2011-09-16 gov't brief ordered by court (9-16-2011)

8/3/2019 2011-09-16 Gov't Brief Ordered by Court (9-16-2011)

1/17

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

MELINDA HAAG (CABN 132612)United States Attorney

MIRANDA KANE (CABN 150630)Chief, Criminal Division

JONATHAN SCHMIDT (CABN 230646)Assistant United States Attorney

450 Golden Gate Ave., Box 36055San Francisco, California 94102Telephone: (415) 436-7200Fax: (415) 436-7234E-Mail: [email protected]

Attorneys for Plaintiff

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN FRANCISCO DIVISION

UNITED STATES OF AMERICA,

Plaintiff,

v.

CONNIE ARMSTRONG,

Defendant.

)))))))))

)

No. CR 94 276 PJH

UNITED STATESADDITIONAL BRIEFING RECONNIE ARMSTRONGS 2255MOTION

I. INTRODUCTION

In a July 22, 2011, Order, the Court asked for further briefing on Connie Armstrongs 2255

motion. There has already been extensive briefing in this case and the Court asked for succinct

briefing in a specific format. In particular, the Court asked for briefing that sets forth

Armstrongs (1) claims, (2) arguments regarding procedural default or bar issues, and (3)

arguments regarding the merits.

II. LEGAL STANDARDS

Claims are procedurally barred if they were not raised on direct appeal or if they were

presented and rejected on direct appeal. Where a defendant has procedurally defaulted a claim

by failing to raise it on direct review, the claim may be raised in habeas only if the defendant can

U.S. Additional Briefing re: 2255 Motion

[CR 94 276 PJH] 1

Case4:94-cr-00276-PJH Document611 Filed09/16/11 Page1 of 10


2/17

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

first demonstrate either cause and actual prejudice, or that he is actually innocent. Bousley

v. United States,523 U.S. 614 (1998) (citations omitted). Armstrong does not argue actual

innocence. Rather, he argues cause and prejudice.

A. Cause

The cause standard requires a petitioner to show that some objective factor external to the

defense impeded his efforts to construct or raise the claim. Murray v. Carrier, 477 U.S. 478,

488 (1986). Such objective impediments to compliance with a procedural rule include a

showing that the factual or legal basis for a claim was not reasonably available at the time of

direct appeal or that interference by officials might have made compliance with the procedural

rule impracticable or prevented the claim from being brought earlier. Murray, 477 U.S. at 488.

B. Prejudice

If a petitioner succeeds in showing cause, the prejudice prong of the test requires

demonstrating not merely that the errors at . . . trial created a possibility of prejudice, but that

they worked to his actual and substantial disadvantage, infecting his entire trial with error of

constitutional dimensions. United States v. Braswell, 501 F.3d 1147 (9th Cir. 2007)(citing

United States v. Frady, 456 U.S. 152, 170, (1982)).

If a claim has no merit is does not meet the prejudice prong.

III. ARMSTRONGS FIRST ISSUE FAILURE TO DISCLOSE A PRIOR INVESTIGATION

A. Failure to Disclose a Prior Investigation

The first issue raised by Armstrong is whether there was aBrady violation when the United

States failed to disclose a prior investigation and outside pressure to indict and thereby hid the

fact that initially the investigation was declined for lack of evidence. The most significant

Brady violation in this case arises from the governments failure to disclose the existence of a

recent, prior investigation . . . that closed upon lack of evidence of a federal crime.

Armstrongs August 18, 2011, Brief (hereafter Brief) at 9.

Armstrongs claim is based on two documents he received after his appeal through a FOIA

request. These documents are a September 23, 1988, letter from the FBI to the United States

Attorneys Office and a February 8, 1991, letter from the FBI to the United States Attorneys


[CR 94 276 PJH] 2



3/17

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Office. Brief, Exhibits A and B.

In the 1988 letter, the FBI confirms that the United States Attorneys Office declined

prosecution of a case involving Hamilton Taft and Company, but would reconsider its opinion if

further information could be obtained. The letter contains no information about the substance

of the allegation or the information gathered at that point.

In the 1991 letter, the FBI refers a case involving Chip Armstrong and Hamilton Taft and

Company to the United States Attorneys Office for possible prosecutions. The letter details the

earlier investigation, notes the United States Attorneys Office earlier declination and provides

new information of criminal activity.

These two documents suggest that the United States Attorneys Office reopened the

investigation after getting this new information. According to Armstrong [t]he prior Hamilton

Taft investigation was clearly exculpatory and obviously implicatesBrady. Brief at 10.

Armstrong also claims that the government should have disclosed the high level of political

involvement at the onset of the 1991 inquiry. Brief at 11-12. And that the political influence

both underscores and explains the governments reversal on the question of criminal culpability,

which found no violation of federal law in 1988 but commenced a public prosecution 30 months

later. Brief at 14.

Put succinctly, Armstrong asserts that there was aBrady violation because the government

did not reveal and thus he could not argue that the government had declined the case in 1988

because of insufficient evidence.

B. Cause

Armstrong contends and the government does not dispute that he could not have raised this

claim on direct appeal because he learned the information through a FOIA request after the

direct appeal.

C. Prejudice and Merit

The failure to disclose the prior investigation was not aBrady violation. UnderBrady, the

prosecution violates a defendant's due process rights if it fails to turn over evidence that is

material either to guilt or to punishment.Raly v. Ylst, 470 F.3d 792, 804 (9th Cir.2006)


[CR 94 276 PJH] 3



4/17

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

(quotingBrady, 373 U.S. at 87) (internal quotation marks omitted). To prevail on aBrady

claim, a defendant must demonstrate that: (1) the evidence at issue is favorable, either because it

is exculpatory or because it is impeaching; (2) such evidence was suppressed by the State, either

willfully or inadvertently; and (3) prejudice resulted.Id. at 804.

Armstrong argues that the failure to disclose the prior investigation was aBrady violation

because it had an exculpatory conclusion. Brief at 11. He cites United States v. Fernandez

559 F.3d 303 (5th Cir. 2009) to support his conclusion. Brief at 10. Fernandez supports the

opposite conclusion. Fernandez found that there was noBrady violation when the government

failed to turn over an earlier IRS internal report that apparently closed a criminal investigation.

559 F.3d at 319. The Fernandez court discussing whether the report was exculpatory noted that

[o]ther courts have held that the subjective opinion of a non-witness agent as to the quantity or

quality of evidence is not relevant to this question.Id. (citations omitted). Here too, an earlier

judgement about the quality or quantity of the evidence is not exculpatory. Moreover the earlier

judgement was superseded when the FBI developed new evidence.

Armstrong further suggests that the alleged political pressure to reopen the investigation is

exculpatory because it explains why the government went back on its initial judgement about the

insufficiency of the evidence. Armstrong does not argue that the prosecution was brought for

impermissible reasons, rather Armstrong claims that the failure to disclose political pressure is

significant because it would explain[] the governments reversal on the question of criminal

culpability. Brief at 14.1

As preliminary matter, Armstrong has failed to show that there was any political pressure to

investigate or charge the case or that the alleged pressure led to a reversal of an earlier decision

about the quantum of evidence. Armstrong supports his argument by pointing to an FBI

memorandum, a lawsuit, a Wall Street Journal Article, and an FBI letter. Brief at 12 and

1 Political pressure is generally not an impermissible grounds for bringing charges. So

long as the prosecutor has probable cause that a defendant committed a crime, the decision

whether or not to prosecute, and what charge to file or bring before a grand jury, generally rests

entirely in [a prosecutors ] discretion.Bordenkircher v. Hayes, 434 U.S. 357, 364 (1978).


[CR 94 276 PJH] 4



5/17

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Exhibits D, F, G and H. These documents when read together or individually do not establish

any pressure on the FBI or the United States Attorneys Office to investigate or prosecute Mr.

Armstrong.

However even if Armstrongs theory is correct that political pressure explains the decision to

reopen an investigation that earlier the government declined to prosecute, there is no exculpatory

information orBrady violation. A prosecutors assessment early in the investigation that there

was insufficient evidence is not exculpatory.

There is no merit to Armstrongs claim that the failure to disclose the earlier investigation

or the alleged political pressure was aBrady violation. Hence Armstrong has failed to show

prejudice. Accordingly this claim is both procedurally barred and fails on the merits.

IV.ARMSTRONGS SECOND ISSUE FALSE STATEMENTS MADE TO OPPOSE A CONTINUANCE

A. False Statement to Oppose a Continuance

The second issue Armstrong raises is whether alleged false statements made by the

government to oppose a continuance was fraud on the court such that the judgment should be set

aside. Brief at 17. Armstrong distinguishes this issue from the issue he failed to raise on direct

appeal: whether the the trial court abused its discretion in denying a continuance to allow

review of the tape. Brief at 16.

According to Armstrong, when opposing a continuance because of the late disclosure of the

tape, the government falsely represented that the tapes were made as part of the Dallas, Comp-U-

Check investigation and that investigation was unrelated to the San Francisco, Hamilton Taft

investigation. Brief at 16 referencing Exhibit I p. 53 and Exhibit J p. 55.

B. Cause



direct appeal.


Armstrong argues that he was prejudiced, because had he known about the alleged false

statements he would have requested and the Court would have granted a motion to set aside the


[CR 94 276 PJH] 5



6/17

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

judgment because of fraud on the court. Brief at 17.

Armstrongs argument fails. First Armstrong cannot establish that the government lied to the

Court. In a January 24, 1977, affidavit FBI SA Hatcher told the Court that the two case agents:

knew of the existence of the Dallas FBIs investigation of Armstrongs activitiesat Comp-U-Check. We understood that this investigation related to conduct thatoccurred well after the bankruptcy of Hamilton Taft. To our knowledge thisinvestigation was unrelated to Hamilton Taft except for the common involvementof Armstrong.

Brief, Exhibit J p. 55 par 4.

Armstrong argues that this statement is false because the tapes were actually prepared by

the Dallas FBI office at the express request of AUSA Yamaguchi in support of his prosecution of

the instant [SF Hamilton Taft] case. Brief at 16. Armstrong cites to Exhibit K for this

assertion.

Exhibit K is an August 4, 1993, communication from the San Francisco FBI office to the

Dallas FBI office regarding Connie Chip Armstrong, Jr. The communication states that SA

Hatcher has obtained verbal authorization from United States Attorney, MICHAEL

YAMAGUCHI for . . . confidential source to record conversations with subjects of this case.

The communication is unclear about the San Francisco United States Attorneys offices role

in the taping. Authorizing or allowing recorded conversations is not the same as requesting

recorded conversations to support a prosecution. It appears that because of the overlapping

investigations, the Dallas FBI sought San Franciscos approval before recording conversations

with Armstrong. This communication does not establish that the tapes were made to support the

Taft prosecution.

Even assuming that the tapes were made for the Taft prosecution and some of the

government statements opposing a continuance were false, there are no grounds to set aside

Armstrongs conviction because of fraud on the court.

Fraud on the court is a civil concept. The cases Armstrong cites in his motions are civil

cases applying Federal Rule of Civil Procedure, Rule 60(b), which allows a court to set aside a

civil judgement for fraud on the court. This civil remedy cannot be used to collaterally attack a

criminal conviction. The Federal Rules of Civil Procedure, by their own terms, apply only to


[CR 94 276 PJH] 6



7/17

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

civil actions. See Fed.R.Civ.P. 1 (stating that these rules govern the procedure . . . in all suits

of a civil nature). The few circuits that have addressed the question have found that a defendant

may not bring an action for fraud upon the court to collaterally attack a criminal conviction. See

United States v. O'Keefe, 169 F.3d 281, 285 (5th Cir.1999) (noting that Supreme Court precedent

certainly does not require or contemplate that Rule 60(b)(6) [for fraud upon the court] . . . be

applied in criminal cases); United States v. Mosavi, 138 F.3d 1365, 1366 (11th Cir.1998) (We

hold that the defendant cannot challenge the criminal forfeiture orders at issue under the Federal

Rules of Civil Procedure . . . Rule 60(b) simply does not provide for relief from judgment in a

criminal case . . . ).

Even if one could collaterally attack a criminal conviction based on fraud on the court, here

there was no fraud on the court. In re Levander, 180 F.3d 1114 (9th Cir. 1999) the Ninth Circuit

explained that not all fraud is fraud on the court:

A court must exercise its inherent powers with restraint and discretion in light oftheir potency. Although the term fraud on the court remains a nebulousconcept, that phrase should be read narrowly, in the interest of preserving thefinality of judgments. Simply put, not all fraud is fraud on the court. Toconstitute fraud on the court, the alleged misconduct must harm[ ] theintegrity of the judicial process. To determine whether there has been fraud onthe court, this circuit and others apply Professor Moore's definition:

Fraud upon the court should, we believe, embrace only that species offraud which does or attempts to, defile the court itself, or is a fraudperpetrated by officers of the court so that the judicial machinery can not

perform in the usual manner its impartial task of adjudging cases that arepresented for adjudication.At 1119 (internal citations omitted).

Here, the alleged falsehood did not rise to this level. The issue of whether the tapes were

made for the San Francisco or Dallas investigation, while noted by the trial court, was tangential

to its decision regarding the continuance. The trial courts analysis of whether to grant a

continuance was primarily based on the fact that the government was not offering the tapes into

evidence. The trial court explained: [w]ere not talking about evidence that the government or

that the defense is going to be presented with having been put on by the government. So I think

were down to really aBrady question. See Reporters Transcript, January 29, 2007, hearing

pp. 3736-3742, at 3740, attached as Exhibit 1. The Brady question referenced by the trial court

had to do with the contents of the tape not the impetus for their creation, and so the court


[CR 94 276 PJH] 7



8/17

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

suggested appointing a special master to review the tapes. Id.at 3742.

Thus whether the tapes were made in connection to the San Francisco or Dallas investigation

was of little relevance to the trial courts continuance decision and to the trial as a whole. And,

even if fraud on the court applied in a criminal context, here there was no fraud on the court.

There is no merit to Armstrongs claim that the conviction should be set aside because of the

alleged false statements to obtain a continuance was fraud on the court. Hence Armstrong has

failed to show prejudice. Accordingly this claim is both procedurally barred and fails on the

merits.

V.ARMSTRONGS THIRD ISSUE THE GOVERNMENTS FAILURE TO DISCLOSE ITS MATERIALPARTICIPATION IN A COLLATERAL PROCEEDING

A. Failure to Disclose Material Participation in a Collateral Proceeding

The third issue raised by Armstrong is the governments failure to disclose its material

participation in a collateral proceeding. Brief at 18. According to Armstrong, the failure to

disclose the governments participation in the bankruptcy proceeding prevented him from

arguing collateral estoppel to preclude the governments ability to argue a legal theory in his

criminal trial. Brief at 18. Armstrong distinguishes this issue from the law of the case issue,

which was raised and rejected on direct appeal. Brief at 17.

Armstrong argues that the government took contrary legal positions in the bankruptcy

proceeding and the criminal proceeding arguing that the money was the property of Hamilton

Taft in the bankruptcy proceeding and arguing that the money was the property of Hamilton

Tafts clients in the criminal proceeding. Brief at 19. Armstrong further states that because of

the close alignment between the prosecution team and the bankruptcy team . . . the two are in

privity for purposes of collateral estoppel. Brief at 21. Armstrong concludes that had he known

of this close alignment he could have argued that the government was bound by the holding in In

re Hamilton Taft & Co., 53 F.3d 285 (1995) that the property was not held in trust and was theproperty of Armstrongs company. Brief at 19.

B Cause




[CR 94 276 PJH] 8



9/17

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

direct appeal.


Armstrongs arguments fail because he could not have argued collateral estoppel in the

criminal proceeding.

Collateral estoppel applies to preclude an issue adjudicated in an earlier proceeding if: (1) the

issue was necessarily decided at the previous proceeding and is identical to the one which is

sought to be relitigated; (2) the first proceeding ended with a final judgment on the merits; and

(3) the party against whom collateral estoppel is asserted was a party or in privity with a party at

the first proceeding. Reyn's Pasta Bella, LLC v. Visa USA, Inc,. 442 F.3d 741 (9th Cir.2006).

Armstrong cannot meet any of these conditions.

First, the issue decided in the bankruptcy proceeding was not identical to one in the criminal

proceeding. The issueIn re Hamilton Taftwas whether the funds used to pay the IRS were

property of the debtor under 11 U.S.C. 547(b). See 53 F.3d 285, 287. The issue in the criminal

trial was whether the funds, whether property of the debtor or not, were also client funds. As the

Ninth Circuit noted in Armstrongs direct appeal, the holding in In re Hamilton Taftthat

Hamilton Taft does not hold client funds in trust for the IRS-is inapplicable to the issue of what

obligations existed between the company and its clients. United States v. C. Armstrong, 216

F.3d 1084, * 1 Ftnt 2 (9th

Cir. 2000) (emphasis in original).

Second there was no final judgement on the merits. As Armstrong acknowledges the

decisionIn re Hamilton Taft & Co. was vacated. Brief at 23, see alsoUnited States v. C.

Armstrong, 216 F.3d 1084,* 1 Ftnt 2 (9th Cir. 2000) (In re Hamilton Tafthas been vacated as

moot, and thus is no longer binding precedent).

Citing Bancorp Mortgage Company v. Bonner Mall Partnership, 513 U.S. 18 (1994)

Armstrong argues that the Ninth Circuit lacked the power to vacate its own opinion. Brief at 23.

Bonner Mall is not on point. The issue in Bonner Mall was whether an appellate court can

vacate a judgement brought before itfor review under 28 U.S.C. 2106. Here the Ninth

Circuit vacated its own opinion, not a lower court decision brought before it for review. SeeIn

re Hamilton Taft & Co., 53 F.3d 285 (9th Cir.1995), opinion vacated, 68 F.3d 337 (9th


[CR 94 276 PJH] 9



10/17

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Cir.1995). HenceBonner Mall does not apply.

Third, Armstrong had not established that the government and the bankruptcy trustee were t

a party in privity. A privity finding necessitates a showing that control was exercised over the

litigation by the party alleged to be in privity. Troy Co. v. Prods. Research Co., 339 F.2d 364,

367 (9th Cir.1964). Privity is a legal conclusion designating a person so identified in interest

with a party to former litigation that he represents precisely the same right in respect to the

subject matter involved. United States v. Schimmels, 127 F.3d 875, 881(9th Cir.1997) (citations

and internal quotations omitted). Even if Armstrongs allegation that the government and the

bankruptcy trustee had a close alignment, is correct (Brief at 21), this does not establish that

the government controlled the litigation in the bankruptcy proceeding. SeeUnited States v.

Bhatia, 545 F.3d 757 (9th Cir 2008) (There was no privity between United States and borrower

in borrower's prior civil breach of contract suit against lender, and thus borrower's dismissal of

suit with prejudice did not bar, under doctrines of res judicata or collateral estoppel, lender's

prosecution for wire fraud and money laundering arising from same facts, even if fruits of

government's parallel criminal investigation of lender may have aided borrower).

There is no merit to Armstrongs claim that had he known about the alleged close alignment

between the government and the bankruptcy trustee he could have precluded the government

from arguing at trial that the Hamilton Taft funds were client funds. Hence Armstrong has failed

to show prejudice. Accordingly this claim is both procedurally barred and fails on the merits.

VI. CONCLUSION

Armstrongs 2255 motion should be denied because (a) he cannot establish prejudice and

(2) his claims lack merit.

DATED: September 16, 2011 Respectfully submitted,

MELINDA HAAGUnited States Attorney

_______/s/_________________________JONATHAN SCHMIDTAssistant United States Attorney


[CR 94 276 PJH] 10



11/17

Case4:94-cr-00276-PJH Document611-1 Filed09/16/11 Page1 of 7


12/17



13/17



14/17



15/17



16/17



17/17


2011-09-16 gov't brief ordered by court (9-16-2011)

Documents