United States v. Bond

Jan 20, 2009

06-50628

Versions:552 F.3d 1092

2009 WL 115487

2009 U.S. App. LEXIS 905

O’SCANNLAIN, Circuit Judge:

We must decide whether the government withheld Brady infоrmation from a defendant in a wire fraud prosecution arising out of an electric power sales scheme in the deregulated California market. 1

In 1998, California deregulated its electricity industry, which, at the time, consisted of three major companies: Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric. Although these utilities cоntinued to transmit and to distribute electricity, after deregulation California customers could choose to buy their power from the regional supplier, or they could select a different electric service provider (“ESP”).

Attracted by the business opportunity presented by deregulation, Defendanb-Aр-pellant Bond bought an inactive shell company in 1998 that had previously been involved in providing electricity and formed PowerSource Corporation (“Pow-erSource”). Bond was its chief executive officer, and marketed the company as an ESP that would provide residential and commerсial electricity throughout the state. PowerSource did not operate its own power stations. Rather, the company purchased electricity from other sources and then sold it to its customers at a slight mark-up.

PowerSource divided California into 39 districts in which it would sell power. It planned to have each district financed by a partnership that would contribute capital in return for a percentage of Power-Source’s profits from that district. Power-Source hired Power Capital Funding Group (“PowerCapFunding”) to sell the partnerships. PowerCapFunding was run by Ronald Johnson and James Miles.

PowerCaрFunding, in turn, hired various telemarketing “boiler rooms” to sell units in the partnerships to investors. The boiler rooms (euphemistically called “independent selling organizations”) then called individuals, in hope that they would be interested in buying into one of the partnerships. Interested individuals were sent further information by mail.

The telеmarketing entities sold partnership units from late 1998 through summer 2001. Each partnership unit cost $10,000, and the investment plan anticipated that each partnership would encompass 60 partnership units. Once sixty 709 units had been sold, the partnership was closed and another partnership was opened.

The finanсing scheme was a scam. Numerous material misrepresentations and omissions were made to the potential investors by the telemarketers and in the printed marketing materials. PowerCap-Funding, with input from Bond, created Partnership Memoranda that detailed the purpose and terms of the partnership offering. These memoranda stated that sales commissions on each investment unit would be between 15 and 45 percent. In fact, however, PowerCapFunding retained a 61 percent sales commission. The mem-oranda also contained misleading biographical information on Bond and other signifiсant PowerSouree figures. The memoranda further identified several individuals as serving in consulting or executive capacities who had never done so and had not given permission for their personal information to be included in the partnership marketing materials.

Also significant, the Partnership Memo-randa included partnership income forecasts based on the number of customers PowerSouree projected gaining in each particular district. These, too, relied on information Bond had provided. The first partnership memorandum, dated October 1, 1998, projected a $1.6 million profit in one of thе districts. And even though PowerSouree was not meeting its market penetration targets, the projections increased with each new partnership marketed to the investors.

PowerSouree and PowerCapFunding also conducted conference calls with investors in each partnership. The рurpose of these calls was to solicit additional investments and to reassure investors. Bond told the investors that after a year, they could convert their partnership units into PowerSouree stock worth $12,500. In reality, the units were converted into worthless PowerSouree Class B preferred stock. The investors were also erroneously told that PowerSouree was successfully acquiring customers, that it had a state-of-the-art computer system that could handle up to two million customers, and that its financial situation remained viable.

In the end, PowerSouree never had more than 6,885 customers, and it struggled to pеrform the most basic business functions, like customer billing. In March 2001, PowerSouree decided to return all of its ‍‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‍customers to the three major electricity companies, and after July 2001, it had zero customers. Ultimately, the investors lost nearly $2.5 million, recouping at most $80 on each $10,000 investment.

In November 2002, FBI agents interviewеd Bond, who stated that he had worked for PowerSouree only from 1997-1999 and only as a consultant. He identified E. Douglas Mitchell as the CEO of PowerSouree. Apparently, Bond’s attempt to minimize his involvement with PowerSouree was initially successful. In 2003, seven individuals connected to Pow-erSource, including Mitchell and Johnsоn, were indicted in the Southern District of Florida. Bond, however, was not among them. Six of these individuals pled guilty. 2 Mitchell, however, went to trial and was convicted of conspiracy to commit wire fraud and mail fraud in violation of 18 U.S.C. § 371. Several of the individuals who pled guilty, including Johnson, testified at Mitchell’s trial. Bond was, of coursе, aware of the Florida proceedings and that various individuals with whom he had worked were testifying. In early 2005, the government specifically gave Bond’s attorney the contact information for the court reporter transcribing the Florida trial.

In July 2005, Bond himself was indicted in the Central District of California for his role in the PowerSouree/ PowerCapFund investment scheme. Specifically, he was charged with one count of conspiracy to commit mail and wire fraud under 18 U.S.C. § 371, seven counts of mail fraud under 18 U.S.C. § 1341, three counts of wire fraud under 18 U.S.C. § 1343, and one count of making a false statement under 18 U.S.C. § 1001. Shortly thereafter, the government again gave Bond’s counsel the contact information for the Florida court reporter. During the pretrial proceedings in Bond’s case, one of Bond’s trial counsel also rеpresented that he had, in fact, been in contact with the Florida court reporter and he had obtained at least some transcripts from the Florida proceedings.

In conversations with defense counsel, the government repeatedly referred to Johnson and some of the other individuals indicted in Florida as possible witnesses against Bond and specifically listed Johnson on the witness list it filed with the district court. Additionally, the government provided Bond’s counsel with two agent interview summaries from when they had questioned Johnson, as well as agents’ notes from several other meetings involving Johnson. However, the government ultimately decided not to call Johnson as a witness, and Bond failed to make any effort to subpoena him as a witness for the defense. Thus, Johnson never testified at Bond’s trial.

The jury convicted Bond on all charges. The Pre-Sentencing Report (“PSR”) submitted to the court concluded that Bond had a catеgory three criminal history and that his base offense level was six. Among other sentencing enhancements, the report recommended a 16-level enhancement under U.S.S.G. § 2B1.1 for amount of loss between $1.0 and $2.5 million.

At the sentencing hearing, Bond raised numerous objections to the PSR, but he did not challenge the amount-of-loss enhancement. In fact, Bond’s counsel agreed that the “probation officer correctly analyzed and applied the guidelines.” The district court, considering the relevant sentencing factors, sentenced Bond to the statutory maximum of 60 months’ imprisonment on each of the 12 counts of conviction to be served partially concurrently and partially consecutively, for a total of 96 months’ imprisonment. The district court further ordered Bond to pay $2,435,441 in restitution. Bond timely appealed.

On appeal, Bond argues that Johnson’s testimony would have been favorable to him and that the government “suppressed” such evidence in violation of Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963), by failing to call Johnson as a government witness after indicating that it would do so.

Relying on United States v. Aichele, the government responds that where the “defendant has enough information to be able to ascertain the supposed Brady material on his own, there is no suppression.” 941 F.2d 761, 764 (9th Cir.1991) (citing United States v. Dupuy, 760 F.2d 1492, 1502 n. 5 (9th Cir.1985)). The government contends ‍‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‍that Johnson’s testimony was not suppressed for Brady purposes because Bond was fully aware of Johnson’s existence and the substance of his likely testimony, as Bond had received transcripts of Johnson’s testimony in the Florida trial. See Wright v. Hopper, 169 F.3d 695, 702 (11th Cir.1999) (holding government did not suppress witness’ preliminary hearing testimony where the defense was aware of her and сould have obtained a transcript of the prior proceeding or interviewed her). As such, the government contends that Bond could have secured Johnson’s testimony by subpoenaing Johnson as a witness for the defense.

The passage in Aichele relied on by the government is dictum. Benn v. Lambert, 283 F.3d 1040, 1061(9th Cir.2002). However, sitting en bane, we have held that a discussion in a published opinion from this court is binding circuit law “regardless of whether it was in some technical sense ‘necessary’ to [the] disposition of the case.” Barapind v. Enomoto, 400 F.3d 744, 750-51 (9th Cir.2005) (en banc) (per curiam). Accordingly, we are bound by this passage, at least in cases like Aichele where there was no government action to throw the defendant off the path of the alleged Brady information. 3

Our conclusion is buttressed by the Court’s decision in United States v. Du-puy, which also involved a witness statement for a trial of a multi-defendant drug conspiracy. 760 F.2d at 1495. The prosecutor ultimately entered into plea agreements with two of the co-defendants. She took notes during the plea negotiations which she agreed would remain confidential except fоr impeachment purposes. Id. at 1501. Just before trial began, however, the prosecutor determined that the notes contained Brady materials, and given her promise to keep such confidential, she approached the trial judge for instruction on what she should do. Id. The judge disclosed the identity of the two co-defendants to the defendant, and then, concluding that the defendant could “independently proceed to ascertain the Brady material,” the judge placed the prosecutor’s notes under seal without conducting an in camera review. Id. at 1501-02.

On appeal, we held that such action would have been appropriate ‍‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‍had the defendant sought the co-defendants’ statements, because “where a witness is involved’[t]he government is not required to make a[his] statement known to a defendant who is on notice of the essential facts which would enable him to call the witness and thus take advantage of any exculpatory testimony that he might furnish.’ ” 4 Id. at 1502 (alteration in original) (quoting United States v. Brown, 582 F.2d 197, 200 (2nd Cir.1978)); see also United States v. Lockhart, 956 F.2d 1418, 1425-26 (7th Cir.1992) (holding there was no Brady violation where government decided not to call one of its witnesses who had recanted but failed to provide precise details of such recantation because the defendant had an opportunity to subpoena the witness). However, because the defendant was seeking access to the prosecutor’s notes rather than to the witnesses’ statements, the court remanded the case back to the district court for consideration of “whether disclosure of the notes might have affected the outcome of the trial.” Dupuy, 760 F.2d at 1502-03.

Nor is Bond’s position aided by our decision in Benn. There, the government cre ated а report concluding that arson had been committed, but did not disclose the opinions of certain of its experts that the fire was accidental. While the government produced the names of the experts, it “not only failed to disclose the crucial information about the accidental nature of the fire, but ... actually misled the defense by disclosing a part of the experts’ findings that, read alone, would lead to a conclusion directly opposite to the one they reached.” Bern, 283 F.3d at 1062 (emphases added). “A defendant furnished with such inculpa-tory evidence by the state is not required to assume that the state has concealed material informаtion and has thereby obligated him to ascertain the Brady material on his own.” Id.

Here, there was no concealment of information at all. There was no material favorable to Bond that the government failed to produce. Nor did the government selectively disclose items to mislead the defense. Instead, it providеd Bond with the information needed to acquire all trial testimony, and provided him with the essential factual data to determine whether the witness’ testimony might be helpful. See Dupuy, 760 F.2d at 1502 (noting that it is enough if the defendant is “on notice of the essential facts which would enable him to call the witness”). We decline to extend Bern beyond cаses in which the government has affirmatively misled the defendant by a selective disclosure of information. 5

Here, Bond essentially argues that Johnson’s testimony would have been favorable to him and that the government “suppressed” such evidence in violation of Brady by failing to call Johnson as a witness after indicating that it would. However, it is elementary that litigants are not required to call every witness identified on their witness lists. The witness list simply ‍‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‍provides notice to the court and to opposing counsel of the witnesses who may be presented at trial. See generally United States v. Schwartz, 857 F.2d 655, 659 (9th Cir.1988). Whether a litigant actually calls all, or any, of the witnesses on its witness list is purely a matter of trial strategy. Brady does not, as a general matter, supplant the prosecutor’s ability to make strategic choices during litigation. Cf. Morris v. Ylst, 447 F.3d 735, 742 (9th Cir.2006). Rather, as this court stated in Morris, “[t]he animating purpose of Brady is to preserve the fairness of criminal trials.... The Brady rule is not meant to displace the adversary system_” Id. (internal quotation marks omitted). Bond merely could have subpoenaed Johnson on his own had he thought that the witness had anything exculpatory to say.

AFFIRMED.

Notes

. In a concurrently filed memorandum disposition, we аddress Bond's additional challenges to the district court’s decision. See United States v. Bond, No. 06-50628,-Fed. Appx. -, 2009 WL 129767 (9th Cir. Jan. 20, 2009).

. Three defendants pleaded guilty to one count of conspiracy to commit wire fraud and mail fraud in violation of 18 U.S.C. § 371. Two defendants pleaded guilty to both a § 371 violation and substantive wire fraud counts. The final defendant pleaded guilty to conspiracy to defraud the United States.

. The case at bár is readily distinguishable from our recent decision in Tennison v. City and County of San Francisco, 548 F.3d 1293 (9th Cir.2008). In Tennison, the police had conducted extensive and detailed interviews with a witness who possessed exculpatory information. We found a Brady violation because of the police officers' failure to share the information with the defensе. While the defendants may have known to some limited degree that the witness "had information about the murder, [such] knowledge is not the same as [the witness’] extensive statements to the police." Id.- at 1303. Here, both sides had access to Johnson’s public testimony. Cf. id. (noting that the defendants did not even know the witness’ name or "the extent of the information” provided by the witness, which included many specific details about the crime).

. In a footnote, the Dupuy court further stated: "Since suppression by ‍‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‍the Government is a necessary element of a Brady claim, if the means of obtaining the exculpatory evidence has been provided to the defensе, the Brady claim fails.” 760 F.2d at 1502 n. 5 (internal citation omitted).

. Nor is Bond aided by our decision in Paradis v. Arave, 130 F.3d 385 (9th Cir.1997). In Paradis, the government failed to turn over notes indicating that a prosecution expert had originally stated that the victim did not die in the creek where her body was found, even though that same expert later testified to the contrary. Again, the government had in its possession specific exculpatory еvidence, but did not disclose it. Id. at 392. Instead, it presented evidence that was inconsistent with the exculpatory evidence, leaving the defendant no reason to believe that exculpatory evidence could be obtained. See id. at 395. In contrast, the government turned over to Bond the existence of the trial transcript, as well as notes from interviews of and other meetings with Johnson.