20090724a Opposition To 2255 Motion

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JOSEPH P. RUSSONIELLO (CSBN 44332) United States Attorney

2 3

BRIAN J. STRETCH (CSBN 163973) Chief, Criminal Division

4

LAUREL BEELER (CSBN 187656) Assistant United States Attorney

5 6 7

450 Golden Gate Avenue, 11th Floor San Francisco, California 94102 Telephone: (415) 436-6765 Facsimile: (415) 436-7234 Email: [email protected]

8 Attorneys for Plaintiff 9 10

UNITED STATES DISTRICT COURT

11

NORTHERN DISTRICT OF CALIFORNIA

12

SAN FRANCISCO DIVISION

13 14 15 16 17

UNITED STATES OF AMERICA, ) ) Plaintiff, ) ) v. ) ) CONNIE C. ARMSTRONG, JR., ) ) Defendant. ) ______________________________)

18 19 20 21 22 23 24 25 26 27 28

UNITED STATES’ OPPOSITION (CR 94 276 PJH)

No. CR 94 276 PJH UNITED STATES' OPPOSITION TO DEFENDANT ARMSTRONG’S 28 U.S.C. § 2255 MOTION

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TABLE OF CONTENTS

2 TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii 3 4

I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

5 II. PROCEDURAL BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 6 7

III. RELEVANT FACTS ...............................................................................................................2

8

A. The Trial Evidence...............................................................................................................2

9 10

B. Armstrong’s Direct Appeal................................................................................................ 5 C. The Re-Sentencing and Second Appeal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

11 12

IV. ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

13

A. Armstrong’s Section 2255 Motion May Be Untimely . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

14

B. Armstrong Procedurally Defaulted His Claim About Late Disclosure of Tapes . . . . . . . . 8

15

C. The Ninth Circuit Rejected Armstrong’s Jury Instruction Claim On Direct Appeal . . . . . 9

16

D. Armstrong Does Not Establish An Impermissible Motive For His Prosecution . . . . . . . 10

17

IV. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

18 19 20 21 22 23 24 25 26 27 28

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TABLE OF AUTHORITIES

2 FEDERAL CASES 3 4

Bordenkircher v. Hayes, 434 U.S. 357, 364 (1978) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

5

Bousley v. United States, 523 U.S. 614, 621-24 (1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 8-9

6

Carrington v. United States, 503 F.3d 888, 891 (9th Cir. 2007), dissent amended on denial of rehearing, 530 F.3d 1183 (9th Cir. 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

7 Clay v. United States, 537 U.S. 522, 527-08 (2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-7 8 Coleman v. Thompson, 501 U.S. 722, 753 (1991) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-9 9 Davis v. United States, 417 U.S. 333 (1974) ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 10 Kaufman v. United States, 394 U.S. 217, 223-28 & n.8 (1969) . . . . . . . . . . . . . . . . . . . . . . . . 2, 9 11 Massaro v. United States, 538 U.S. 500, 504 (2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 8 12

Matus-Leva v. United States, 287 F.3d 758, 761 (9th Cir. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . 1

13 Mayle v. Felix, 545 U.S. 644, 654-55 (2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 14 Missouri v. Jenkins, 495 U.S. 33, 45 (1990) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 15

Shah v. United States, 878 F.2d 1156, 1161 (9th Cir. 1989) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

16 United States v. Armstrong, 517 U.S. 456, 464 (1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 17 18

United States v. Armstrong (Armstrong I), No. 97-10392, memorandum opinion, 2000 WL 425007 (9th Cir. April 19, 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim

19

United States v. Armstrong (Armstrong II), No. 00-10399, memorandum opinion, 2002 WL 554373 (9th Cir. April 8, 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim

20 United States v. Frady, 456 U.S. 152, 170 (1982) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-9 21 22

United States v. Leonti, 326 F.3d 1111, 1119 (9th Cir. 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 United States v. Lopez, 474 F.3d 1208, 1211 (9th Cir.), cert. denied, 550 U.S. 928 (2007) . . . . 10

23 24

United States v. Lupton, memorandum opinion, 2008 WL 4603336, *4–*5 (E.D. Wis. Oct. 16, 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

25

United States v. Redd, 759 F.2d 699, 700 (9th Cir. 1985) (per curiam) . . . . . . . . . . . . . . . . . . 2, 9

26

United States v. Scrivner, 189 F.3d 825, 827-28 (9th Cir. 1999) . . . . . . . . . . . . . . . . . . . . . 2, 9-10

27

Wayte v. United States, 470 U.S. 598, 607-08 (1985) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

28

Withrow v. Williams, 507 U.S. 680, 720-21 (1993) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

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FEDERAL STATUTES

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18 U.S.C. § 1343 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

3

18 U.S.C. § 2314 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

4

28 U.S.C. § 2255 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim

5 FEDERAL RULES 6 Fed. R. Civ. P. 56(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 7 8

LOCAL RULES

9

Civil L. R. 7-5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

10

Criminal L. R. 47-2(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

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JOSEPH P. RUSSONIELLO (CSBN 44332) United States Attorney

2 3

BRIAN J. STRETCH (CSBN 163973) Chief, Criminal Division

4

LAUREL BEELER (CSBN 187656) Assistant United States Attorney

5 6 7

450 Golden Gate Avenue, 11th Floor San Francisco, California 94102 Telephone: (415) 436-6765 Facsimile: (415) 436-7234 Email: [email protected]

8 Attorneys for Plaintiff 9 10

UNITED STATES DISTRICT COURT

11

NORTHERN DISTRICT OF CALIFORNIA

12

SAN FRANCISCO DIVISION

13 14 15 16 17

UNITED STATES OF AMERICA, ) ) Plaintiff, ) ) v. ) ) CONNIE C. ARMSTRONG, JR., ) ) Defendant. ) ______________________________)

No. CR 94 276 PJH UNITED STATES' OPPOSITION TO DEFENDANT ARMSTRONG’S 28 U.S.C. § 2255 MOTION

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I. INTRODUCTION

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Connie C. Armstrong, Jr.1 asserts that his conviction and sentence should be vacated under

21

28 U.S.C. § 2255 for the following reasons: (1) the government prosecuted him only because it

22

was pressured to do so; (2) the government failed to timely disclose certain audio tapes of

23

Armstrong; and (3) the trial court erred by denying a defense request for a theory-of-the-case

24

jury instruction that certain assets were not held in trust for Armstrong’s clients but instead were

25

assets of Armstrong’s company that were available for his investment and use.

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Armstrong’s motion should be denied.

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Armstrong is on supervised release and therefore is “in custody” for purposes of his 28 U.S.C. § 2255 motion. See Matus-Leva v. United States, 287 F.3d 758, 761 (9th Cir. 2002). UNITED STATES’ OPPOSITION (CR 94 276 PJH)

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First, Armstrong’s 2255 motion may be untimely because it may not have been filed within

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one year of the date Armstrong’s conviction became final. The United States has requested

3

documents from the Ninth Circuit to clarify this issue.

4

Second, assuming a timely-filed section 2255 motion, Armstrong cannot challenge the

5

allegedly-late disclosure of tapes at trial because he did not raise the issue on direct appeal, and

6

he cannot show cause and actual prejudice, or actual innocence, to overcome his procedural

7

default. See Massaro v. United States, 538 U.S. 500, 504 (2003); Bousley v. United States, 523

8

U.S. 614, 621-24 (1998). As to his claim that the district court erred by denying his theory-of-

9

the case instruction, the Ninth Circuit rejected that claim on direct appeal. United States v.

10

Armstrong (Armstrong I), No. 97-10392, memorandum opinion, 2000 WL 425007 (9th Cir. April

11

19, 2000). He establishes no grounds to re-litigate the claim. See Kaufman v. United States, 394

12

U.S. 217, 223-28 & n.8 (1969); United States v. Scrivner, 189 F.3d 825, 827-28 (9th Cir. 1999);

13

United States v. Redd, 759 F.2d 699, 700 (9th Cir. 1985) (per curiam).

14

Finally, Armstrong offers only conclusory allegations, not facts, about undue political

15

influence, and thus he is not entitled to relief. See James v. Borg, 24 F.3d 20, 26 (9th Cir. 1994).

16

II. PROCEDURAL BACKGROUND

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On June 27, 1994, a federal grand jury returned a twenty-one count indictment charging

18

Armstrong and a co-defendant with causing travel in interstate commerce to execute a scheme to

19

defraud (18 U.S.C. § 2314) (Counts 1-3); wire fraud (18 U.S.C. § 1343) (Counts 4-14, 19-21);

20

and interstate transportation of securities traceable to fraudulently-obtained funds (18 U.S.C. §

21

2314) (Counts 15-18). CR 1. The charges related to the operation of Hamilton Taft &

22

Company, Inc. (“Hamilton Taft”), a payroll tax service company headquartered in San

23

Francisco, California.

24

A jury trial before the Honorable Charles A. Legge began on December 3, 1996, and ended

25

on February 26, 1997, with guilty verdicts as to Armstrong on all counts. CR 239, 315. On

26

August 29, 1997, the district court sentenced Armstrong to 108 months’ custody, three years of

27

supervised release, restitution of $62,750,000, and a fine. CR 360, 361.

28

Armstrong appealed his conviction. The Ninth Circuit affirmed all but counts 15-18

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(reversing on sufficiency grounds), and remanded for re-sentencing. See Armstrong I, 2000 WL

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425007. On August 15, 2000, Judge Legge re-sentenced Armstrong to 108 months’ custody,

3

three years of supervised release, and restitution of $1,000,000. CR 492, CR 494. Following a

4

second appeal, the Ninth Circuit affirmed the judgment, which was entered on April 15, 2002.

5

See United States v. Armstrong (Armstrong II), No. 00-10399, memorandum opinion, 2002 WL

6

554373 (9th Cir. April 8, 2002); Armstrong II, No. 00-10399, docket entry dated 04/15/02.

7

On April 29, 2002, Armstrong asked for an extension of time to file a petition for rehearing

8

and rehearing en banc, and he filed his petition on May 29, 2002. Armstrong II, No. 00-10399,

9

docket entries dated 04/29/02 and 05/29/02. On January 31, 2003, the Ninth Circuit granted the

10

motion for an extension of time, ordered the brief filed, and denied the petition for rehearing and

11

rehearing en banc, and on February 10, 2003, it issued the mandate. Id., docket entries dated

12

01/31/03 and 02/10/03. Counsel for Armstrong sent a letter to the court in June 2007, and

13

Armstrong sent a letter in July 2007. Id., docket entries dated 06/07/07 and 08/02/07. The

14

docket entries suggest that the letters discussed the Ninth Circuit’s previous denial of the petition

15

for rehearing. Id. On April 22, 2008, the Ninth Circuit construed the letters as a motion to recall

16

the mandate, recalled the mandate, withdrew the January 31, 2003 order, issued a new order

17

denying the petition for rehearing and rehearing en banc, and ordered the mandate to issue

18

forthwith. Id., docket entry dated 04/22/09. On May 12, 2008, mail (presumably addressed to

19

either defense counsel or Armstrong) was returned “refused.” Id., docket entry dated 05/21/08.

20

Armstrong apparently filed his section 2255 motion on April 22, 2009, and an amended

21

motion on May 11, 2009. CR 536, 541 (refers to April 22 motion), 549. The April 22 motion is

22

not listed on the docket, possibly because Armstrong tried unsuccessfully to file it under seal

23

CR 537. The government does not have a copy. Declaration of Laurel Beeler at 1-2. III. RELEVANT FACTS

24 25 26

A. The Trial Evidence An overview of the trial evidence shows that Hamilton Taft – a service company that assisted

27

large companies by calculating, collecting, and paying their payroll taxes to federal, state, and

28

local taxing entities – had long been in existence when Armstrong acquired it in March 1989

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(Armstrong I Government Brief (hereafter, “GB”) 60).2 Until that time, Hamilton Taft had

2

derived its income from investing client funds (employee and employer tax payments collected

3

for payment to taxing authorities) during the time period from receipt of the funds until the

4

checks to the taxing agencies cleared (GB 60).

5

In March of 1991, some of Hamilton Taft’s clients forced it into involuntary bankruptcy (GB

6

60). Afterward, a bankruptcy trustee determined that under Armstrong’s stewardship, Hamilton

7

Taft had collected $91 million from its clients to pay their taxes to various taxing agencies, but

8

that despite those collections, Hamilton Taft had only $5.8 million on hand (GB 60). The trustee

9

also discovered that over a two-year period, Hamilton Taft had prepared tax payment checks but

10

held them back, and thus was not making timely payments to taxing authorities (GB 60-61).

11

Because this created a perpetual and increasing shortfall, Hamilton Taft held back more checks

12

each quarter to make the past tax payments and to pay penalties that accrued when taxes due

13

were not paid on time (GB 61). Basically, each quarter, Hamilton Taft used incoming funds

14

from clients to cover delinquent taxes and penalties for other clients (GB 61).

15

The trustee’s accountant determined that by the last quarter of 1990, Hamilton Taft had held

16

back $57 million in checks (GB 61). The accountant determined that during Armstrong’s

17

ownership of Hamilton Taft, the company was not profitable, and its shortfall continually

18

increased because of operating losses, large penalties for late tax payments, and Armstrong’s

19

transfer of funds from Hamilton Taft to his own companies (where he used the funds to buy

20

assets like real estate, oil wells, a multi-million dollar ranch, a helicopter, luxury cars, and a lease

21

of an airplane) (GB 61). Specifically, the accountant determined that during Armstrong’s

22

ownership, Hamilton Taft (1) spent more than $14 million to cover the cost of its operations; (2)

23

paid more than $8.5 million in penalties and interest to tax agencies for delinquent taxes and

24

accrued (but did not pay) additional penalties of $8 to $9 million; (3) transferred more than $55.1

25 26 27 28

2

For its facts here, the government relies on its lengthy statement of facts from its brief in Armstrong I, which cites the record. (The government similarly relied on that brief in its recitation of facts in Armstrong II.) Because the government’s copy of the Armstrong I brief is from the government’s excerpt of records in Armstrong II, it has bates numbers on its lower right-hand corners. For ease of reference, the government uses those bates numbers here. The government will lodge copies of both parties’ briefs from both appeals with the Court. UNITED STATES’ OPPOSITION (CR 94 276 PJH)

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million to Armstrong’s companies; and (4) spent more than $16.5 million on Armstrong

2

personally (including $9.2 million for his ranch, $965,000 in political and charitable

3

contributions, $735,000 for a criminal defense retainer, $1.7 million for a helicopter, $352,000

4

for cars, $217,000 for a Fourth of July party, and $1.4 million in other personal expenditures

5

including $98,392 for furs and Christmas presents) (GB 61).

6

B. Armstrong’s Direct Appeal

7

On direct appeal, Armstrong challenged the district court’s refusal to give his “theory of the

8

defense” instruction that client funds collected by Hamilton Taft to pay client payroll taxes were

9

not held in trust but instead were the “property of” the company. Armstrong I Appellant’s

10

Opening Brief (hereafter, “AOB”) at 50-56. That meant, Armstrong argued, that Hamilton Taft

11

(and Armstrong) could use the funds for any purpose and for any length of time as long as –

12

when the taxes were paid – Hamilton Taft paid any penalties and interest. AOB 50-52. The

13

instruction, Armstrong asserted, was supported by the Ninth Circuit’s opinion in In Re Hamilton

14

Taft, 53 F.3d 285 (9th Cir. 1995), an opinion that the court ultimately vacated as moot. See In Re

15

Hamilton Taft, 68 F.3d 337 (9th Cir. 1995). The Ninth Circuit rejected this claim, holding that

16

the district court did not abuse its discretion in rejecting Armstrong’s proposed theory-of-the-

17

defense instruction because the good-faith instruction adequately covered Armstrong’s theory.

18

Armstrong I, 2000 WL 426007, at *1 & n.2 (specifically rejecting Armstrong’s argument that In

19

Re Hamilton Taft required the district court to use his proposed instruction).

20

On direct appeal, Armstrong also challenged the sufficiency of the evidence of his fraudulent

21

intent as to all 21 counts of the indictment, the district court’s refusal to admit a hearsay

22

declaration, and the district court’s ex parte contacts with the jury. AOB at 24-40, 49-62. The

23

Ninth Circuit rejected his claims. Armstrong I, 2000 WL 425007, *2-*4. As to the trial evidence

24

about fraudulent intent, the court held that it showed the following:

25 26 27 28

(1) Armstrong repeatedly was warned that his use of client funds was likely improper or illegal; (2) he directed . . . withhold[ing of] client checks, and actively sought to cover up the diversion and withholding of client funds; (3) Armstrong and Hamilton Taft failed to fulfill client expectations and specific contractual obligations to pay taxes on time; (4) Armstrong made misrepresentations to particular clients regarding the use of their funds; (5) in addition to using client funds for risky, long-term investments, Armstrong also made extensive personal use of client funds.

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Id. at *2. This evidence established that Armstrong “had the intent and developed a scheme to

2

defraud.” Id. The Court then affirmed 17 of the 21 counts, reversed Counts 15-18 on

3

sufficiency grounds, and remanded the case for re-sentencing.

4

C. The Re-Sentencing and Second Appeal

5

Following remand, Judge Legge re-sentenced Armstrong to 108 months’ prison, three years

6

of supervised release, and restitution of $1,000,000. CR 492, CR 494. Following a second

7

appeal, the Ninth Circuit affirmed the judgment. See Armstrong II, 2002 WL 554373.

8 9

IV. ARGUMENT Armstrong alleges that his conviction and sentence should be vacated for the following

10

reasons: (1) the government prosecuted him only because it was pressured to do so; (2) the

11

government failed to timely disclose certain audio tapes of Armstrong; and (3) the trial court

12

erred by denying a defense request for a theory-of-the-case jury instruction that certain assets

13

were not held in trust for Armstrong’s clients but instead were assets of Armstrong’s company

14

that were available for his investment and use.

15

The Court should dismiss the claims. Armstrong’s motion may be untimely because it may

16

not have been filed within one year of the date his conviction became final. Assuming a timely-

17

filed section 2255 motion, Armstrong cannot challenge the allegedly late disclosure of tapes

18

because he did not raise the issue on direct appeal, and he cannot overcome his procedural

19

default. He already challenged on direct appeal, and cannot re-litigate here, his claim that the

20

district court erred by denying his proposed theory-of-the case instruction. Finally, Armstrong’s

21

conclusory allegations do not establish an impermissible motive for his prosecution.

22

A. Armstrong’s Section 2255 Motion May Be Untimely

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First, Armstrong’s 2255 motion may be untimely because it may not have been filed within one year from the date Armstrong’s conviction became final. Under 28 U.S.C. § 2255, a section 2255 motion must be filed within one year from the date

26

that a conviction is final. A conviction is final when the opportunity for direct review is

27

exhausted. See Clay v. United States, 537 U.S. 522, 527-08 (2003). Here, following the second

28

appeal in Armstrong II, Armstrong did not file a petition for certiorari. Therefore, his conviction

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was final 90 days after entry of the Ninth Circuit’s judgment in Armstrong II. See Clay, 537

2

U.S. at 527-08; Supreme Court Rule 13.1.

3

A timely petition for rehearing operates to suspend the finality of a court of appeals’

4

judgment and therefore tolls the 90-day time period for filing a petition for certiorari. See

5

Missouri v. Jenkins, 495 U.S. 33, 45 (1990); Supreme Court Rule 13.4. Put another way, the 90-

6

day period runs from the date of the denial of rehearing. See Supreme Court Rule 13.4.

7

Here, the Ninth Circuit entered its judgment in Armstrong II on April 15, 2002, granted

8

Armstrong’s motion for an extension of time to file his petition for rehearing, and denied the

9

petition on January 31, 2003. See Armstrong II, No. 00-10399, docket entries dated 04/15/02,

10

04/29/02, 05/29/02, 01/31/03. Thus, Armstrong’s conviction was final 90 days after January 31,

11

2003. See Clay, 437 U.S. at 524-25 (this date, and not the issuance of the appellate court

12

mandate, is the triggering date). Ordinarily, his section 2255 motion filed in 2009 would be

13

untimely because it was filed more than one year after his conviction became final.

14

On April 22, 2008, however, the Ninth Circuit construed certain defense letters as a motion

15

to recall the mandate, recalled the mandate, withdrew the January 31, 2003 order, issued a new

16

order denying the petition for rehearing and rehearing en banc, and ordered that the mandate

17

issue forthwith. Id., docket entry dated 04/22/09. The Ninth Circuit has authority to recall its

18

mandate in extraordinary circumstances in order to protect the integrity of its processes, but it

19

should do so only in exceptional circumstances. See Carrington v. United States, 503 F.3d 888,

20

891 (9th Cir. 2007), dissent amended on denial of rehearing, 530 F.3d 1183 (9th Cir. 2008). After

21

the United States obtains the letters,3 it will be able to evaluate whether the April 22, 2008, order

22

– issued five years after Armstrong’s conviction otherwise became final – affects the timeliness

23

of Armstrong’s section 2255 motion.

24

A related procedural issue is whether the 90-day period for certiorari runs from the renewed

25

denial of Armstrong’s petition for rehearing on April 22, 2008. Ordinarily the 90 days runs from

26

the denial of the petition for rehearing, see Supreme Court Rule 13.4, but it seems unusual that

27 28

3

The letters are not in the government’s files. According to the Ninth Circuit, it will take three to five days to retrieve the documents from the Federal Records Center in San Bruno, California, and after that, the government will copy them. Declaration of Laurel Beeler at 1. UNITED STATES’ OPPOSITION (CR 94 276 PJH)

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the new order should restart the certiorari clock – and extend the time period for filing a section

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2255 motion – five years after the Ninth Circuit denied the petition for rehearing. Again, the

3

Ninth Circuit documents may illuminate the issue. The inquiry is relevant because Armstrong

4

filed his section 2255 motion on April 22, 2009, one year after the denial of the petition for

5

rehearing, but filed an amended motion more than a year later, on May 11, 2009. See CR 536

6

and 541 (orders discussing April 22 motion, which apparently was never filed), CR 549. If the

7

90-day certiorari grace period does not apply, then the claims in the May 11 motion are deemed

8

filed within the one-year period only if they “relate back” to the April 22 motion under Federal

9

Rule of Civil Procedure 15(c). See Mayle v. Felix, 545 U.S. 644, 654-55 (2005).

10

B. Armstrong Procedurally Defaulted His Claim About Late Disclosure of Tapes

11 12

Armstrong cannot challenge the allegedly late disclosure of tapes because he did not raise the issue on direct appeal, and he cannot overcome his procedural default.

13

Generally, a defendant who does not raise a claim on direct appeal cannot raise it on

14

collateral review unless he shows both cause excusing his procedural default and actual

15

prejudice resulting from the claim of error. See Massaro, 538 U.S. at 504. The “cause and

16

prejudice” standard requires Armstrong to show not only that “some objective factor external to

17

the defense” impeded his efforts to raise the issue earlier, Coleman v. Thompson, 501 U.S. 722,

18

753 (1991), but also that the error he alleges “worked to his actual and substantial disadvantage,

19

infecting his entire trial with error.” United States v. Frady, 456 U.S. 152, 170 (1982) (emphasis

20

in the original). If Armstrong cannot show cause and prejudice, the Court can consider his claim

21

only if he demonstrates “actual innocence.” See Bousley, 523 U.S. at 621-24.

22

Here, Armstrong asserts that “near the end of trial” or in “the middle of trial,” the

23

government disclosed 70 hours of audio recordings between Armstrong and one of his personal

24

assistants that “showed Mr. Armstrong’s lack of intent to defraud.” Amended 2255 Motion at 15

25

n.4 & 20. Armstrong asserts – without citation to the relevant transcript – that the district court

26

denied his motion for a continuance and that only after trial could counsel analyze the tapes. Id.;

27

see also CR 353, 354, 360 (motion for new trial heard on August 29, 1997).

28

Although Armstrong challenged the timing of the disclosure of the tapes during trial, he did

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not raise the issue on appeal. He has not overcome this procedural default by showing that an

2

objective factor external to the defense impeded his ability to raise the issue on direct appeal, and

3

his conclusory allegations about the relevance of the tapes do not show an actual and substantial

4

disadvantage that infected his entire trial with error. See Coleman, 501 U.S. at 753; Frady, 456

5

U.S. at 170; James, 24 F.3d at 26 (conclusory allegations, unsupported by specific facts, do not

6

warrant habeas relief). Also, Armstrong cannot establish actual innocence. See Bousley, 523

7

U.S. at 622. As the Ninth Circuit held in Armstrong I, the evidence established that Armstrong

8

“had the intent and developed a scheme to defraud.” 2000 WL 425007, *2-*4 (summarizing

9

Armstrong’s diversion of funds, failure to pay client taxes, misrepresentations to clients, risky

10

investments, and extensive personal use of client funds).

11

C. The Ninth Circuit Rejected Armstrong’s Jury Instruction Claim On Direct Appeal

12 13 14

Armstrong already challenged on direct appeal – and the Court should not reconsider here – his claim that the district court erred by denying his proposed theory-of-the case instruction. Armstrong’s claim – that client funds collected by Hamilton Taft to pay client payroll taxes

15

were not held in trust but instead were available to Hamilton Taft and Armstrong to invest so

16

long as they ultimately paid the taxes and any interest and penalties – is the same claim that

17

Armstrong raised before the Ninth Circuit on direct appeal. AOB at 50-56. The Ninth Circuit

18

rejected this claim, holding that the good-faith instruction adequately covered Armstrong’s

19

theory of the defense. See Armstrong I, 2000 WL 426007, at *1 & n.2

20

Because Armstrong raised this claim on direct appeal, and the Court of Appeals rejected it, it

21

cannot be the basis of a collateral attack on his conviction “absent countervailing equitable

22

considerations” such as actual innocence or cause and actual prejudice. Withrow v. Williams,

23

507 U.S. 680, 720-21 (1993) (Scalia, J., concurring) (collecting cases); see Kaufman, 394 U.S. at

24

223-28 & n.8; Redd, 759 F.2d at 700; supra p. 8 (Armstrong has not shown either cause and

25

prejudice or actual innocence). This approach to federal prisoner collateral litigation is an

26

extension of the law-of-the-case doctrine, which can be overridden when exceptional

27

circumstances exist. See Scrivner, 189 F.3d at 827. Exceptional circumstances justifying

28

section 2255 relief generally involve an intervening change in the governing substantive law,

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usually a new judicial decision narrowly construing the statute of conviction. See Davis v.

2

United States, 417 U.S. 333 (1974); Scrivner, 189 F.3d at 827-828. Armstrong has not

3

articulated exceptional circumstances here, and the Court should not address his claim.

4

D. Armstrong Does Not Establish An Impermissible Motive For His Prosecution

5

Armstrong alleges that the government determined that he did not “violate[] any federal laws

6

and only prosecuted him . . . due to intense pressure from Howard Baker, Nancy Pelosi, Barbara

7

Boxer, the director of the FBI, [deputy FBI director] L.A. Potts, and a few [of Harris Taft’s]

8

clients such as Federal Express.” Motion at 10. Armstrong’s conclusory allegations do not

9

establish a claim.

10

The prosecutor has broad discretion to enforce the nation’s criminal laws, especially pretrial,

11

in part because of the separation of powers doctrine and in part because prosecutorial decisions

12

are “particularly ill-suited to judicial review.” See United States v. Armstrong, 517 U.S. 456,

13

464 (1996); Wayte v. United States, 470 U.S. 598, 607-08 (1985). So long as the prosecutor has

14

probable cause that a defendant committed a crime, “the decision whether or not to prosecute,

15

and what charge to file or bring before a grand jury, generally rests entirely in his discretion.”

16

Bordenkircher v. Hayes, 434 U.S. 357, 364 (1978). Prosecutorial discretion is not unlimited:

17

decisions cannot be based on unconstitutional standards (“selective prosecution”), made in bad

18

faith, or made in retaliation for the defendant’s exercise of a protected statutory or constitutional

19

right (“vindictive prosecution”). Wayte, 470 U.S. at 607-10 (selective prosecution); United

20

States v. Leonti, 326 F.3d 1111, 1119 (9th Cir. 2003) (prosecutor’s refusal to file substantial

21

assistance motion may not be made in bad faith); United States v. Lopez, 474 F.3d 1208, 1211

22

(9th Cir.) (vindictive prosecution), cert. denied, 550 U.S. 928 (2007).4

23

In support of his claim, Armstrong cites the following:

24

1. A February 8, 1991, letter from the FBI to the United States Attorney’s Office (USAO) (a) asking the USAO to review whether federal law was violated by Armstrong as CEO of Hamilton Taft, (b) summarizing the investigation through 1988, (c) mentioning the USAO’s 1988 determination that there was insufficient evidence at that time to charge a

25 26 27 28

4

Armstrong does not cite any cases addressing whether outside influence is an impermissible motive for prosecution. The government found one unpublished opinion discussing whether a prosecutor may bring charges based on partisan political objectives. See United States v. Lupton, memorandum opinion, 2008 WL 4603336, *4 –*5 (E.D. Wis. Oct. 16, 2008). UNITED STATES’ OPPOSITION (CR 94 276 PJH)

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case, and (d) summarizing new evidence. Motion at 12-13 & Exh. 4. 2. A September 23, 1988, letter from the FBI confirming assistant United States attorney Michael Yamaguchi’s decision that “there was insufficient evidence to support a violation at this time and he would therefore decline prosecution . . . [but] if further information could be obtained regarding the allegations presented, he would reconsider his opinion.” Motion at 12-13 & Exh. 8 (emphasis added).

7

3. A March 8, 1991, FBI memorandum summarizing the investigation since February 13, 1991 and, among other things, referencing (a) calls from the Department of Justice in Washington, D.C., (b) calls from the Wall Street Journal, and (c) the agent’s on-going efforts to corroborate the cooperating witness’s information while remaining covert in this phase of the investigation. Motion at 13-14 & Exh. 12.

8

4. Federal Express’s March 1991 lawsuit against Hamilton Taft. Motion at 14 & Exh. 14.

9

5. A March 15, 1991, Wall Street Journal article about Armstrong’s Ponzi scheme. Motion at 15 & Exh. 16.

5 6

10 11 12

6. An April 3, 1991, letter from the FBI to “Mr. Baker,” (“former Senator Howard Baker, Chief of Staff for President Reagan, and a member of the Federal Express board of directors . . . [cc’d] to the representatives of the offices of Nancy Pelosi and Barbara Boxer”) advising Baker that the FBI was investigating Armstrong for embezzling over $100 million in a Ponzi scheme. Motion at 16 & Exh. 20.

13 14

Armstrong’s allegations do not establish any impermissible motive for his prosecution.

15

First, although he signed the section 2255 motion under penalty of perjury under his

16

counsel’s signature, see Motion at 29, that is not the declaration contemplated by this Court’s

17

local rules and Federal Rule of Civil Procedure 56(e). See Criminal L. R. 47-2(b) (“Motions

18

presenting issues of fact shall be supported by affidavits or declarations which shall comply with

19

the requirements of Civil L. R. 7-5); Civil L. R. 7-5 (“An affidavit or declaration . . . shall

20

conform as much as possible to the requirements of FRCivP 56(e)”); Fed. R. Civ. P. 56(e)

21

(“affidavits shall be made on personal knowledge”). Armstrong does not establish where

22

documents came from, and many of his conclusory assertions lack foundation.

23

Second, he mischaracterizes the government’s initial declination of the case as a conclusion

24

that no crime occurred. See, e.g., Motion at 12 (citing Exhibit 8 and 1988 declination). But

25

Exhibit 8 establishes only that in 1988, the government declined prosecution “at this time” but

26

would reconsider its decision if more information were obtained. Armstrong’s additional

27

exhibits demonstrate that more investigation led to more evidence and his prosecution.

28

Third, although Armstrong casts his 2255 motion as an attack on the government’s motives,

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mainly he revisits issues raised on direct appeal about the sufficiency of the evidence

2

establishing his fraudulent intent. Compare Motion with Armstrong I, 2000 WL 425007, *1-*4.

3

Fourth, the FBI letter to Mr. Baker (apparently then on the board of victim Federal Express)

4

merely advises him about the existence of an investigation into a scheme and does not establish

5

any political pressure on the government to prosecute. Armstrong offers no other facts

6

supporting his conclusory allegation of “intense political pressure” from Howard Baker,

7

politicians, and victims. Similarly, inquiries from Main Justice, the Wall Street Journal article,

8

and Federal Express’s lawsuit do not establish inappropriate outside influence. The Court should

9

dismiss Armstrong’s claims summarily. See James, 24 F.3d at 26 (conclusory allegations,

10

unsupported by specific facts, do not warrant habeas relief); Shah v. United States, 878 F.2d

11

1156, 1161 (9th Cir. 1989) (vague or conclusory allegations do not warrant an evidentiary

12

hearing and allow summary dismissal of claims).

13

V. CONCLUSION

14

Depending on what Ninth Circuit documents show about the recall of the mandate in 2008,

15

Armstrong’s 2255 motion may be untimely because it was not filed within one year of the date

16

his conviction became final in 2003. Assuming a timely-filed section 2255 motion, the Court

17

should dismiss Armstrong’s claims as follows: (a) Armstrong procedurally defaulted on his

18

claim about disclosure of tapes; (b) the Ninth Circuit rejected on direct appeal his claim that the

19

district court erred by denying his theory-of-the case instruction; and (c) Armstrong’s conclusory

20

allegations do not establish any impermissible motive for his prosecution.

21

The United States also requests a copy of Armstrong’s April 22 motion from the Court.

22 DATED: July 23, 2009

Respectfully submitted,

23 24

JOSEPH P. RUSSONIELLO United States Attorney

25 26

/s Laurel Beeler LAUREL BEELER Assistant United States Attorney

27 28

UNITED STATES’ OPPOSITION (CR 94 276 PJH)

12