U.S. v. Lexin

• Decision Date: 22 May 2006
• Docket Number: No. C 06 CR 0043 BEN.,C 06 CR 0043 BEN.
• Citation: 434 F.Supp.2d 836
• Parties: UNITED STATES of America, Plaintiff, v. Cathy LEXIN (2) Teresa Webster (3), Defendants.
• Court: U.S. District Court — Southern District of California

Page 836

434 F.Supp.2d 836

UNITED STATES of America, Plaintiff, v. Cathy LEXIN (2) Teresa Webster (3), Defendants.

No. C 06 CR 0043 BEN.

United States District Court, S.D. California.

May 22, 2006.

COPYRIGHT MATERIAL OMITTED

U.S. Attorney, U.S. Attorney's Office, San Diego, CA, for Plaintiff.

ORDER GRANTING DEFENDANTS LEXIN'S AND WEBSTER'S RQUESTS FOR APPOINTMENT OF COUNSEL; ORDER GRANTING IN PART AND DENYING IN PART COPLEY PRESS' MOTION FOR EMERGENCY INTERVENTION (20-1); ORDER GRANTING DEFENDANTS LEXIN'S AND WEBSTER'S MOTION TO SEAL PERSONAL FINANCIAL INFORMATION SUBMITTED IN SUPPORT OF REQUESTS FOR APPOINTMENT OF COUNSEL (24-1)

PAPAS, United States Magistrate Judge.

On January 6, 2006 five individuals formerly involved with the San Diego City Employees' Retirement System ("SDCERS") were indicted by a federal grand jury in the Southern District of California. Two of the defendants, Cathy Lexin ("Lexin") and Teresa Webster ("Webster") or ("Defendants"), seek appointment of counsel pursuant to 18 U.S.C. § 3006A. They also request that the financial information they have submitted to the Court in support of their Applications be sealed on the basis of their rights to privacy.

This opinion addresses three separate issues relative to the Applications for Appointment of Counsel. First, whether Lexin and Webster are eligible for appointment of counsel pursuant to 18 U.S.C. § 3006A. Second, whether the financial information submitted in support of the applications should be sealed. Third, whether the press has standing to intervene in the case or otherwise participate in the dialogue regarding the request by Lexin and Webster to seal the financial documentation related to their request.

For the reasons stated below, the Court finds each Defendant eligible for appointment of counsel pursuant to 18 U.S.C. § 3006A, grants Defendants' Motion to Seal the Financial Information submitted in support of their Requests for Appointment of Counsel, and finds the press has standing to participate in the proceedings before the court relative to public access to court records.

Relevant Factual and Procedural Background

A twenty count indictment charges five defendants, including Lexin and Webster, with conspiracy to commit honest services wire and mail fraud in violation of 18 U.S.C. § 371, honest services wire fraud in violation of 18 U.S.C. §§ 1343 and 1346, and honest services mail fraud in violation of 18 U.S.C. §§ 1341 and 1346. The indictment covers a time frame going back nearly ten years, describes and involves actions and activities of SDCERS, various members of the City Council for the City of San Diego, panels and committees related to and appointed by the Mayor of the City of San Diego and the City Council and other individuals and municipal agencies. In particular, the following matters are pending and involve both Lexin and Webster:

(1) People v. Lexin, San Diego Superior Court Case No. CD190930. In this case, both Defendants are named along with five co-defendants. This is a criminal case alleging violation of California Government Code § 1090 (Conflict of Interest). The preliminary hearing in the case resulted in the Defendants being bound over for trial. Trial will be lengthy.

(2) People v. Grissom, San Diego Superior Court Case No. GIC850246. Both Defendants are named in this civil case brought by the San Diego City Attorney. Hearings are pending in this action.

(3) SDCERS v. Aguirre, (and related cross-actions), San Diego Superior Court Case No. GIC841845. This case was originally a civil action brought by SDCERS challenging certain conduct of the San Diego City Attorney and has now been consolidated with a second lawsuit. The City Attorney, and now the City, have cross-complained.

(4) San Diego Police Officers' Association v. Aguirre, Case No. 05-C1581-H(POR). This is a federal civil action brought on behalf of the San Diego Police Officers' Association raising numerous state and federal claims against the San Diego City Attorney, the Retirement System and numerous individuals, including Defendants Lexin and Webster. The matter is pending before District Judge Huff.

(5) Torres v. City of San Diego, San Diego Superior Court No. GIC852293. This action was brought by plaintiffs, including Defendants Lexin and Webster, against the City of San Diego for declaratory relief and indemnification of attorney fees in the civil actions. The City of San Diego has declined to support Defendants' requests to the City for attorney fees or costs.

(6) SEC Investigation IA-14A. The Securities and Exchange Commission is investigating bond disclosures with regard to the issuance of bonds by the City of San Diego in the years 2002 and 2003. It is the position of the SEC that certain City officials and City employees may have been negligent and/or reckless with regard to omissions and/or misrepresentations in bond disclosure footnotes as they pertain to the pension system. Defendants Lexin and Webster have been notified that they are potential defendants. The Court has been informed that the San Diego City Attorney has indicated that the City will pay attorney fees for Defendants Lexin and Webster regarding the SEC investigation. However, to the Court's knowledge and to date, no attorney fees have been paid.

In addition to the above mentioned cases in which these Defendants are named parties, there are numerous other cases pending in San Diego Superior Court in which both Lexin and Webster are potential witnesses and/or parties. These cases are:

(1) City of San Diego v. Murphy, Zucchet and Inzunza (GIC854373);

(2) McGuigan v. City of San Diego (GIC849883);

(3) City of San Diego v. Callan Associates, Inc. (GIC 852419);

(4) Newsome v. SDCERS (GIC856841);

(5) City of San Diego v. Orrick, Harrington and Suchlift, et al. (GIC857632);

(6) Abdelnour v. City of San Diego (GIC852110).

During argument before this Court on the issue of eligibility for appointed counsel, attorneys for both Lexin and Webster proffered that future attorney fees and costs for the above litigation is likely to exceed 1.5 million dollars excluding indemnification which issue has not yet been resolved.

On February 1, 2006, this Court ordered Lexin and Webster to submit CJA Form 23 affidavits in support of their Requests for Appointment of Counsel. At that time, defense counsel requested that the Form 23 be sealed. All financial submissions from Defendants were provisionally sealed pending a hearing on the request. On February 14, 2006, the Copley Press ("Copley") moved to intervene, seeking access to all court records in the case, which unavoidably put Copley on a collision course with Defendants' sealing requests. Thereafter, on March 14, 2006, additional briefing was ordered on issues surrounding which assets of the Defendants or their families the court could consider in assessing Defendants' eligibility for appointed counsel. All parties submitted briefing on the various issues before the court and argument was heard by the Court on April 17, 2006

Eligibility for Appointed Counsel¹

As part of its evaluation, the Court reviewed each Defendant's original Form 23 and supplemental sealed financial affidavits and requested that the Defendants and government address three issues²: (1) whether separate assets of Defendants' spouses, (2) what part, if any, of Defendants' community property assets, and, (3) whether Defendants' individual retirement accounts, could be considered by the Court in determining Defendants' eligibility for appointed counsel.

Defendants argue that eligibility for appointed counsel should be made without regard to assets of their spouses, if the spouses are unwilling to contribute to the Defendants' costs of defense in this case. Further, Defendants argue that certain community property assets of Defendants and their spouses cannot be used to determine eligibility for appointment of counsel because one spouse cannot liquidate certain community property assets without the consent of the other spouse. Finally, Defendants argue that individual retirement accounts cannot be considered by the Court since they are not subject to attachment, levy and execution and are exempt from liquidation in bankruptcy proceedings. Moreover, Defendants argue that they are now unemployed and unemployable due to the charges pending against them, and that their spouses are already carrying the full financial burden to support them and their families. Therefore, Defendants conclude, whether willing or unwilling, their spouses are unable to support them and their families, and also pay for Defendants' defense, which would be extraordinarily costly.

The government argues that the Court must consider all assets and financial resources of Defendants' families in determining eligibility for appointed counsel, including individual retirement accounts over which the Defendants exercise ultimate control. The government further argues that since Defendants and their spouses each have the right to the control of all community property assets, all assets should be considered by the Court.

Assuming the Court accepts each argument of the government and considers all assets of the Defendants, whether separate property of a spouse, all community assets, separate retirement accounts or any other assets included in the financial affidavits submitted, the Court concludes that these two Defendants are eligible for appointed counsel. As a result, the issue of Defendants' eligibility for appointed counsel is less about whether defendants qualify for appointment of counsel and more about which assets may be considered by the Court assessing whether Defendants can provide partial contribution as an offset toward the attorney fees and related expenses likely to be incurred as part of the defense to the charges pending against them. Thus, despite the conclusion that each Defendant is eligible for appointed counsel, the Court proceeds with an examination each of...