U.S. v. McHan

• Decision Date: 04 December 1996
• Docket Number: 94-5657,Nos. 94-5464,s. 94-5464
• Citation: 101 F.3d 1027
• Parties: 45 Fed. R. Evid. Serv. 880 UNITED STATES of America, Plaintiff-Appellee, v. Charles William McHAN, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellant, v. Charles William McHAN, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1027

101 F.3d 1027

45 Fed. R. Evid. Serv. 880

UNITED STATES of America, Plaintiff-Appellee, v. Charles William McHAN, Defendant-Appellant.

UNITED STATES of America, Plaintiff-Appellant, v. Charles William McHAN, Defendant-Appellee.

Nos. 94-5464, 94-5657.

United States Court of Appeals Fourth Circuit.

Argued Jan. 29, 1996.

Decided Dec. 4, 1996.

ARGUED: Sean Patrick Devereux, Whalen, Hay, Pitts, Hugenschmidt, Master, Devereux & Belser, P.A., Asheville, NC, for Appellant. B. Frederic Williams, Jr., Assistant United States Attorney, Kenneth Davis Bell, Office of the United States Attorney, Charlotte, NC, for Appellee. ON BRIEF: Mark T. Calloway, United States Attorney, Charlotte, NC, for Appellee.

Before HALL, NIEMEYER, and LUTTIG, Circuit Judges.

OPINION

NIEMEYER, Circuit Judge:

After pleading guilty in 1988 to conspiring to distribute marijuana, Charles William McHan was convicted again in 1992 of participating in another marijuana distribution conspiracy, operating a continuing criminal enterprise, and committing various narcotics and tax offenses. The district court sentenced McHan to 150 months imprisonment and ordered him to forfeit $395,670 in proceeds from his drug operations.

On appeal from his 1992 conviction, McHan contends that the district court committed reversible error (1) in denying his motions to quash his indictment on transactional and use immunity grounds; (2) in denying his motion to dismiss various counts of his indictment on double jeopardy grounds; and (3) in admitting at his trial the grand jury testimony of a cooperating co-conspirator who had died before trial. On its cross-appeal of McHan's sentence, the government contends that the district court erred (1) in departing downward under U.S.S.G. § 5G1.3 on the basis of McHan's 1988 sentence even though McHan had completed serving that sentence by the time of his sentencing in this case, and (2) in deducting from McHan's forfeitable drug proceeds the costs of his drug operations as well as one-half of the proceeds received by a drug joint venture of which McHan was a one-half partner.

Finding no error in McHan's 1992 prosecution, we affirm his conviction. But because we conclude that the district court abused its discretion in departing downward to credit McHan for his discharged sentence and erred in deducting from the amount of McHan's criminal forfeiture both the costs of his drug operations and one-half of his drug partnership's revenues, we vacate McHan's sentence and remand this case for resentencing.

I

On May 3, 1988, Charles McHan was arrested while attempting to purchase 200 pounds of marijuana from an undercover government agent, and he and others were indicted for conspiring to possess with the intent to distribute 200 pounds of marijuana, in violation of 21 U.S.C. § 846. McHan pled guilty, and the court sentenced him to 52 months imprisonment.

Contemporaneously with McHan's guilty plea, Paul Cunningham, an indicted co-conspirator, entered into a plea agreement with the government, promising to testify truthfully in any proceedings later designated by the United States. At that time, the government knew that Cunningham was suffering from advanced emphysema and was not expected to live more than two years. To preserve Cunningham's testimony, the government brought him before a federal grand jury in October 1988, where he testified about, inter alia, McHan's involvement in both the 1988 conspiracy and earlier marijuana dealings. Cunningham died less than five months later.

When McHan later learned that the government was considering using his conspiracy plea as a predicate offense for a continuing criminal enterprise (CCE) charge against him, he attempted to withdraw his 1988 guilty plea. The district court, however, denied McHan's motion. On appeal of his 1988 conviction, we affirmed the district court's refusal to allow McHan to withdraw his guilty plea, but we remanded the case for resentencing because the court had erroneously granted McHan a downward departure "in recognition of his strong community ties and substantial charitable contributions." United States v. McHan, 920 F.2d 244, 245 (4th Cir.1990) (McHan I). The district court resentenced McHan in March 1991 to 63 months imprisonment.

Following resentencing, the government obtained in rem civil forfeitures of two of McHan's automobiles and McHan's interest in a 35-acre property. And we affirmed those forfeitures with an unpublished, per curiam opinion. United States v. 35 Acres, No. 90-7376, 940 F.2d 654 (4th Cir. Aug. 15, 1991) (Table) (McHan II).

Beginning in September 1989, during litigation over his attempt to withdraw his 1988 plea, McHan began negotiating a cooperation agreement with the government. When McHan and his attorney, Mark Kadish, met with Assistant United States Attorney (AUSA) Max Cogburn on January 16, 1990, to discuss McHan's potential cooperation, Cogburn questioned McHan about his and others' drug-related activities. Then, on February 2, 1990, two weeks after his initial meeting with Cogburn, McHan submitted to an interview without his counsel by State Bureau of Investigation (SBI) Agent Tom Frye and Federal Bureau of Investigation (FBI) Agent Joe Gilson. No transcript was made of either the January or February interviews.

In March 1990, McHan was indicted in this case for distributing and conspiring to distribute marijuana. Following indictment, his new attorney, Sean Devereux, not only wrote to AUSA Cogburn maintaining that McHan had reached an oral agreement with the government in January 1990 that precluded McHan's indictment, but also filed two motions to quash the indictment, one asserting transactional immunity and the other, use immunity. Nevertheless, Devereux also notified the government of McHan's continued availability for questioning and a polygraph examination.

While the parties "agreed to disagree" about the existence of a nonprosecution agreement, the United States further availed itself of McHan's cooperation in July 1990. FBI Agent Frye and an Internal Revenue Service (IRS) agent questioned McHan on July 17, 1990, and two IRS agents questioned him on July 25, 1990. Sean Devereux attended both debriefing sessions, and a court reporter transcribed the proceedings.

The grand jury returned a superseding 17-count indictment against McHan in September 1990. Count 1 charged that from November 1984 to November 1986 McHan conspired to possess with the intent to distribute and to distribute more than 50 kilograms of marijuana, in violation of 21 U.S.C. § 846. Counts 2-12 alleged various substantive drug offenses during the summer of 1985, in violation of 21 U.S.C. § 841(a)(1) and 18 U.S.C. §§ 2 and 545. Counts 13-15 alleged that McHan had filed false income tax returns from 1985 through 1987, in violation of 26 U.S.C. § 7206(1). Count 16 charged McHan with operating a CCE by "doing, causing, facilitating, and aiding and abetting the importation, possession with intent to distribute, and distribution of marijuana" from November 1984 to May 1988, in violation of 21 U.S.C. § 848. And Count 17 sought a forfeiture under § 853 of any property, including $1,830,870 in currency, that McHan had either "obtained directly or indirectly as a result of" or "used or intended to ... use[ ] ... in any manner or part, to commit, or to facilitate the commission of the felony drug violations charged in the Superseding Indictment."

McHan refiled his motions to quash on immunity grounds. After an evidentiary hearing before a magistrate judge, the judge made findings and recommended denial of McHan's motion asserting transactional immunity. The district court adopted the recommendation. Upon McHan's request, the district court deferred ruling on McHan's second motion, which asserted use or derivative use immunity, until the presentation of evidence at trial. Trial commenced in March 1991.

Shortly after trial began, McHan reached a plea agreement with the government, which the district court accepted. McHan's wife, however, refused to forfeit certain property as required by the agreement, and the court rescheduled McHan's trial to begin again in December 1991.

As the trial began for the second time, McHan filed motions to dismiss his superseding indictment as violative of the Fifth Amendment's Double Jeopardy Clause. The district court denied McHan's motion, and on McHan's interlocutory appeal, we affirmed, holding (1) that McHan's 1984-86 conspiracy constituted "a separate and distinct offense from the 1988 conspiracy" and (2) that "McHan's participation in each of the conspiracies, even though alleged to be predicate acts of a [CCE], constitute[d] separate offenses" from the CCE offense charged. See United States v. McHan, 966 F.2d 134, 136 (4th Cir.1992) (McHan III).

McHan's third trial began on July 20, 1992. On the first day of trial, McHan announced his decision to plead guilty to Counts 2-7 of the superseding indictment, charging him with possessing, distributing, and aiding and abetting the possession and distribution of marijuana in April, July, and August, 1985. During the trial on the remaining counts (except Count 17 seeking forfeiture), the government read Paul Cunningham's grand jury testimony into the record over McHan's objection. The jury convicted McHan of Counts 1 and 8-16.

In his post-trial motions for judgments of acquittal, McHan renewed his double jeopardy challenges, asserting that his trial had developed a fuller evidentiary record than was available to the trial court when it denied his motions earlier. The district court denied those motions. McHan also filed a post-trial motion in December 1993 for a hearing under Kastigar v. United States, 406 U.S. 441, 92 S.Ct. 1653, 32 L.Ed.2d 212(1972), on the government's "direct or derivative use" of information that McHan had provided during his February and July, 1990 debriefings. Following a separate hearing on the motion, the district court also denied it.

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