proposed a brief recess so that the government could produce documentation showing that the relevant material had been disclosed, the AUSA abruptly changed course:

AUSA: Your Honor, if I could just advise the Court in an abundance of caution rather than find the record of what we turned over, we'll make another copy of everything right now and provide it to the defense counsel immediately.

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COURT: Well, but it's supposed to be turned over. It's not a matter of doing it now.

The judge declared a brief recess and the court reconvened outside the presence of the jury. The following exchange took place:

AUSA: Your Honor, we cannot find a record of making this information available to defense counsel. We believe, however, that we did or it was certainly our intention to do so.

COURT: But your belief isn't good enough. This stuff has to be disclosed to them.

AUSA: And we've disclosed it now, your Honor.

COURT: Well, I understand, but that's late. I'm [not] going to say it's to[o] late, but it's late.

AUSA: Your Honor, we apologize.

COURT: Okay, I want this stuff--this stuff is going to be produced or I'm going to start striking testimony or worse.

Defense counsel walked the court through various discovery violations up to that point and urged it to impose immediate sanctions. The AUSA acknowledged that "there are some additional witnesses that do have criminal histories and convictions.... What we will do is that we will make full copies of . . . any charging documents, plea agreements, for any of the remaining witnesses and have that available for defense counsel this evening."

B. Mistrial Hearing

The next day, Chapman's attorney alerted the court to hundreds of pages of documents that the government had delivered that morning and the previous evening. They totaled some 650 pages and consisted of rap sheets, plea agreements, cooperation agreements, and other information related to numerous government witnesses, including at least three important witnesses whose testimony was already complete. Chapman's attorney provided the court with a thirty-four-page sampling of some of the disclosed documents, entitled "Hearing Exhibit 1." Counsel explained that he had not had a chance to review the newly disclosed material carefully, but that it included conviction records for many government witnesses, including several who had already testified and been released. He further pointed to dates on some of the disclosed "rap" sheets, which showed that the government had not even inquired as to those witnesses' criminal records until after the trial had begun. Counsel argued that the defense had been prejudiced by this failure to timely disclose the Brady and Giglio material; that recalling the prior witnesses was impractical and would not cure the error; and that a mistrial would only reward the government by giving them a second chance to try their case; therefore, dismissal of the indictment was the only appropriate remedy. Jacobi's attorney agreed, asserting that these late disclosures made the trial "nothing more than a colossal waste of everybody's time."

In response, the AUSA represented that much of the material under discussion had already been disclosed to the defense, but admitted that he could not prove what...

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