Wednesday, December 30, 2009

Cyber Pimping

After being convicted of pimping and pandering in violation of California law, Michael Cason appealed. People v. Cason, 2009 WL 4548313 (California Court of Appeals 2009). He raised several issues on appeal, but we’re only concerned with one, which I’ll get to in a minute.

Cason was convicted of violating California Penal Code §§ 266h and 266i. Section 266h (“pimping”) provides, in part, that any

person who, knowing another person is a prostitute, lives or derives support or maintenance in whole or in part from the . . . proceeds of the person's prostitution. . . or who solicits or receives compensation for soliciting for the person, is guilty of pimping, a felony, and shall be punishable by imprisonment in the state prison for three, four, or six years.

California Penal Code § 266(a). Section 266i(a)(2) provides, in part, that

any person who does any of the following is guilty of pandering, a felony, and shall be punishable by imprisonment in the state prison for three, four, or six years:

(1) Procures another person for the purpose of prostitution.

(2) By promises, threats, violence, or by any device or scheme, causes, induces, persuades or encourages another person to become a prostitute.

The convictions were based on Chason’s involvement with several women. I won’t describe the facts in each case. I think this one gives you an idea of the factual basis of the charges against him:

D. was working as a clerk at Walgreen's in Hemet when she met defendant in 2005. [He] told her she was beautiful . . . . [I]n the beginning, D. and defendant had a boyfriend-girlfriend relationship. . . . However, a few weeks after they began dating, [he] revealed that he ran an escort business and talked to D. about some of the girls who worked for him. Eventually, D. began working for [him] too. Defendant photographed her with other prostitutes and posted their pictures, along with phone numbers and prices coded in `roses’ on the Internet Web site, craigslist. . . .

D. worked for defendant from July 2006 to August 2007. She stopped for four months. . . . [and] worked as a hostess at a restaurant. [He] . . . tried to persuade her to return to work for him. . . . Eventually, . . . she returned to work for [him] . . .

D. would sometimes accompany . . . [his] other girls to hotel rooms where she and they would wait for customers to call their cell phones. Defendant had a laptop computer . . . on which he could monitor their calls and post Internet ads. . . . [T]he girls had a quota of $1,000 a day. All the girls gave defendant all the money they made every day.

People v. Cason, supra.

Two of Cason’s arguments on appeal concerned two of the women who worked for him: “P.” and “Q.” People v. Cason, supra. His first argument challenged his conviction for pimping P. in violation of California Penal Code § 266h. The Court of Appeals found that “substantial evidence” supported the conviction by showing that Cason pimped P. by

advertising her for prostitution, taking the proceeds of this activity, and living on her earnings. As D. . . testified, defendant included photographs of P. in his prostitution advertisements on the Internet. . . . [and[ took all the money his girls earned as prostitutes.

People v. Cason, supra.

That, though, isn’t the argument this post is really about. It’s about Cason’s second argument – that “he could not have pandered” either woman “to become” a prostitute in violation of California Penal Code § 266i(a)(2), which is quoted above, because they were “already `actively seeking work’” as a prostitute when he contacted them. People v. Cason, supra.

The California Court of Appeals rejected this argument as to Cason’s involvement with the women known as P. and Q. It noted that other California appellate courts had held that § 266i(a)(2) “covers `cases where a defendant has solicited one whom he believes to be a former prostitute to re-enter the profession’”. People v. Cason, supra (quoting People v. Bradshaw, 31 Cal. App.3d 421, 107 Cal. Rptr. 256 (California Court of Appeals 1973).

The Cason court also noted that it had earlier reached this same conclusion, on the premise that the act of “encouraging even `an established prostitute’” to engage in the activity “`indicates a willingness to actively promote the social evil of prostitution.’” People v. Cason, supra (quoting People v. Patton, 63 Cal. App.3d 211, 133 Cal. Rptr. 533 (California Court of Appeals 1976). It held, therefore, that the purpose of

section 266i . . . is apparent, and to hang everything on one literal meaning of the word `become’ would generate consequences inconsistent with that purpose. Thus, in our view, the Legislature does not need to change the wording of section 266i from `become a prostitute’ to `engage in prostitution.’ . . . The latter concept is necessarily contained within the former. The statute as worded. . . . is adequate.

People v. Cason, supra.

Now we come to the cyber pimping part of the opinion. One of the women – Q. – who worked for Cason had posted her own Internet ad before she met him. The Court of Appeals addressed this issue in the last part of its opinion:

We . . . consider the act of contacting a person who has placed an advertisement for possible prostitution on the Internet, and persuading her to become an actual -- as opposed to a potential or virtual -- prostitute by engaging in acts of prostitution, a violation of section 266i. . . .

[O]ur defendant. . . telephoned a woman, who had placed her first advertisement on the Internet, and talked her into joining his ring. . . . Q. had never actually engaged in prostitution before she met defendant. Later, when she tried to quit, [he] refused to give her any money, denigrated and discouraged her, and persuaded her to come back. Even if she somehow approached him first by placing the ad, that does not preclude a finding that he pandered.

Because P. did not testify, there was no direct evidence as to how defendant got her into his ring. But there was abundant evidence about his depressingly unvaried recruitment methods and how he went about pandering and procuring. . . . He contacted vulnerable young women inexperienced in prostitution and, with promises of increased income, . . . safe working conditions, and the possible purchase of a car, persuaded them, or tried to persuade them, to work for him. It was not unreasonable for the jury to conclude that he had done the same with P. Whether P. was formerly a prostitute or ever got any customers through defendant's efforts was irrelevant.

In 1922, a California court found a defendant who `stood at the door of [the prostitute's] room and demanded and received the money from the men who entered without handing any of it over to her,’ guilty of pimping, in violation of a precursor statute of sections 266h and 266i. . . . Defendant's actions represent the modern version of the same enterprise. The `door’ to a prostitute's `room’ now opens through an Internet Web site. It is at this virtual door that defendant stood, soliciting for, and ultimately collecting money from, the services of Q. and P.

People v. Cason, supra (quoting People v. Navarro, 60 Cal. App. 180, 212 P.403 (California Court of Appeals 1922).

There you have it: cyber pimping.

Monday, December 28, 2009

The Petite Policy

This post deals with issues similar to those I addressed in an earlier post. That is, it also deals with a defendant who sought to have federal charges dismissed on the grounds that they improperly duplicated the substance of charges brought earlier, by another sovereign.

The defendant in the earlier post based his motion to dismiss on the Double Jeopardy Clause of the Fifth Amendment. As I explained in that post, the Double Jeopardy Clause bars the government from re-prosecuting someone for the same crime; but as I also explained, the U.S. Supreme Court has held that the Clause only bars a subsequent prosecution brought by the same sovereign (e.g., the federal government or the same U.S. state) because it only prevents a prosecution for the “same offense.” The Court held that when conduct simultaneously violates the law of two different sovereigns (e.g., Iowa and Maine), it constitutes the commission of two separate offenses, each of which can be prosecuted by the sovereign whose law was violated.

This post is about a defendant who raised a different, but similar, argument. The case is U.S. v. Yakoob, 2009 WL 270161 (U.S. District Court for the Eastern District of Michigan 2009) and it involves Jivan Yakoob’s prosecution for violating 18 U.S. Code § 2422(b) (coercion to commit illegal sexual activity) and 18 U.S. Code § 2423(b) (travel with intent to engage in illicit sexual conduct). U.S. v. Yakoob, supra. Here’s how the case arose:

On October 4, 2006, Belanger, a City of Windsor detective, logged into a chat room on the Internet. Defendant responded the same day. Carefully tracked, the transcript of the instant messages between Belanger, posing as a 13-year-old girl, and defendant establish that the initiative of engaging in a sexual encounter originated with defendant. Defendant in his messages displayed a desire to have a sexual relationship with a 13-year-old girl.

On November 9, 2006, [Windsor, Canada, Detective] Belanger contacted [US ICE Agent] MacBride to alert him to the conversations he was having with [Yakoob], who he knew was in the United States. Belanger asked MacBride to assist in identifying the owner of the computer with the screen name and Internet address being used by [Yakoob].

MacBride issued administrative subpoenas to two Internet service providers (ISPs) to obtain the name and address of the owner of the computer being used by [Yakoob]. This cooperation between police agencies is a common occurrence.

On November 16, 2006, ISP Wide Open West responded to the subpoena with information that 20516 Joanne Smith Drive, Warren, Michigan, was the location of the computer defendant was using and that Internet service at the address was registered in the name of Sinan Yakoob.

In a conversation on November 16, 2006, defendant and `Cassie’ [the 13-year-old girl Belanger was posing as] agreed to meet on November 17, 2006, at a shopping mall in Windsor.

On November 17, 2006, ICE agents surveilled the residence at the Smith Drive address and observed [Yakoob] leaving the residence.

On November 17, 2006, MacBride went to Windsor and unofficially participated in a police briefing, and then went to the shopping mall where he observed[Yakoob] being arrested.

MacBride observed and listened to the Windsor police question [Yakoob], and at the same time prepared a search warrant for the Smith Drive address. The search warrant was signed by a magistrate judge at 1:30 a.m. on November 18, 2007, and served at 10:00 a.m. the same morning.

The Windsor police charged [Yakoob] on November 19, 2006, with a violation of the Criminal Code of Canada offense of `luring a child. [He] pled guilty to the charge on July 20, 2007, and was sentenced to probation on July 23, 2007.

U.S. v. Yakoob, supra. On February 22, 2007, a Michigan federal grand jury indicted Yakoob on the charges cited above; the charges were based on the same conduct that was at issue in the Canadian case. U.S. v. Yakoob, supra.

Yakoob moved to dismiss the U.S. federal charges on the grounds that the prosecution had been brought in violation of the Petite policy. U.S. v. Yakoob, supra. The policy takes its name from the U.S. Supreme Court’s decision in Petite v. U.S., 361 U.S. 529 (1960), in which the Court granted the U.S. Department of Justice’s request for an order vacating a federal conviction which violated the Department’s policy against duplicating federal-state prosecutions.

The current policy – the Petite policy – is contained in § 9-2.031 of the Department of Justice’s U.S. Attorney’s Manual, which you can find here. It provides as follows:

This policy establishes guidelines for the exercise of discretion by . . . officers of the Department of Justice in determining whether to bring a federal prosecution based on substantially the same act(s) or transactions involved in a prior state or federal proceeding. . . .

The purpose . . . is to vindicate substantial federal interests through appropriate federal prosecutions, to protect persons charged with criminal conduct from the burdens associated with multiple prosecutions and punishments for substantially the same act(s) or transaction(s), to promote efficient utilization of Department resources, and to promote coordination and cooperation between federal and state prosecutors.

This policy precludes the initiation or continuation of a federal prosecution, following a prior state or federal prosecution based on substantially the same act(s) or transaction(s) unless three substantive prerequisites are satisfied: first, the matter must involve a substantial federal interest; second, the prior prosecution must have left that interest demonstrably unvindicated; and third, applying the same test that is applicable to all federal prosecutions, the government must believe that the defendant's conduct constitutes a federal offense, and that the admissible evidence probably will be sufficient to obtain and sustain a conviction by an unbiased trier of fact. In addition, there is a procedural prerequisite to be satisfied, that is, the prosecution must be approved by the appropriate Assistant Attorney General. . . .

Since Yakoob’s prosecution was clearly based on “substantially the same act(s) . . . involved in” the prior Canadian prosecution, it seemed to violate the policy. It would, though, have been proper to bring the prosecution under the Petite policy if it involved a substantial federal interest that was not vindicated by the Canadian prosecution.

That, however, assumes (i) that the Petite policy applies in this situation and (ii) that Yakoob could use it as the basis for having the prosecution dismissed (assuming the prosecution did, in fact, violate the policy). Neither assumption is valid.

First of all, the U.S. Court of Appeals for the Second Circuit has held that the Petite policy applies “only to domestic prosecutions,” not to instances in which the prior prosecution was brought by a foreign government. U.S. v. Catino, 735 F.2d 718 (1984). The Second Circuit reached this result by examining the plain language of the Petite policy; as you can see from the excerpt quoted above, it only refers to U.S. initiated state-federal prosecutions.

The other problem Yakoob had was that, even if the policy somehow applied to his situation, he couldn’t raise it. Federal courts of appeals have consistently held that since “the policy is not constitutionally mandated”, it “confers no rights on an accused.” U.S. v. Yakoob, supra. One court, for example, described the Petite policy as one of the “internal housekeeping rules of the Department of Justice” and noted that such rules create no enforceable rights in defendants. U.S. v. Snell, 592 F.2d 1083 (U.S. Court of Appeals for the Ninth Circuit 1979).

The premise that internal rules like the Petite policy don’t create rights enforceable by defendants like Yakoob dates at least back to the U.S. Supreme Court’s decision in U.S. v. Caceres, 440 U.S. 741 (1979). In Caceres, the Court refused to use the exclusionary rule to enforce an internal agency regulation that limited electronic eavesdropping. The Court noted that since the violation involved an agency rule – and not a constitutional right – it would not be appropriate to apply the exclusionary rule. It also noted that to use the exclusionary rule or similar sanctions to enforce an internal agency rule could have the undesirable effect of discouraging agencies from adopting self-imposed rules of restraint, such as the Petite policy.

So Yakoob seems to have had a good argument based on the policy itself, but he still lost.

Friday, December 25, 2009


I’ve done a few posts in which I speculate about the state of the law in a particular area involving law and technology. This post, I’m afraid, is going to be even more inconclusive.

For a long time I’ve been looking for a good steganography case, by which I pretty much mean a reported (or unreported) decision in which a court addresses a stego issue. I still haven’t found one, so I’m going to base this post on comments in the U.S. Court of Appeals for the Ninth Circuit made in a decision that peripherally addressed steganography.

Before I proceed, I should probably generally describe what steganography is and why it might be a concern to lawyers and judges. Steganography is, as Wikipedia notes, “the art and science of writing hidden messages in such a way that no one, apart from the sender and intended recipient, suspects the existence of the message”. Steganography is a little like cryptography, but unlike cryptography, steganography conceals the fact that there is a message, as well as the contents of the message.

Steganography is, as Wikipedia explains, an ancient device. As Wikipedia notes, in the fifth century B.C., Histiaeus, the tyrant of Miletus, used steganography to send a secret message to Aristagoras, his son-in-law and advisor. Histiaeus shaved the head of his favorite slave, tattooed a message on his head, waited for the hair to grow back and then sent the slave to Aristagoras, who knew to shave the slave’s head. Aristagoras read the message and attacked the Persians, as Histiaeus had instructed.

Computer technology makes steganography a lot easier to use. According to Wikipedia, the Steganography Analysis and Research Center has identified “[o]ver 725 digital steganography applications”. Digital steganography encompasses a variety of tactics, such as concealing messages in image or sound files.

Logically, then, digital steganography (which from here on I’m going to refer to as stego) seems to have the potential to create problems for law enforcement officers who are dealing with digital evidence. The Steganography Analysis and Research Center says it “presents a significant challenge . . . because detecting hidden information and then extracting that information is very difficult and may be impossible in some cases.” And both editions (2001 and 2008) of the National Institute of Justice’s Electronic Crime Scene Investigation: A Guide for First Responders mentions stego as something officers should be aware of when investigating crimes that involve digital evidence.

And yet, I can only find one reported case in which stego was an issue, and that was peripherally. That leads me to wonder if despite its potential as a means of hiding evidence, it simply isn’t being used, which means neither officers nor courts have had to deal with stego or the legal issues it at least potentially raises.

The one case that mentions stego is U.S. v. Comprehensive Drug Testing, Inc., 513 F.3d 1085 (U.S. Court of Appeals for the Ninth Circuit 2008). Actually, the issue came up several times in this course of this litigation.

As the court notes at the beginning of the opinion cited above, the case (which is really three consolidated cases) arose “from the federal investigation of the Bay Area Lab Cooperative (`Balco’) and its alleged distribution of illegal steroids to enhance the performance of professional baseball athletes.” U.S. v. Comprehensive Drug Testing, supra.

As part of the investigation, the government issued subpoenas to two companies that had tested urine samples from major league baseball players during the time period at issue: Comprehensive Drug Texting, Inc. (CDT) and Quest. U.S. v. Comprehensive Drug Testing, supra. The companies resisted producing the information sought by these subpoenas, so the government issued narrower subpoenas. The Major League Baseball Players’ Association (MLBPA) asked a federal judge to quash the subpoenas.

All of that was going on in federal court in San Francisco. When the government heard about the motion to quash, it applied for

a search warrant to search the CDT offices for the same information it was seeking in the grand jury subpoena. The search warrant application was made some 240 miles away in another federal judicial district, without notice to the Players Association or to the district court in the Northern District of California.

U.S. v. Comprehensive Drug Testing, supra. The application for the search warrant didn’t tell the judge to whom it was submitted that a motion to quash the CDT and Quest subpoenas had been filed. It said that “while not denying that they have the requested materials, CDT has declined to comply with the subpoena and has stated its intent to attempt to quash the subpoena.” U.S. v. Comprehensive Drug Testing, supra. In ruling later on the propriety of what the government did here, the Court of Appeals noted that

[t]he affidavit [submitted in support of the warrant] did not disclose that CDT had agreed in writing to keep the data . . . secured until the scope of the grand jury subpoena was settled, either through negotiation or a ruling on a motion to quash. Rather, the affidavit justified removing computer data and equipment from the searched premises on the basis that the computer data could be concealed, altered, or destroyed by the user.

U.S. v. Comprehensive Drug Testing, supra. The affidavit also justified the issuance of the search warrant on the grounds that

[c]omputer users can also. . . . conceal data within another seemingly unrelated and innocuous file in a process called `steganography.’ . . . [B]y using steganography, a computer user can conceal text in an image file which cannot be viewed when the image file is opened.

U.S. v. Comprehensive Drug Testing, supra. In fact, as the Court of Appeals later noted, the government did not have any evidence

or reason to believe that CDT had engaged in steganography . . . or any type of data destruction or alteration. To the contrary, it had accepted in writing CDT's assurances `that CDT will maintain and preserve all materials called for by the first subpoena as well as any materials called for by the new subpoena’ and that `CDT would not destroy or alter any of the materials called for by either of the subpoenas.’ However, the plain import of the application was that CDT was improperly resisting compliance with a valid grand jury subpoena and data was in jeopardy of being destroyed.

U.S. v. Comprehensive Drug Testing, supra. In its original opinion, the Court of Appeals held that this evidence justified the lower courts in finding that “the government made misleading statements in the search warrant applications.” U.S. v. Comprehensive Drug Testing, Inc., 473 F.3d 915 (U.S. Court of Appeals for the Ninth Circuit 2006) (opinion withdrawn and superseded by 513 F.3d 1085).

This observation doesn’t appear in the superseding opinion in the case, but that doesn’t matter to us. This post isn’t about what happened in the CDT case. It’s about stego and the legal issues it raises/might raise. I’m still wondering if there are any. According to a law review article, federal agents seeking computer search warrants “consider it standard practice to tell stories” in their search warrant affidavits about steganography and other “technology that can be used to hide data”. Paul Ohm, The Myth of the Superuser: Fear, Risk, and Harm Online, 41 University of California Davis Law Review 1327 (2008). That, of course, implies steganography isn’t being used which, if true, means there can’t be any live legal issues as to its use.

The legal issue I could see coming up with stego is whether, assuming we have effective tools to detect stego and stego-concealed data, a computer search warrant would have to specifically authorize the use to stego-detection tools or whether the use of such tools would be within the scope of the search generally authorized by the warrant. So, say the search warrant authorizes a search of a hard drive for child pornography. If the officer who gets the warrant suspects stego may have been used to hide data, does he/she have to include that in the affidavit for the warrant and request specific authorization to use stego-detection tools? Or is the use of stego-detection tools simply part of the general forensic examination process?

I raise that question because I can see an argument that the use of stego-detection tools implicates the Supreme Court’s holding in Kyllo v. United States. As I explained in an earlier post, the Kyllo Court held that it is a 4th Amendment “search” to use “technology that is not in general public use” to obtain information, especially from inside a home. As I’ve noted in other posts, a few courts have addressed the issue as to whether the use of forensic tools like EnCase is a search under Kyllo, i.e., whether the use of those tools requires some special authorization.

I can see a similar argument being made with regard to stego-detection techniques, if they exist and if and when there’s any reason to seek authorization to use them in analyzing digital evidence. But maybe I’m off base . . . maybe stego-detection is routinely being used as part of digital forensic examinations and the Kyllo issue hasn’t come up because defense attorneys haven’t keyed in on it or because it’s just not a live issue.

As I noted in an earlier post, in August of 2009 the Ninth Circuit revisited the issues in the Comprehensive Drug Testing litigation and issued an order that at least implicitly addressed the stego issue. As I noted in that post, in this decision the Ninth Circuit said that from that point on, “[w]arrants and subpoenas must disclose the actual risks of destruction” (and, I assume, concealment) of evidence. The purpose was to prevent the government from relying on general allegations that tools like stego “might” be used in conceal or destroy evidence. U.S. v. Comprehensive Drug Testing, Inc., 579 F.3d 989 (U.S. Court of Appeals for the Ninth Circuit 2009).

(On September 9, the U.S. Department of Justice moved to stay the decision pending the filing of a motion for certiorari, i.e., asking the U.S. Supreme Court to review this decision. See U.S. v. Comprehensive Drug Testing, Inc., Docket # 05-55354, (U.S. Court of Appeals for the Ninth Circuit). The Department later moved for rehearing, i.e., asked the Ninth Circuit to revisit the issues it addressed in this latest decision. And on December 18, the Ninth Circuit filed an order stating that it is considering whether it should grant rehearing in this case and “will issue an order granting or denying rehearing in due course.” So we’ll have to see what comes next; if the Ninth Circuit doesn’t grant rehearing, the Department of Justice will certainly try to get the U.S. Supreme Court to hear the case.)

Wednesday, December 23, 2009

Double Jeopardy and Dual Sovereignty

As I may have noted, the Double Jeopardy clause of the Fifth Amendment to the U.S. Constitution says “[no person shall] be subject for the same offense to be twice put in jeopardy of life or limb.” As Wikipedia explains, the clause is intended to “limit abuse by the government in repeated prosecution for the same offense as a means of harassment”. As Wikipedia notes, “jeopardy” attaches under the clause (i) in a jury trial when the jurors and alternate jurors have been sworn in and (ii) in a non-jury trial (a trial to the judge) when the first witness is sworn in to testify.

There are, as Wikipedia also notes, several exceptions to the double jeopardy prohibition. But before we get into the exceptions, I need to outline and facts and issues in the case on which this post is based.

The case is U.S. v. Marimuthu, 2009 WL 4729032 (U.S. District Court for the District of Nebraska). This opinion contains the court’s ruling on defendant Jaisankar Marimuthu’s motion to dismiss the charges against him on the grounds that they violated the double jeopardy prohibition. Here are the facts that would eventually lead to Marimuthu’s being prosecuted in federal court:

Jaisankar Marimuthu is a citizen of India. He was arrested when he entered Hong Kong through the airport on December 19, 2006. He was ultimately charged in the Hong Kong court system with 6 counts of `obtaining access to a computer with a dishonest intent to gain for himself or another, contrary to section 161(1)(c) of the Crimes Ordinance, Cap. 200’; 7 counts of money laundering or `dealing with property known or believed to represent proceeds of an indictable offence, contrary to section 25 of the Organized and Serious Crimes Ordinance, Cap. 455’; and one count of `possessing equipment for making a false instrument with intention, contrary to section 76(1) of the Crimes Ordinance, Cap. 200.’ The charging documents state that the offenses occurred between October 18 and October 26, 2006. Marimuthu reportedly obtained access to computer systems belonging to Boom Securities (H.K.) Limited, the Hang Seng Bank Limited, and the Bank of China (Hong Kong) Limited. The property representing proceeds of an indictable offense totaled more than $250,000 in Hong Kong currency owned by the Hongkong and Shanghai Banking Corporation Limited.

On October 30, 2007, Marimuthu pled guilty in Hong Kong to 7 counts of money laundering and was sentenced to 26 months' imprisonment.

U.S. v. Marimuthu, supra. Here is how the Hong Kong judge who sentenced Marimuthu described the conduct involved in the charges to which he pled guilty:

1. The offence . . . was dealing with money which had been obtained as a result of dishonest Internet access to other people's bank accounts . . . which . . . were used to buy into a particular form of security, namely, a put warrant, . . . to ramp up the price of that security which was simultaneously being traded on your own bank account. . . .

3. Over a period of several days, in October 2006, six such transactions occurred, though there were multiple sales and purchases of the warrant . . . through the accounts. . . .

4. [T]hese third parties lost . . .$3,189,000, though it seems none of them realised it at the time. At the same time, a gain of $628,730 was credited to your account in Hong Kong.

5. Your offence . . . was to deal with those proceeds, remitting the money overseas. The proceeds transferred amounted to $297,932.

U.S. v. Marimuthu, supra. Marimuthu served his Hong Kong sentence and on June 20, 2009, was arrested in Hong Kong on a warrant issued by the U.S. District Court for the District of Nebraska. U.S. v. Marimuthu, supra.

The United States initiated this prosecution by filing a criminal complaint on December 21, 2006. Marimuthu and two codefendants were indicted by the Grand Jury in the District of Nebraska on January 18, 2007. . . . [T]he charged conduct involves a stock fraud scheme targeting thinly traded securities in the U.S. stock markets. Marimuthu and his co-conspirators hacked into individuals' online brokerage accounts and fraudulently created online brokerage accounts in the names of real individuals. They used these online accounts to purchase targeted securities with the intent to fraudulently increase the value of the targeted securities, thereby allowing the defendants to realize gains in their own security holdings. . . . .

Marimuthu is charged . . . with . . . conspiracy to commit computer fraud, securities fraud, wire fraud, and aggravated identity theft . . . ; . . . computer fraud . . . ; . . . wire fraud . . . ; . . . securities fraud . . . ; and . . . aggravated identity theft . . . . These offenses allegedly occurred between February 2006 and November 6, 2006.

U.S. v. Marimuthu, supra.

As I noted above, Marimuthu moved to dismiss the federal charges on the grounds that they violated the prohibition on double jeopardy. (I assume, then, that although the opinion doesn’t specifically say this, that some of the conduct that provided the basis for the Hong Kong prosecution also provided the basis for at least some of the federal charges.)

On its face, the federal prosecution didn’t violate the prohibition because the prosecutions were brought by two different sovereigns, which typically triggers the dual sovereignty exception to the double jeopardy prohibition contained in the Fifth Amendment. As the U.S. Supreme Court explained in U.S. v. Lanza, 260 U.S. 377, 382 (1922), the

dual sovereignty doctrine is founded on the common-law conception of crime as an offense against the sovereignty of the government. When a defendant in a single act violates the `peace and dignity’ of two sovereigns by breaking the laws of each, he has committed two distinct `offences.’

So if someone’s conduct violates Kentucky law and Idaho law, she can be prosecuted by both states, sequentially. An Idaho prosecution that follows a Kentucky prosecution (and conviction) doesn’t violate double jeopardy because the conduct constituted a separate and distinct crime against each sovereign. Heath v. Alabama, 474 U.S. 82 (1985).

Marimuthu’s lawyers were aware of the exception and its effect, so they sought to invoke an exception to the dual sovereignty exception. In Bartkus v. Illinois, 359 U.S. 121, 123-124 (1959), the U.S. Supreme Court suggested that the exception might not apply when two sovereigns worked so closely together there was, in effect, only a single prosecution:

The record establishes that the prosecution was undertaken by state prosecuting officials within their discretionary responsibility and on the basis of evidence that conduct contrary to the penal code of Illinois had occurred within their jurisdiction. . . . It does not support the claim that the State of Illinois . . . was merely a tool of federal authorities, who thereby avoided the prohibition . . . against a retrial of a federal prosecution after an acquittal. It does not sustain a conclusion that the state prosecution was a sham and a cover for a federal prosecution, and thereby in essential fact another federal prosecution.

In his motion to dismiss, Marimuthu argued that the Hong Kong authorities

searched him on December 19, 2006, seized `items of evidentiary value,’ and immediately sent copies of those items to the FBI in Omaha, Nebraska. The charges pending in this court were initiated with the use of information obtained from Marimuthu after his arrest in Hong Kong. He contends that the Hong Kong prosecution was a sham, the Hong Kong authorities were merely acting as a tool of the United States, and the two countries should be viewed as a single sovereign for purposes of double jeopardy.

U.S. v. Marimuthu, supra.

The Marimuthu judge wasn’t convinced that Bartkus actually established this “sham prosecution” exception. He pointed out that the U.S. Court of Appeals for the Eighth Circuit, the decisions of which are controlling precedent for Nebraska district courts, had described the Bartkus language quoted above as dicta. U.S. v. Marimuthu, supra. As Wikipedia explains, dicta (or obiter dicta) is a “remark . . . made by a judge that, although included in the . . . court’s opinion, does not form a necessary part of the court’s decision” and therefore has no precedential value. If the comments were dicta, then the Marimuthu judge wasn’t required to apply the “sham prosecution” exception.

Ultimately, the judge held that after examining “the parties’ evidentiary materials, the criminal complaint, the indictment” and other materials, he found Marimuthu had not “shown that the government of Hong Kong was `merely a tool’ of the United States when it pursued its own criminal charges against Marimuthu. At most, Marimuthu has shown there was cooperation between the two sovereigns”, which is not enough to trigger the Bartkus “sham prosecution” exception if, in fact, it exists. U.S. v. Marimuthu, supra.

This decision was issued by a U.S. Magistrate Judge and was a recommendation to the U.S. District Court judge who has the Marimuthu case. He recommended that the District Court Judge deny the motion to dismiss, which that judge did a couple of months later. In denying the motion, the District Court Judge explained that a review

of the evidence presented shows that the two actions involve charges relating to financial transactions committed in similar ways. However, the evidence shows that the actions involve different accounts, victims, securities, and securities markets.

U.S. v. Marimuthu, 2009 WL 4729024 (U.S. District Court for the District of Nebraska 2009). The District Court Judge agreed with the Magistrate Judge that at most, Marimuthu had shown cooperation between the sovereigns. U.S. v. Marimuthu, supra.

I don’t find any other reported cybercrime cases in which this issue has come up, at least not as directly as it did in this case. Given the ease with which cybercrimes transcend state and national borders, I suspect we may see this issue come up more often in the future.

Monday, December 21, 2009

Mandamus and Jurisdiction

As I noted in an earlier post, jurisdiction is a court’s power to act in a given case. As I also noted there, defendants will, whenever possible, challenge a court’s jurisdiction over the charges or civil claims against them; if a court doesn’t have jurisdiction, it can’t preside over the case and so must grant a motion to dismiss the charges or civil claims.

If a defendant wins on a motion to dismiss for lack of jurisdiction, he/she/it has put that prosecution or civil suit to an end; the only way it can be revived is if it can be brought in another jurisdiction before a court that has jurisdiction to preside over the charges or civil claims.

As I’ve also noted, our use of cyberspace can complicate the analysis of whether a court has jurisdiction over a given case. If you’d like to read more about that issue, check out the law review article you can find here.

This post is about a jurisdictional challenge Ali Hijazi filed in a federal criminal case. In re Hijazi, 2009 WL 4723277 (U.S. Court of Appeals for the Seventh Circuit 2009).

Hijazi is a Lebanese citizen and a resident of Kuwait. In March 2005, he was indicted in the Central District of Illinois on various fraud-related charges. Hijazi has never appeared in Illinois . . . and there is no extradition treaty between the United States and Kuwait that would enable the United States to secure his presence. Indeed, . . . the Kuwaiti government has informed the court that it does not intend to turn Hijazi over voluntarily.

In re Hijazi, supra. Hijazi retained a U.S. lawyer and moved to dismiss the indictment against him on several theories, most of which attacked the propriety of a U.S. court’s exercising “territorial jurisdiction over” him. In re Hijazi, supra.

The federal district court – the trial court –refused to rule on his motions to dismiss “until he appears in person and is arraigned”. In re Hijazi, supra. Hijazi’s position was that absent “an extradition treaty or any other source of law, he is under no legal obligation to travel to the United States and to submit himself to the authority of the district court.” In re Hijazi, supra. He therefore asked the U.S. Court of Appeals for the Seventh Circuit, which supervises federal courts in Illinois and two other states, to issue a writ of mandamus ordering the district court judge to rule on his motions to dismiss. In re Hijazi, supra.

The Seventh Circuit began its ruling on Hijazi’s petition by outlining the facts that led to his being indicted on federal charges:

In late 2001, the U.S. Army contracted with Kellogg Brown & Root (`KBR’), a U.S. company, to provide both goods and services to the military at locations through-out the world, including in Kuwait. [Jeff] Mazon, an American, was the procurement manager for KBR . . . in Kuwait. . . . [H]e was responsible for hiring subcontractors to perform work under KBR's contract. The Army concluded it needed fuel tankers and related services at the Kuwaiti airport. . . . Mazon accordingly solicited bids for the tankers in early 2003; KBR anticipated that the cost would be about $685,000. Two bidders responded: one was Hijazi, who submitted a bid for 507,000 Kuwaiti Dinars (approximately $1,673,100) on behalf of his company, LaNouvelle General Trading & Contracting Co., a Kuwaiti company with no American ownership interests; the other is referred to only as Company A, which bid 573,300 Kuwaiti Dinars (approximately $1,891,890).

Mazon pushed the prices up . . . so LaNouvelle's bid became $5,521,230, and Company A's bid $6,243,000. So `adjusted,’ Mazon then awarded the contract to LaNouvelle. The government alleges he did so with the understanding that Hijazi would `reward’ him for his efforts. Mazon and Hijazi signed the subcontract in Kuwait. Around the same time, Mazon sent four emails relating to the subcontract to KBR managers in the United States. Then, from March to August 2003, LaNouvelle submitted allegedly inflated invoices to KBR for its work, and KBR paid the anticipated $5,521,230. After paying LaNouvelle, KBR . . . billed the United States for reimbursement; the Army complied, using checks and wire transfers. LaNouvelle itself had no direct dealings with the U.S. Army or the U.S. government.

In September 2003, Hijazi paid Mazon $1 million and executed a promissory note to make it appear this represented a loan. Later, . . ., Hijazi sent an email to Mazon, to an account in the United States, in which he wrote `this . . . (principal & interest) totally your money....’ Mazon, however, was not in the United States. . . He was living and working in Greece . . . and that was where he received this email. . . In October 2003, back in the United States, Mazon opened a bank account where he unsuccessfully tried to deposit the $1 million. When that did not work, Hijazi emailed Mazon again (. . . at his personal account, also allegedly based in the United States), instructing Mazon to open three different offshore accounts where he could deposit the money. Hijazi represents that Mazon opened this email in Greece as well. Mazon . . . tried to deposit the funds in a different U.S. bank, on October 28, 2003. . . .Two weeks later, after he was interviewed by a KBR investigator, Hijazi sent a third email to Mazon warning him to be careful about what he said to his `ex-friends in Kuwait.’ The government alleges that Mazon was back in the United States at the time he received this email.

In re Hijazi, supra. (Mazon was also indicted. In re Hijazi, supra.)

After Hijazi was indicted, the Government of Kuwait made it clear it didn’t “believe the United States has any basis for asserting legal jurisdiction over Mr. Hijazi for acts alleged to have taken place in Kuwait.” In re Hijazi, supra. Or, as the Seventh Circuit put it, “[t]o the extent that crimes have been committed in a transaction that Kuwait sees as one between two private companies operating in Kuwait, criminal jurisdiction . . . lies in Kuwait.” In re Hijazi, supra. In his motions to dismiss, Hijazi said “the statutes under which he was charged do not apply, and constitutionally cannot apply to the conduct of foreign nationals outside the boundaries of the United States.” In re Hijazi, supra.

The Seventh Circuit could have ruled on Hijazi’s motions to dismiss itself, but it chose not to. Instead, it limited its decision to the issue of whether Hijazi was entitled to have the district court rule on his motions . . . and held that he was. In re Hijazi, supra.

It found, first, that Hijazi had no adequate alternative remedy for the harm he suffered from having the Illinois prosecution pending against him. Hijazi said federal authorities had directed INTERPOL to issue a “red notice” for him, which “operates as a request to all 188 INTERPOL members to arrest Hijazi if he enters their jurisdiction and, if possible, extradite him to the United States.” In re Hijazi, supra. Hijazi said this meant, among other things, that he couldn’t travel to Lebanon to see his family. In re Hijazi, supra.

The Seventh Circuit also found that Hijazi had established he had a right to the issuance of the writ of mandamus given that he was “attempting to raise fundamental questions about the legislative reach of the Major Fraud Act and the Wire Fraud Act.” In re Hijazi, supra. And, finally, it found that issuing the writ was appropriate in this case:

The question remains . . . whether this case is an appropriate candidate for mandamus. We conclude that it is. Hijazi's arguments raise serious questions about the reach of U.S. law, and it remains to be seen whether the U.S. contacts on which the government relies are sufficient to support its prosecution. Added to those concerns, on which we elaborate in a moment, is the fact that there is reason to believe that this case raises delicate foreign relations issues.

In re Hijazi, supra. As to the nature of the questions about the reach of U.S. law, the Seventh Circuit noted that the Restatement (Third) of the Foreign Relations Law of the United States takes the position that “`[s]ubject to § 403, a state has jurisdiction to prescribe law with respect to . . . conduct outside its territory that has or is intended to have a substantial effect within its territory.’” In re Hijazi, supra. One question the district court will have to address is whether the conduct attributed to Hijazi met this standard, i.e., whether it was intended to and/or had a “substantial effect” within U.S. territory. Even if the court finds the facts satisfy this requirement, that is not the end of the analysis. Section 403 of the Restatement adds an additional requirement: If a court finds the U.S. has jurisdiction under the “substantial effect” test, the U.S. still cannot exercise jurisdiction if doing so would “`unreasonable’” on the facts. In re Hijazi, supra.

While it was not the Seventh Circuit’s task to apply these principles to the charges against Hijazi, the court noted that given the facts, Hijazi’s arguments were far from frivolous:

The alleged fraudulent deal . . . involved KBR, a U.S. company doing business in Kuwait, and LaNouvelle, a Kuwaiti company. Although . . . KBR was operating under a contract with the U.S. government, it is not clear whether Hijazi knew or cared where KBR's money was coming from. He obviously knew LaNouvelle was submitting a bid for fuel tankers. It might matter whether Hijazi knew the tankers were for the use of the U.S. military, but the sketchy record we have thus far does not permit one to draw any conclusions about his knowledge. The government also alleges that Hijazi personally had some direct contacts with the United States. But, upon closer inspection, it turns out that it is referring to the emails that Hijazi (located in Kuwait) sent to Mazon (located in Greece) using email addresses that the government characterizes as `based in the United States’ ( e.g., At least one email might have been sent to Mazon after he returned to the United States. Finally, the government argues that Mazon's activities in the United States can and should be attributed to Hijazi. As we pointed out earlier, Mazon attempted to deposit the $1 million Hijazi had given him in a couple of U.S. financial institutions. This raises its own set of complex issues. Hijazi reminds us . . . that the government has dropped all fraud charges against Mazon and has accepted a guilty plea for a single misdemeanor count of making a false statement.

In re Hijazi, supra.

I don’t know what the district court will do, but it looks to me like Hijazi has a strong argument that jurisdiction doesn’t exist under the Restatement standards outlined above.

According to his brief before the Seventh Circuit, when the indictment says the first two emails that are alleged to support jurisdiction were sent to accounts “`located in the United States,”” this “apparently is a mere reference to the location of computer servers. In re Hijazi, Appellate Brief, 2008 WL 5788099. Hijazi says the “mere fact that constituent electrons of two Kuwait-to-Greece emails may have passed through U.S. servers” doesn’t give the U.S. jurisdiction under the Restatement standard. Appellate Brief, supra. Hijazi notes that there is no allegation that he “had any idea what route the emails would take” and that the U.S. Court of Appeals for the Tenth Circuit rejected this jurisdictional theory in Intercon, Inc. v. Bell Atl. Internet Solutions, Inc., 205 F.3d 1244, 1247 (200)). Appellate Brief, supra.

As to the third email, Hijazi says it was sent to Mazon “months after any alleged illegal conduct on the part of either man.” He also says the indictment “makes no attempt to show how the contents of the email connect in any way to any” of the charges it contains. Appellate Brief, supra.

The Seventh Circuit’s decision issued on December 11. I’m sure it will take a while before the district court rules on Hijazi’s motions; I’ll try to find the ruling when it issues.