Mail Fraud, the Hard Drive and Encryption

This post examines a recent opinion from a U.S. District Court Judge who sits in the U.S. District Court for the District of South Carolina:  U.S. v. Hartsoe, 2016 WL 70819 (2016). The judge begins by explaining that

Defendant [Jerry Elmo Hartsoe] was indicted in this District for mail fraud, a violation of 18 U.S. Code §1341, and aiding and abetting, a violation of 18 U.S. Code § 2 (Counts 1 through 8); and making false statements in violation of 18 U.S. Code §1001 (Count 9). Defendant was thereafter charged in a superseding indictment with an additional count of passing fictitious financial instruments in violation of 18 U.S. Code § 514 (Count 10).

Defendant, along with two co-defendants, proceeded to trial. Count 10 (passing fictitious financial instruments) was dismissed by the court prior to submission to the jury; Defendant was thereafter convicted of the remaining counts (Counts 1 through 9). The matter was then set for sentencing.

On March 24, 2014, Defendant's counsel filed a motion for status of counsel hearing. On May 7, 2014, the court conducted a hearing pursuant to Faretta v. California, 422 U.S. 806 (1975), at which the court ruled that Defendant would be allowed to represent himself at sentencing. Sentencing was then rescheduled to allow additional time for Defendant to review and respond to the Presentence Report (PSR).

On July 15, 2014, Defendant appeared pro se for sentencing. After overruling in part and sustaining in part Defendant's pro se objections to the PSR, the court sentenced Defendant to 120 months' imprisonment, five years' supervised release, a $900 special assessment, and ordered $681,410 in restitution.

Defendant filed a Notice of Appeal. Appellate counsel was appointed by the Fourth Circuit Court of Appeals. On January 29, 2015, Defendant's conviction and sentence were affirmed. United States v. Hartsoe, 591 F. App'x 216 (U.S. Court of Appeals for the 4th Circuit 2015). Defendant then timely filed the current motion for relief under 28 U.S. Code § 2255.

U.S. v. Hartsoe, supra.

You can, if you are interested, read about the charges and facts that brought Hartsoe to this point in the news stories you can find here, here and here.

In his 28 U.S. Code § 2255 motion, Hartsoe raised “six Grounds for Relief”, but this post only examines one of them: “Ground Two”. U.S. v. Hartsoe.  According to the Judge, in “Ground Two” Hartsoe “claim[ed] the Government committed prosecutorial misconduct in failing to turn over exculpatory evidence in violation of Brady v. Maryland, 373 U.S. 83 (1963), and/or in corrupting the above-noted computer hard drive so that it was inaccessible for review.”  U.S. v. Hartsoe, supra.  As Wikipedia explains, Brady v. Maryland,          

was a landmark United States Supreme Court case in which the prosecution had withheld from the criminal defendant certain evidence. The defendant challenged his conviction, arguing it had been contrary to the Due Process Clause of the Fourteenth Amendment to the United States Constitution. . . .

The Supreme Court held that withholding exculpatory evidence violates due process "where the evidence is material either to guilt or to punishment"; and the court determined that under Maryland state law the withheld evidence could not have exculpated the defendant but was material to the level of punishment he would be given. Hence the Maryland Court of Appeals' ruling was affirmed.

A defendant's request for `Brady disclosure’ refers to the holding of the Brady case, and the numerous state and federal cases that interpret its requirement that the prosecution disclose material exculpatory evidence to the defense. Exculpatory evidence is `material' if there is a reasonable probability that his conviction or sentence would have been different had these materials been disclosed.’ Brady evidence includes statements of witnesses or physical evidence that conflicts with the prosecution's witnesses, and evidence that could allow the defense to impeach the credibility of a prosecution witness.

Getting back to the opinion, the Judge explained that, in “Ground One”, Hartsoe claimed

[his] counsel was ineffective in failing to access and review a computer hard drive seized by the Government. Defendant maintains this computer hard drive contained exculpatory evidence of `Satisfaction of Mortgage’ documents, copies of which he contends did not exist in customers' files and were evidence of the viability of Defendants' `debt elimination’ scheme.

Based on information obtained during an investigation, the Federal Bureau of Investigation (FBI) secured a search warrant for the offices of Eden Gifted Properties (EGP), the business of Defendant and his co-Defendants. On June 1, 2012, the FBI executed the search warrant seizing . . . a variety of documentary evidence and a computer hard drive which operated as a server for EGP computers. The Government retained this evidence throughout the prosecution of this matter. . . .

During the course of trial, counsel for co-Defendants Chappell Dew and Mark Manuel argued that they attempted to review the contents of the hard drive and were unsuccessful. . . . Initially, counsel for co-Defendant Dew argued that he and counsel for co-defendant Manuel were unable to access material on the hard drive because of encryption placed on the hard drive by the Government. . . . The Government denied it had placed any encryption on the hard drive, asserting that it had `not placed any sort of locks or restrictions [on access to the information] and that any restrictive access on this hard drive would be something that the defendants have done themselves on their own computer.’ . . .  The Government indicated it was able to review material on the hard drive through use of a `forensic tool kit,’ but that `the encryption is the defendants'. Id. at 146. The court noted that Defendants `can either tell their lawyers how to get through their encryption or the FBI would have to unencrypt it for them if they can't un-encrypt it any more.’ . . .  The Government maintained that if it `un-encrypted” the information for defense counsel, that would “alter[ +] the evidence,’ . . . and `[w]e want to give them a copy of what exactly was on there.’

U.S. v. Hartsoe, supra.

The opinion goes on to explain that the trial judge then

attempted to ascertain whether the FBI was indicating that `they had to use some method to break through the encryption[.]’ . .  Counsel for co-Defendant Manuel contended that counsel had downloaded the forensic tool kit but that the files were still inaccessible because `we needed some Oracle database running underneath the tool kit. And I don't have that. I don't even know what that is.’ . . .

`After a lunch break, the Government informed the court that the FBI had looked at certain parts, [and had gotten] through the encryption on that computer. However, what they saw from looking at it seemed to be electronic copies of the hard copies that we already had. A full [un]encryption would have required the computer to be sent to Quantico. We did not do that. We instead told the defense that if they wanted to come see it to let us know six months ago. So, from speaking with the [FBI personnel], it does not appear that even we were able to open all of it because of the encryption placed on it by the defendants. . . .’

The next day, counsel for co-Defendant Dew indicated that all defense counsel had gone to the review the hard drive at its location (at the local FBI facility), and that the files on the hard drive were not encrypted but that the files – `thousands and thousands and thousands of pages,’ . . . – were not searchable. Counsel for Hartsoe, Mr. Craig, stated that the FBI agent who assisted counsel in accessing the hard drive indicated counsel could access the material on the hard drive and `search it[,]’ . . ;  counsel for Dew indicated that counsel understood that to mean counsel would have to search the hard drive by looking at each file. . . .The undersigned then indicated that because counsel had sufficient time prior to trial to review the material, it was at a loss to remedy the problem as trial was in process.

U.S. v. Hartsoe, supra (emphasis in the original).

The opinion then explains that Hartsoe’s

Ground for Relief asserts that counsel failed to access the computer hard drive in a timely manner; that is, that the alleged ineffectiveness arose prior to trial. . . . Therefore, it must be determined whether Craig's failure to review the computer hard drive in possession of the Government prior to trial was ineffective and, if so, whether this failure prejudiced Defendant.

Assuming for purposes of this motion that counsel was ineffective in failing to review the computer hard drive prior to commencement of trial, Defendant cannot establish prejudice resulting from counsel's alleged failure. First, at no time during the proceedings did any defendant contend that the hard drive contained specific documents showing that the process had resulted in an actual satisfaction of the mortgage of any EGP client. Notably, Defendant fails to proffer any evidence of any such document, presumably available from any county clerk of court where the mortgage had been originally recorded, in support of his argument.

Third, the evidence of Defendant's guilt was voluminous and overwhelming. The Government introduced over 600 exhibits, most of which were EGP client files containing numerous frivolous documents sent through the mails in an effort to execute Defendants' fraudulent scheme. As noted above, at least one letter contained in those files was introduced by defense counsel and evidenced satisfaction of a mortgage; however, Defendant provides no evidence other than his self-serving, unverified statement⁴ that these documents noting satisfaction of a mortgage `validated the effectiveness of the process being used by [co-defendants].’ . . .  Defendant's conviction evidences the jury's rejection of the argument that the satisfaction of mortgage was by any means other than via payment of the mortgage balance.

Therefore, as Defendant cannot establish prejudice on this Ground for Relief, the Government is entitled to summary judgment and it is dismissed with prejudice.

U.S. v. Hartsoe, supra (emphasis in the original).

The District Court Judge also pointed out that

the evidence of [Hartsoe’s] guilt was voluminous and overwhelming. The Government introduced over 600 exhibits, most of which were EGP client files containing numerous frivolous documents sent through the mails in an effort to execute [Hartsoe’s] fraudulent scheme. As noted above, at least one letter contained in those files was introduced by defense counsel and evidenced satisfaction of a mortgage; however, [Hartsoe] provides no evidence other than his self-serving, unverified statement that these documents noting satisfaction of a mortgage `validated the effectiveness of the process being used by [co-defendants].’ . . . Defendant's conviction evidences the jury's rejection of the argument that the satisfaction of mortgage was by any means other than via payment of the mortgage balance.

Therefore, as Defendant cannot establish prejudice on this Ground for Relief, the Government is entitled to summary judgment and it is dismissed with prejudice.

U.S. v. Hartsoe, supra.

The District Court Judge then ruled on Hartsoe’s Brady claim, explaining that Hartsoe

maintains the Government violated Brady v. Maryland, 374 U.S. 83 (1963), in allegedly rendering the above-discussed computer hard drive inaccessible. There are three components to a Brady violation: (1) the evidence at issue must be favorable to the accused; (2) that evidence must have been suppressed by the Government; and (3) prejudice must have ensued. Strickler v. Greene, 527 U.S. 263 (1999).

As noted above, Defendant fails to establish that any Government action rendered the computer hard drive inaccessible. Counsel went to review the hard drive at its location (at the local FBI facility), and the files on the hard drive were not encrypted but the files – `thousands and thousands and thousands of pages,’ Trial Tr. (Non-Testimony Portions) at 192, ECF No. 416 – were not searchable. Craig stated that the FBI agent who assisted counsel in accessing the hard drive indicated counsel could access the material on the hard drive and `search it[,]’ . . . ; counsel for co-Defendant Dew indicated that counsel understood that to mean counsel would have to search the hard drive by looking at each file. Id. Therefore, it appears the computer hard drive was not inaccessible; rather, the volume of material on the hard drive was such that it was not feasible to review it during trial. Therefore, appellate counsel was not ineffective in failing to assert a claim under Brady, and this ground for relief is rejected.

U.S. v. Hartsoe, supra.

For these and other reasons, the District Court Judge held that “the Government's motion for summary judgment is granted and Defendant's motion for relief is dismissed with prejudice.”  U.S. v. Hartsoe, supra. In other words, Hartsoe lost.