United States v. Walters
910 F.3d 11
2d Cir.2018Background
- Walters, a professional gambler, was indicted and convicted for insider trading in Dean Foods and Darden; sentenced to 60 months, a $10M fine, forfeiture of $25,352,490, and restitution later vacated and remanded for reconsideration.
- FBI Special Agent David Chaves leaked confidential grand-jury / investigative information to reporters at The Wall Street Journal and The New York Times from ~April 2013–June 2014; the Government later confirmed the leaks and referred Chaves for investigation.
- Leaked articles disclosed detailed investigatory facts (targets, trades, subpoenas, investigative theories); the FBI and USAO reacted internally and restricted media contacts once publication was imminent.
- Walters moved to dismiss the indictment arguing (1) Rule 6(e) grand-jury secrecy violations and extraordinary government misconduct (including claimed prejudice because leaks revived the probe and prompted cooperating witness Davis), (2) subornation of perjury at trial, and (3) insufficient evidence as to Darden counts; he also challenged restitution and forfeiture.
- District court (1) presumed a Rule 6(e) violation but denied dismissal as Walters showed no prejudice or fundamental unfairness, (2) denied a new trial on suborned-perjury grounds, and (3) adopted the Government’s end-of-day method for forfeiture; restitution was vacated on appeal for reconsideration under Lagos.
Issues
| Issue | Walters' Argument | Government's Argument | Held |
|---|---|---|---|
| Whether Rule 6(e) leaks require dismissal of the indictment | Dismiss because FBI leaks substantially influenced grand jury (revived investigation, procured Davis’s cooperation) or misconduct was systematic/pervasive so prejudice may be presumed | No prejudicial effect shown; investigation was active, Davis likely would have cooperated absent leaks; other remedies suffice | Denied — dismissal not warranted; prejudice not shown and supervisory dismissal is drastic |
| Whether pervasive/"outrageous" government misconduct violates Due Process and requires dismissal | Leaks were systematic/pervasive and shocking to conscience — due process violated | Conduct, while improper, did not rise to coercion or bodily-violation level required for dismissal; prejudice absent | Denied — conduct not the sort that shocks the conscience; no basis for dismissal |
| Whether an evidentiary hearing on leaks was required | Remand for hearing to develop scope and prejudice | Extensive paper record and agent invokes Fifth; hearing would not materially add | Denied — district court did not abuse discretion in declining a hearing |
| Whether trial evidence (including Davis’s "bat phone" testimony) was insufficient or tainted by suborned perjury | Davis committed perjury re: bat phone and Government knew; conviction should be set aside | Inconsistencies likely memory errors; testimony immaterial given overwhelming circumstantial evidence; government did not knowingly present perjury | Denied — no clear error or abuse of discretion; evidence sufficient, including for Darden counts |
Key Cases Cited
- Bank of Nova Scotia v. United States, 487 U.S. 250 (presumption of prejudice only in limited "fundamental" grand-jury errors)
- Douglas Oil Co. v. Petrol Stops Nw., 441 U.S. 211 (grand jury secrecy essential)
- United States v. Mechanik, 475 U.S. 66 (harmlessness of petit-jury verdict to grand-jury error)
- United States v. Cuervelo, 949 F.2d 559 (2d Cir. review of motions to dismiss for outrageous governmental conduct)
- United States v. Vilar, 729 F.3d 62 (forfeiture and review principles)
- United States v. Yousef, 327 F.3d 56 (de novo review of dismissal denial; clear-error review of factual findings)
- Vasquez v. Hillery, 474 U.S. 254 (racial discrimination as structural grand-jury error)
- Ballard v. United States, 329 U.S. 187 (exclusion of women from grand jury as structural error)
- United States v. Al Kassar, 660 F.3d 108 (due process "outrageous conduct" standard)
- United States v. Chin, 934 F.2d 393 ("shocks the conscience" test)
- Rochin v. California, 342 U.S. 165 (extreme coercion examples)
- Watts v. Indiana, 338 U.S. 49 (coercive interrogation examples)
- Brown v. Mississippi, 297 U.S. 278 (confessions by brutality)
- United States v. Lard, 734 F.2d 1290 (government-created crime approach)
- United States v. Myers, 692 F.2d 823 (limits on outrageous-conduct claims)
- United States v. Twigg, 588 F.2d 373 (outrageous conduct where government implanted criminal design)
- United States v. Contorinis, 692 F.3d 136 (forfeiture/disgorgement principles in insider-trading cases)
- United States v. Treacy, 639 F.3d 32 (district court discretion in estimating forfeiture amounts)