Wednesday, November 10, 2010

An Exchange (of Sorts) on Posner on Black: Posner, George Jonas-Essentially an Unwitting Participant, David and Me

1. Posner on Black:

2. George Jonas:

George Jonas: U.S. courts willfully blind to the facts of Conrad Black’s case

This is a therapeutic column. Having read the opinion of U.S. appellate court Judge Richard Posner in the matter of Conrad Black, my only alternative to apoplexy is to drop the renowned American jurist a note with an opinion of my own.

We both call what we write “opinions,” Judge, but it’s an uneven match. Yours matter. Mine don’t. You speak for a three-member panel in the United States Court of Appeals for the Seventh Circuit. I speak only for myself. You know a great deal of law. All I know is some facts. Appellate lawyers shy away from facts. It has been drummed into them that their forum is about bigger things. As a result, appellate judges get away with murd … well, let’s say with being creative about the evidentiary basis of their opinions.

Since I’m not a lawyer and a newspaper isn’t an appellate forum, I’ll review some facts.

Conrad Black and his co-defendants were charged with misappropriating $60-million from a newspaper conglomerate they had created and managed. At trial, a Chicago jury acquitted Conrad of nine counts (representing $53.9-million) and convicted him of three counts ($6.1-million) plus one count of obstruction of justice.

The two cases ending in conviction were called, respectively, “APC” and “Paxton-Forum.” In both, the jurors were instructed they could find the defendants guilty of fraud if (a) they took something that didn’t belong to them, or (b) although they didn’t, their conduct breached a controversial doctrine called “honest services.” Whether on the basis of (a) or (b), the jurors convicted and, on appeal, the Seventh Circuit affirmed the convictions.

Wait a minute, said the U.S. Supreme Court. Was the “honest services” doctrine designed to go that far when the law was drafted? We don’t think so. We’ll vacate your judgment, Judge Posner, and ask you to reconsider it.

The nine Supreme Court justices underestimated your resourcefulness, Judge. If the court above wouldn’t let Chicago stretch the law to fit the facts, stretching the facts to fit the law was another option.

You did reverse APC, a $5.5-million count, saying “[it] was a solid honest-services case before the Supreme Court weighed in, but not a solid pecuniary-fraud case.” The same reasoning should have reversed Paxton-Forum, a $600,000 count, too. Valid and invalid grounds had been equally available for a verdict and no one could say if the jury chose the first or the second. But a little judicial sleight-of-hand salvaged Paxton-Forum for the prosecution, along with Conrad’s conviction for obstruction of justice.

Conrad’s “crime” was to remove 13 boxes of documents from a Toronto office he had to vacate within six working days (not “10 days” as you say, but why quibble). The prosecution alleged he did so to impede the investigation launched by the American authorities.

On page 4 of your opinion, you agree, Judge Posner: “There was compelling evidence that he [Black] knew that the acts that later formed the basis of the fraud charges against him and his co-defendants were being investigated by a grand jury and by the SEC.”

No, Judge. What evidence there was went the other way. Conrad’s American lawyer had been notified of the SEC investigation, but testified that he couldn’t recall having had a chance to tell his client before he removed the boxes from his office. A lawyer not remembering is hardly “compelling” evidence.

On page 5, you write: “The evidence that the boxes were removed in order to conceal documents from the government investigators was compelling …”

Judge, the evidence that Conrad removed boxes “in order to conceal documents from the government investigation” was zero. It was just the prosecution’s assertion. The evidence was that he removed boxes from his office. Period. It was never denied. Nor was it a crime. He had to vacate his office within days. Removing things is what people do when they’re evicted. The U.S. government’s assertion that Conrad removed things with the corrupt intent of concealment was supported solely by the inflammatory ruse of introducing footage from security cameras to make an ordinary act seem surreptitious — a prosecutorial trick, hoodwinking the jury and the appellate courts.

You continue on page 6: “There was also evidence that in removing the boxes he tried to avoid the surveillance cameras in his office building — unsuccessfully.”

No, judge, there wasn’t. The evidence showed Conrad pointing at the security cameras. He knew he was being taped and had no reason to care; he wasn’t doing anything wrong, at least not in his own mind — and he had no reason to worry about your mind at that point.

“The evidence of obstruction of justice was very strong,” you say on page 7.

If you mean the evidence of Conrad moving boxes, it was overwhelming. The evidence of obstruction of justice was non-existent.

“No reasonable jury could have acquitted Black of obstruction if only it had not been instructed on honest-services fraud.”

That’s not the argument. The argument is that a reasonable jury could have acquitted Conrad of fraud, f-r-a-u-d, if it hadn’t been instructed on honest services. That’s your own argument for reversing APC. Without a fraud conviction, of course, there may be no obstruction, either. That’s as reasonable as it gets.

A $60-million charge resulting in a $600,000 conviction amounts to the government proving 1% of its case — but try telling a pack of hounds they’re barking up the wrong tree. Last summer a Wall Street Journal editorial used the word “railroaded” when talking about Conrad. The description seemed exaggerated then.

After reading your opinion, Judge, I’m not so sure.

2. David:

Itz, did you once express admiration for Posner? is his judgment here defensible.

3. Me

The second count of fraud concerns the $600,00.00 payment to Black et al (hereafter “Black”) in connection with Hollinger’s sale to “x” of community newspapers. The $600,000.00 was alleged by Black to be consideration for not competing with x in its publishing of these community newspapers. There is no argument by Black that this payment was for management fees owed by Hollinger to Black. The argument, as stated by Posner, was that “... that the money was compensation for bona fide covenants not to compete.”

The issue on appeal was: could a reasonable jury on the evidence have failed to convict on this count. It did convict at trial.

Posner says the defence is implausible for a number of reasons:

1. These are small newspapers and Black could have had no intention of ever competing with them as an individual—the non- competes bind Black not Hollinger nor any other company going into the newspaper business;

2. x testified it never asked for such a covenant;

3. Radler wrote to Black during the transactions saying, jokingly that Forum-Paxton had:

“...asked for a 5-year non-compete from Conrad [Black] and me covering not only the states wherein they purchased assets but those states that border the said states. This
would leave us only Alaska , Wyoming and Louisiana for us to continue our activities . . . . I have been assured there is [sic]suitable accommodations four [sic] our new headquarters in Casper , Wyoming .”

4. There were no non-compete covenants. None were prepared and Black concedes that saying their non-existence was an accident. If their non-existence was truly an innocent mistake, Black could never have been convicted originally of honest services fraud or of plain fraud. If not an accident, then no covenants were intended and the fees were part of the price of the papers, owed to Hollinger, and stolen by Black. No reasonable jury could have convicted Black on this count of honest services fraud but not on plain fraud.

The defence argued a jury might have believed that that their non-existence was accident but found criminal liability in the failure to disclose the payment to Hollinger’s board. But the central factual issue at trial on this count was whether the non-competes’ non-existence was an oversight or proof of money fraud.

The jury in fact acquitted Black on two other counts related to non-competes with x. But for those counts the fees went to Hollinger and Hollinger issued covenants not to compete. Hollinger the company was a plausible potential competitor. Black was not. As Posner says:

“The only...rational explanation for the split verdict is
that the jury believed that the $600,000 that the defendants received from Forum-Paxton without covenants not to compete, unlike the other transactions with that company, was proceeds of a plain-vanilla pecuniary fraud—and only a pecuniary fraud. For had the jury believed that a failure to disclose the fees for promising not to compete with the little newspapers was honest-services fraud, it would have convicted the defendants on all the fraud counts, because the defendants disclosed those fees neither to the board nor to the shareholders; and the jury didn’t do that."

That is to say, there was no disclosure to Hollinger’s board with respect to any of the payments for the non-competes. So that can’t be a factor distinguishing the original split on conviction and acquittal for honest services fraud. The jury, in fact, acquitted Black on two other counts related to non-competes with x but found him guilty of “plain-vanilla” money fraud with respect to the $600,000.00.

5. So when what is added to this last "logical" point is the absence of a written record of the $600,000.00 transaction, x’s evidence that it didn’t request a non-compete, Radler’s written joke that the non-competes were made up and not bona fide, and the lack of any intention on Black to compete because he would never have become an individual publisher of small community newspapers, the evidence of money fraud is so compelling that any reasonable jury would have convicted.

I haven’t commented on the obstruction charge but I’d be happy to.

Plus, the two other judges on the panel agreed with Posner. (Before POSNER, KANNE, and SYKES, Circuit Judges.)

4. Me:

Posner says there was compelling evidence of Black’s obstruction of justice. The essence of the crime charged against him is: concealing or attempting to conceal documents with the intent to impair their integrity or availability for use in in an official proceeding. The appeal against the obstruction did not turn on the sufficiency of the evidence. Rather, Black’s argument was that:

1. the instruction to the jury on the overturned charge of honest services fraud prejudicially spilled over on to the jury’s deliberations on obstruction; and that

2. but for the instruction on honest services, a reasonable jury might have acquitted Black, which is to say, more awkwardly, a reasonable jury, properly instructed, might not have found Black guilty of obstruction.

While the sufficiency of the conviction evidence was not being questioned on the appeal, Posner summarily reviews it. At the material time, Black knew he was under investigation by the Grand Jury and the SEC. In the midst of that investigation he removed 13 boxes of documents from his office and took them to his home. He tried to avoid being seen by the surveillance cameras in his office—unsuccessfully. It was found to be material to the investigation whether he had the documents in his office: that meant he had received them. In summarily reviewing the evidence—again, not the issue as such—Posner notes that contrary to Black’s secretary’s evidence that the documents were being removed innocently to set up a temporary office for him in her home because he had 10 days to get out of Hollinger’s offices—testimony and a theory the jury rejected—the boxes were put into Black’s car, not hers, though it was there, and taken to his home, not hers.

Posner notes that obstruction doesn’t require proof of obstruction for conviction, only proof of the intent to obstruct. For the crime's essential concern is not the consequence of acquittal as a result of obstruction but, rather, the consequence of increased government investigatory resources to overcome the obstruction, such as increased man hours and/or more investigators. Therefore, for instance, criminal liability lay when a thief lied about the whereabouts of the proceeds of his theft, causing police to go on a wild goose chase.

On the prejudicial spill over point—the real heart of the appeal on obstruction—Posner dismisses it as follows:

Firstly, he notes there was a separate jury instruction on obstruction, quite distinct from the jury instruction on honest services fraud.

Secondly, he distinguishes cases where misjoinder was held to have caused prejudicial spill over. Those cases involved inflammatory charges that were wrongly tried together with other separate charges. But honest services fraud is not an inflammatory charge. It is, rather, esoteric. It is a subtle sub-set of pecuniary or economic fraud. That combined with the compelling evidence of fraud, which the jury found, and which was not challenged on appeal, meant that no reasonable jury, if it had not received the honest services fraud instruction, could have acquitted on obstruction. When Black removed the documents he knew he was being investigated for fraud and he has been convicted of fraud; and, at the time, honest services fraud was a wide-ranging criminal offence, that time being years before SCOTUS cut the offence back to bribes and kickbacks.

Thirdly, Posner disposes of the Minnie Mouse example handily, wouldn't you think? Estrada argued that if a man was being investigated for having an affair with Minnie Mouse and burned his Disney comics, no obstruction would lay because there is no offence of having an affair with Minnie Mouse. There being no offence, there could not have been the corrupt intent obstruction requires, even though there was an “official investigation”. So, the argument is that the jury could have seen the obstruction evidence differently had it known that honest services fraud was not a crime or had it received no instruction for that type of fraud. The jury, reasonably, so goes the argument, might have given Black more credit for his innocent theory for his taking away the documents.

The answer is that Black was not under investigation for a patently non-existent crime such as sex with a fictional, comic mouse. He was being investigated for fraud, including honest services, mail, wire and money fraud. Plus, at the time, as noted, no one could foresee SCOTUS whittling down of the scope of honest services fraud. More devastating to the point raised by the example, and, to repeat, Black was charged with, and convicted of, money fraud for which he was being investigated at the same time.

5. Me:

So what does Jonas say now?

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