U.S. v. Gardner

• Decision Date: 07 July 1998
• Docket Number: No. 97-CR-34-H.,97-CR-34-H.
• Citation: 23 F.Supp.2d 1283
• Parties: UNITED STATES of America, Plaintiff, v. Richard Clark GARDNER, Defendant.
• Court: U.S. District Court — Northern District of Oklahoma

23 F.Supp.2d 1283

UNITED STATES of America, Plaintiff, v. Richard Clark GARDNER, Defendant.

No. 97-CR-34-H.

United States District Court, N.D. Oklahoma.

July 7, 1998.

COPYRIGHT MATERIAL OMITTED

Charles Robert Burton, IV, Richard Thomas Seymour, Fred Randolph Lynn, Ernest A. Bedford, Richard Clark Gardner, Tulsa, OK, for defendant.

John David Russell, United States Attorney, Tulsa, OK, for U.S.

ORDER

HOLMES, District Judge.

This matter comes before the Court on a motion for attorneys' fees (Docket # 73) by Defendant Richard Clark Gardner. In this case of first impression, Mr. Gardner requests that the Court assess attorneys' fees and expenses incurred in his defense pursuant to Public Law No. 105-119, § 617, 111 Stat. 2440, 2519 (1997) (the "Hyde Amendment") (enacted Nov. 26, 1997). Mr. Gardner seeks $108,332.91 in fees and expenses. A hearing was held in this matter on June 11, 1998.

I

Agents of the Internal Revenue Service ("IRS") began investigating Mr. Gardner in 1991 in connection with his activities as a tax preparer.¹ In March 1995, IRS agents obtained a search warrant and searched his tax preparation business, Gardner's Tax Service. On March 11, 1997, a grand jury returned an indictment charging Mr. Gardner with eighteen counts of assisting in the preparation of false and fraudulent tax returns in violation of 26 U.S.C. § 7206(2); three counts of fraudulently concealing an asset during a bankruptcy proceeding in violation of 18 U.S.C. § 152; and two counts of bankruptcy fraud in violation of 18 U.S.C. § 157. On May 8, 1997, a grand jury returned a superseding indictment that realleged the eighteen tax fraud counts for violations of 26 U.S.C. § 7206(2). The superseding indictment also alleged three violations of 18 U.S.C. § 152, one of which duplicated count 21 of the original indictment. Counts 1-3 of the superseding indictment alleged Mr. Gardner prepared false tax returns for undercover IRS agents.

On November 6, 1997, the Court granted Defendant's motion to sever the bankruptcy counts from the tax fraud counts. However, the Court also scheduled the two trials to occur back-to-back and allowed the Government to choose the order in which the two trials would proceed. Pursuant to the Government's request, in orders dated November 26, 1997, and December 1, 1997, the Court scheduled the trial of the bankruptcy fraud counts to commence first, to be immediately followed by the trial of the tax fraud counts.

On October 10, 1997, the Court, based upon the Government's motion, dismissed without prejudice counts 6 and 10 of the superseding indictment, both of which alleged § 7206(2) tax fraud violations. Mr. Gardner did not contest this motion. On December 19, 1997, the Court granted the Government's motion to dismiss without prejudice counts 4, 7, 9, 11, 16, and 18, alleging § 7206(2) violations, and counts 19, 20, and 21, the three bankruptcy fraud counts. Mr. Gardner argued that these counts should have been dismissed with prejudice.

At the pretrial hearing on December 19, 1997, the Court addressed the Government's proposal regarding its expert witness. The Government requested that its expert, Mitch Ross, testify at the conclusion of testimony and summarize the evidence that had been presented. The Government further requested that under this format Mr. Ross be relieved of his obligation to provide an expert witness report under Fed.R.Crim.P. 16(a)(1)(E).

Because this proposed format was contrary to Fed.R.Crim.P. 16(a)(1)(E) and otherwise unsupported by legal authority, the Court denied the Government's request. The Court ordered the Government to produce an expert report by December 30, 1997.² The Government, however, did not produce any such report, having decided instead to dismiss the charges against Mr. Gardner. It is noteworthy that also discussed at this pretrial hearing was the Government's intention not to call the IRS agent who had investigated this case, Agent Robert Walter, as a witness in this case.

On January 5, 1998, the date scheduled for a hearing on Defendant's motion to dismiss for prosecutorial vindictiveness,³ the Government moved to dismiss without prejudice the remaining counts of the superseding indictment. At a hearing on this matter, Mr. Gardner argued that this dismissal should be granted with prejudice. The Court dismissed the remaining counts of the superseding indictment without prejudice, with the exception of counts 1-3, the counts involving the undercover IRS agents. The Court dismissed these counts with prejudice, finding that "in order for there to be a violation of 26 U.S.C. Section 7206(2) in circumstances involving a tax adviser where a `return' is prepared by that tax adviser, there must exist actual tax matters in respect of an individual who is subject to the requirements of the Internal Revenue Code to present a tax return under the Internal Revenue Code, and the consultation with the tax adviser must be regarding the contents of the return so required." Order of Jan. 12, 1998, at 2.

II

The Hyde Amendment, the statute under which Mr. Gardner seeks attorneys' fees and expenses, was enacted as part of a 1997 appropriations bill and is found as a statutory note to 18 U.S.C. § 3006A. The Hyde Amendment provides in its entirety as follows:

§ 617. During fiscal year 1998 and in any fiscal year thereafter, the court, in any criminal case (other than a case in which the defendant is represented by assigned counsel paid for by the public) pending on or after the date of the enactment of this Act, may award to a prevailing party, other than the United States, a reasonable attorney's fee and other litigation expenses, where the court finds that the position of the United States was vexatious, frivolous, or in bad faith, unless the court finds that special circumstances make such an award unjust. Such awards shall be granted pursuant to the procedures and limitations (but not the burden of proof) provided for an award under section 2412 of title 28, United States Code. To determine whether or not to award fees and costs under this section, the court, for good cause shown, may receive evidence ex parte and in camera (which shall include the submission of classified evidence or evidence that reveals or might reveal the identity of an informant or undercover agent or matters occurring before a grand jury) and evidence or testimony so received shall be kept under seal. Fees and other expenses awarded under this provision to a party shall be paid by the agency over which the party prevails from any funds made available to the agency by appropriation. No new appropriations shall be made as a result of this provision.

Pub.L. No. 105-119, § 617, 111 Stat. 2440, 2519 (1997). By its terms, the Hyde Amendment incorporates the "procedures and limitations" contained in 28 U.S.C. § 2412, the Equal Access to Justice Act ("EAJA"). Mr. Gardner argues that he has satisfied all requirements of the Hyde Amendment and thus is entitled to his requested attorneys' fees and expenses. In the alternative, Mr. Gardner argues that he is entitled to discovery to develop a case in support of his request for relief under the Hyde Amendment.

There is sparse legislative history with respect to the Hyde Amendment and as yet no court has rendered an opinion construing its provisions. A version of the law was first introduced on September 24, 1997 during the floor debate on the fiscal year 1997 appropriations bill for the Departments of Commerce, Justice, and State, when Representative Henry Hyde offered the following proposed amendment:

SEC. 616. ATTORNEYS FEES AND OTHER COSTS IN CERTAIN CRIMINAL CASES.

During fiscal year 1997 and in any fiscal year thereafter, the court, in any criminal case pending on or after the date of the enactment of this Act, shall award, and the United States shall pay, to a prevailing party, other than the United States, a reasonable attorney's fee and other litigation costs, unless the court finds that the position of the United States was substantially justified or that other special circumstances make an award unjust. Such awards shall be granted pursuant to the procedures and limitations provided for an award under section 2421[sic] of title 28, United States Code. Fees and other expenses awarded under this provision to a party shall be paid by the agency over which the party prevails from any funds made available to the agency by appropriation. No new appropriations shall be made as a result of this provision.

143 Cong. Rec. H7786-04, H7791 (statement of Rep. Hyde). Prior to the proposed addition of this language, section 616 of the appropriations bill dealt only with the reimbursement of legal expenses to Members of Congress and their staffs when a Justice Department prosecution failed to convict them. Id. at H7792 (statement of Rep. Rivers).

Offered on the floor, there had been no hearings on Representative Hyde's proposed amendment to section 616 and there had been no opportunity for the Department of Justice or the criminal defense bar to comment on its provisions. Id. at H7791 (statement of Rep. Skaggs). Further, criticism of the proposed amendment noted the lack of any requirement that the Government's conduct be "malicious" and "abusive" Id. at H7792.

The final version of the Hyde Amendment passed the House of Representatives by a vote of 340-84 on September 25, 1997. 143 Cong. Rec. H7849-01, H7849. There is little history to explain the transformation of Representative Hyde's original proposed amendment into its present form.⁴ The Conference Report on the Commerce, Justice, State appropriations bill on this issue states in its entirety as follows:

On the Hyde provision, we have language that we believe is acceptable to all parties, that allows the recovery of attorneys' fees in criminal cases where the defendant is acquitted where the court finds that the prosecutor acted vexatiously, frivolously or in bad faith.

143 Cong. Rec. H10918-07,...