United States v. Sedaghaty

• Decision Date: 23 August 2013
• Docket Number: No. 11–30342.,11–30342.
• Citation: 728 F.3d 885
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. Pirouz SEDAGHATY, Defendant–Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

728 F.3d 885

UNITED STATES of America, Plaintiff–Appellee,

v.Pirouz SEDAGHATY, Defendant–Appellant.

No. 11–30342.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Dec. 3, 2012.

Filed Aug. 23, 2013.

Steven T. Wax (argued), Federal Public Defender, Portland, OR; Lawrence Matasar, Lawrence Matasar, P.C., Portland, OR, for Defendant–Appellant.

Kelly A. Zusman (argued), Christopher Cardani, and Charles Franklin Gorder, Jr., Assistant United States Attorneys, Office of the United States Attorney for the District of Oregon; Virginia Marie Vander Jagt, Counsel, United States Department of Justice, Washington, D.C., for Plaintiff–Appellee.

Appeal from the United States District Court for the District of Oregon, Michael R. Hogan, District Judge, Presiding. D.C. No. 6:05–cr–60008–HO–2.

Before: MARY M. SCHROEDER, M. MARGARET McKEOWN, and RICHARD C. TALLMAN, Circuit Judges.

Opinion by Judge McKEOWN; Partial Concurrence and Partial Dissent by Judge TALLMAN.

OPINION

McKEOWN, Circuit Judge:

This is a tax fraud case that was transformed into a trial on terrorism. The case stems from charges that Pirouz Sedaghaty (known as Pete Seda) falsified a 2000 charitable organization tax return in order to conceal his support of an independence movement in Chechnya, a republic in the Caucasus mountains of southern Russia. Seda founded the U.S. branch of the Al–Haramain Islamic Foundation, Inc. (“Al–Haramain”), a Saudi Arabian charity that the U.S. government suspected of funding terrorist activities and supporting the Chechen mujahideen (holy warriors engaged in violent jihad against Russian forces) under the guise of humanitarian aid.¹ Seda's defense was based on his claim that any discrepancy on the tax return could be traced to his accountant, as well as on his long history of peaceful engagement on behalf of Islam and his track record of charitable work in the United States and abroad.

The appeal illustrates the fine line between the government's use of relevant evidence to document motive for a cover up and its use of inflammatory, unrelated evidence about Osama Bin–Laden and terrorist activity that prejudices the jury. This tension was evident both before and during trial and dominates much of the briefing on appeal.

Similarly, what was charged as a tax fraud case in fact involved significant amounts of classified materials and multiple in camera, ex parte reviews as well as classified proceedings. These classified proceedings figure prominently in the appeal. To the extent possible, we have written our opinion without reference to classified materials so as to allow the maximum transparency in this criminal case. To supplement this opinion, we are filing concurrently, under appropriate seal, a classified opinion with respect to the substitution—a terse summary that the government provided Seda in place of actual classified documents that are relevant and helpful to his defense. That opinion also addresses in more detail Seda's claim regarding foreign bank records.

We recognize that a system that permits ex parte hearings and requires the court to pass on the legitimacy of claims related to classified information places a heavy burden on the court. We also recognize that defense counsel, who best know their client's interests, are placed at a serious disadvantage in challenging classified proceedings in a vacuum. Toward that end, we take our duty very seriously and undertake our review of classified information with special scrutiny.²

Following his conviction for tax violations, Seda challenges a host of rulings. In particular, he takes aim at the prosecution's failure to disclose its interview notes regarding payments to a key witness, the court's handling of classified information under the provisions of the Classified Information Procedures Act (“CIPA”), 18 U.S.C. app. 3, the breadth of computer and other documents seized pursuant to a warrant, and various evidentiary rulings. Seda also claims that he was deprived of a fair trial by the government's refusal to aid him in obtaining evidence from overseas, by its appeal to religious preferences, and by its use of inflammatory evidence of guilt by association.

In the main, we are not persuaded by Seda's arguments regarding the classified material, the district court's evidentiary decisions, the notion that the government was one-sided in its effort to obtain evidence abroad, or his view that the government's characterization of the evidence rose to the level of a constitutional violation. Nonetheless, there were significant errors that merit a new trial.

We conclude that the government violated its obligations pursuant to Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963), by withholding significant impeachment evidence relevant to a central government witness. After reviewing the classified record, we also determine that the court erred in approving an inadequate substitution for classified material that was relevant and helpful to the defense. The substitution did not satisfy CIPA's requirement that the summary “provide the defendant with substantially the same ability to make his defense as would disclosure of the specific classified information.” 18 U.S.C. app. 3 § 6(c)(1). We reject Seda's remaining challenges to the handling of classified information under CIPA. We also conclude that the search that the government conducted of Seda's computer hard drives went well beyond the explicit limitations of the warrant and remand to the district court to consider the appropriate scope of items seized and whether the exclusionary rule should apply.

We are particularly troubled by the cumulative effect of these errors, which resulted in admitting evidence illegally seized while denying Seda both material impeachment evidence and potentially exculpatory evidence. See United States v. Wallace, 848 F.2d 1464, 1476 (9th Cir.1988) (emphasizing the cumulative effect of three trial errors improperly admitting impeachment evidence of a defense witness, erroneously bolstering the testimony of a prosecution witness, and admitting defendant's statements that should have been suppressed). Although each of these issues potentially merits a remand or a new trial on its own, given these multiple, significant errors, “ ‘a balkanized, issue-by-issue harmless error review’ is far less effective than analyzing the overall effect of all the errors in the context of the evidence introduced at trial....” United States v. Frederick, 78 F.3d 1370, 1381 (9th Cir.1996) (quoting Wallace, 848 F.2d at 1476). Considering the errors both individually as well as cumulatively in light of the evidence as a whole, we conclude that the errors were prejudicial and reverse and remand for a new trial. As a consequence, we do not address Seda's arguments regarding his sentence.

Background

In the 1990s, Al–Haramain was one of Saudi Arabia's largest non-governmental organizations, with more than fifty offices worldwide distributing humanitarian aid and funding religious education. With close ties to the Saudi government, it has been described by U.S. government officials as the “United Way” of Saudi Arabia. Apart from humanitarian aid and educational materials, however, some Al–Haramain offices distributed funding and other support to terrorists. Based on joint submissions by the governments of the United States and Saudi Arabia, the United Nations implemented sanctions against Al–Haramain offices in eleven countries beginning in 2002. By 2004, the Saudi government had dissolved Al–Haramain altogether. That same year, the United States designated former Al–Haramain principals Aqil Al–Aqil and Soliman Al–Buthe and the U.S. chapter of Al–Haramain as “Specially Designated Global Terrorists” subject to financial sanctions because of their role in providing financial support to terrorist groups. Seda came under investigation by the FBI and the IRS because of his role in the U.S. chapter of Al–Haramain.

Seda moved from his native Iran to Ashland, Oregon, in the 1970s. After attending Southern Oregon University, he became a well-known arborist in the city. With the mission of promoting the understanding of Islam and building bridges within the community, Seda cofounded the Qur'an Foundation with his friend David Rodgers, who had grown up in Ashland. The Qur'an Foundation hosted public lectures and distributed the Qur'an locally and to prisoners who requested copies.

While working as a horse trainer in Saudi Arabia, Rodgers was approached by Al–Haramain officer Al–Buthe, who suggested that Al–Haramain could supply Qur'ans to the Ashland effort. In 1997, the two organizations entered into a partnership to “promote peace through understanding of Islam” and Al–Buthe and Seda opened Al–Haramain's only U.S. branch (“Al–Haramain–U.S.”). Al–Aqil became the U.S. branch's president, Al–Buthe its treasurer, and Seda its secretary. Seda opened a bank account for Al–Haramain–U.S. at Bank of America and successfully applied for tax-exempt status.

In late 1999, both Al–Haramain and its U.S. branch solicited funds for aid to the people of Chechnya. Although the efforts of Al–Haramain were conducted under the supervision of the Saudi government and through a separate entity the government created, the Saudi Joint Relief Committee, at trial it was disputed whether these efforts were truly humanitarian in nature or a cover to fund the mujahideen operating in Chechnya.

In February 2000, an engineer and construction executive in England, Dr. Mahmoud Talaat El–Fiki, contacted Al–Haramain saying that he wanted to donate $150,000 for Chechen relief. Al–Haramain instructed El–Fiki that he could wire the money for “the poor, orphans and refugees” in Chechnya to its Al–Rajhi Bank account in Riyadh, Saudi Arabia, or its Bank of America account in Ashland. El–Fiki transferred $150,000 to the Al–Haramain–U.S. account in Ashland on February 24, 2000. On March 7, Al–Buthe traveled from Saudi Arabia to Oregon....