Reply In Support Of 2255

1 2 3 4

BILL BOYD Texas Bar No. 0278000 [email protected] RUSS A. BAKER Texas Bar No. 24045440 [email protected]

7

BOYD-VEIGEL, P.C. P.O. Box 1179 McKinney, Texas 75070 Telephone: 972-562-9700 Telecopier: 972-562-9600

8

Attorneys for Armstrong

5 6

9 UNITED STATES DISTRICT COURT 10 NORTHERN DISTRICT OF CALIFORNIA 11 SAN FRANCISCO DIVISION 12 UNITED STATES OF AMERICA 13 Plaintiff 14 v. 15 CONNIE C. ARMSTRONG, JR.

No. CR 94 276 PJH ARMSTRONG’S REPLY IN SUPPORT OF 28 U.S.C. § 2255 MOTION

16 Defendant 17 18

Armstrong submits this Reply in support of his pending motion under 28 U.S.C. § 2255

19

and in traverse of the factual allegations and legal argument provided in the government’s

20

response of July 24, 2009.

21 22 23 24 ARMSTRONG’S REPLY IN SUPPORT OF 28 U.S.C. § 2255 MOTION

1

TABLE OF CONTENTS

2

Table of Contents ............................................................................................................................. i

3

Index of Authorities ........................................................................................................................ ii

4

Statement of Issues ..........................................................................................................................1

5

Statement of Facts ............................................................................................................................1

6

Argument .........................................................................................................................................2

7 8

A.

The section 2255 motion and amended motion were filed timely. ..........................2

9

B.

Improper suppression of Brady material requires that Armstrong’s conviction be set aside. .......................................................................4

10 1.

Summary ......................................................................................................4

2.

Legal Standard .............................................................................................5

3.

The Undisclosed Prior Investigation ............................................................6

4.

The Undisclosed Political Pressure ..............................................................8

5.

The Undisclosed Collusion with the Bankruptcy Trustee .........................10

11 12 13 14 15 C.

Fraud on the court requires that Armstrong’s conviction be set aside. ..................14

16 17

Conclusion .....................................................................................................................................15

18

Signature ................................................................................................................... Signature Page

19 20 21 22 23 24 ARMSTRONG’S REPLY IN SUPPORT OF 28 U.S.C. § 2255 MOTION

Page i

1

INDEX OF AUTHORITIES

2

Cases

3

Animal Legal Defense Fund v. Veneman, 490 F.3d 725 (9th Cir. 2007) ...................................... 13

4

Banks v. Dretke, 540 U.S. 668, 691 (2004). ................................................................................... 4

5

Bernstein v. Universal Pictures, Inc., 79 F.R.D. 59 (S.D. N.Y. 1978) ........................................... 7

6

Carrington v. United States, 503 F.3d 888, 891 (9th Cir. 2007). ................................................... 4

7

Clay v. United States, 537 U.S. 522, 527 (2003). ....................................................................... 2, 3

8

Dodd v. Hood River County, 59 F.3d 852, 863 (9th Cir.1995). .................................................... 11

9

Ferrell v. West Bend Mut. Ins. Co., 393 F.3d 786 (8th Cir. 2005); .............................................. 12

10

Gantt v. Roe, 389 F.3d 908, 912 (9th Cir. 2004). ....................................................................... 4, 6

11

In re ABA Recovery Service, Inc., 110 B.R. 484, 488 (Bankr. S.D. Cal.1990). ........................... 13

12 13 14

In re Hamilton Taft, 53 F.3d 285 (9th Cir. 1995) ......................................................................... 10 In re Intermagnetics America, Inc., 926 F.2d 912, 916 (9th Cir.1991) ........................................ 15 In re Levander, 180 F.3d 1114, 1120 (9th Cir. 1999)............................................................. 14, 15

15

In re U. S. Financial Securities Litigation, 75 F.R.D. 702 (S.D. Cal. 1977) .................................. 8

16

Jimenez v. Quarterman, 129 S.Ct. 681, 685 (2009); ...................................................................... 2

17

Jones v. S.E.C., 115 F.3d 1173 (4th Cir. 1997); ........................................................................... 12

18

Kunzelman v. Thompson, 799 F.2d 1172 (7th Cir. 1986). ............................................................ 12

19

Kyles v. Whitley, 514 U.S. 419, 434 (1995). ................................................................................... 5

20

Memorex Corp. v. IBM Corp., 458 F. Supp. 423 (N.D. Cal. 1978)................................................ 7

21

Missouri v. Jenkins, 495 U.S. 33, 46-47 (1990) ............................................................................. 3

22

Mitchell v. McCaughtry, 291 F. Supp.2d 823 (E.D. Wis. 2003) .................................................... 4

23

Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 (1979). .................................................... 12, 13

24 ARMSTRONG’S REPLY IN SUPPORT OF 28 U.S.C. § 2255 MOTION

Page ii

1

Reid v. Simmons, 163 F. Supp.2d 81 (D. N.H. 2001). .................................................................... 7

2

Schlup v. Delo, 513 U.S. 298 (1995). ........................................................................................... 13

3

Stanford University Hosp. v. Federal Ins. Co., 1995, WL 912346 (N.D. Cal. 1995) .................. 12

4

U.S. Bancorp Mortgage Co. v. Bonner Mall P’ship, 513 U.S. 18 (1994) .................................... 13

5

U.S. v. Bagley, 473 U.S. 667, 682 (1985). ...................................................................................... 5

6

U.S. v. Blanco, 392 F.3d 382 (9th Cir. 2004) ........................................................................... 6, 10

7

U.S. v. Boulware, 558 F.3d 971, 974 (9th Cir. 2009....................................................................... 7

8

U.S. v. Fernandez, 559 F.3d 303 (5th Cir. 2009). ........................................................................... 7

9

U.S. v. Golb, 69 F.3d 1417, 1430 (9th Cir. 1995) ........................................................................... 5

10

U.S. v. Jernigan, 492 F.3d 1050, 1053 (9th Cir. 2007)................................................................... 4

11

U.S. v. Lopez, ___ F.3d ___, WL 2501886 (9th Cir., Aug. 18, 2009) ............................................ 5

12

U.S. v. Schimmels, 127 F.3d 875, 881(9th Cir. 1997)................................................................... 12

13

U.S. v. Shaffer, 789 F.2d 682, 690 (9th Cir. 1986) ......................................................................... 5

14

Weldon v. U.S., 225 F.3d 647 (2nd Cir. 2000).............................................................................. 15

15

Younan v. Caruso, 51 Cal. App. 4th 401 (1996)........................................................................... 12

16

Rules

17

Supreme Court Rule 13.1................................................................................................................ 3

18

Supreme Court Rule 13.3................................................................................................................ 3

19 20 21 22 23 24 ARMSTRONG’S REPLY IN SUPPORT OF 28 U.S.C. § 2255 MOTION

Page iii

1 2

STATEMENT OF ISSUES Armstrong replies to the opposition tendered by the government which argues that a) his

3

section 2255 motion was not timely, b) claims related to the late production of evidence were

4

procedurally defaulted, and c) his complaints regarding suppression of evidence concerning

5

political pressure are conclusory. In reply, Armstrong would show that his motion was timely,

6

given the undisputed dates of his filing and of the conclusion his direct appeal. Further,

7

Armstrong explains that the issue concerning the late-produced evidence is not, per se, a Brady

8

complaint; rather, the issue is that the lead prosecutor and the lead FBI agent lied under oath

9

about the character of the evidence in an apparent effort to block a defense request for a

10

continuance. Finally, Armstrong shows that his suppression complaints are not conclusory but

11

compel and support the conclusions reached.

12

In its opposition, the government did not address the non-political Brady complaints

13

alleged in Armstrong’s § 2255 motion and the amendment thereto. Armstrong provides a

14

summary of these complaints in response to this Court’s reasonable observation that his amended

15

motion was “not entirely comprehensible.” [Docket Entry 548, Order to Show Cause].

16 17 18

STATEMENT OF FACTS Armstrong is currently serving a sentence imposed by the Honorable Charles Legge. On

19

February 26, 1997, Armstrong was convicted by a jury on each count of a twenty-one count

20

indictment. Armstrong appealed to the Ninth Circuit, which on April 19, 2000, affirmed in part

21

and reversed in part his conviction. On August 15, 2000, Judge Legge resentenced Armstrong to

22

108 months in prison on counts for which his conviction had been affirmed. Armstrong

23

appealed, and April 15, 2002, the Ninth Circuit affirmed. Armstrong filed a petition for

24 ARMSTRONG’S REPLY IN SUPPORT OF 28 U.S.C. § 2255 MOTION

Page 1

1

rehearing in the Ninth Circuit, which was denied on January 31, 2003 with a mandate issued on

2

February 10, 2003. On April 22, 2008, upon a finding that Armstrong did not receive notice of

3

the January 31, 2003 order, the Ninth Circuit recalled its mandate, withdrew its January 31, 2003

4

order, and re-issued that order as of April 22, 2008. On April 22, 2009, Armstrong filed a motion to vacate, set aside, or correct his

5 6

sentence under 28 U.S.C. § 2255. On May 11, 2009, Armstrong filed an amendment to that

7

motion under Rule 15(c) of the Federal Rules of Civil Procedure. Armstrong’s complaints center

8

on Brady and concern the suppression of a) evidence of a prior exculpatory investigation, b)

9

evidence that the prosecution was spurred by pressure from political leaders connected to

10

Armstrong’s opponent in ongoing civil litigation, and c) evidence that the prosecution team and

11

the bankruptcy trustee in a collateral proceeding worked in concert, such that collateral estoppel

12

bound the prosecution to final judgments in the bankruptcy court. Finally, Armstrong complains

13

of gross prosecutorial misconduct arising from false testimony and affidavits tendered to the trial

14

judge by officers of the court. On July 24, 2009, the government filed an opposition to the 2255

15

motion. ARGUMENT

16 17 18

A.

The section 2255 motion and amended motion were filed timely. Pursuant to 28 U.S.C § 2255, a section 2255 motion must be filed within one year from

19

the date the conviction is final. In the context of post-conviction relief, finality attaches to the

20

conviction when the United States Supreme Court (1) affirms a conviction on direct review, (2)

21

denies a petition for a writ of certiorari, or (3) when the time for filing a certiorari petition

22

expires. See Jimenez v. Quarterman, 129 S.Ct. 681, 685 (2009); Clay v. United States, 537 U.S.

23

522, 527 (2003). For a petition for writ of certiorari to be timely, it must be filed within 90 days

24 ARMSTRONG’S REPLY IN SUPPORT OF 28 U.S.C. § 2255 MOTION

Page 2

1

of the entry of judgment by the lower appellate court. See Clay, 537 U.S. at 527–28; Supreme

2

Court Rule 13.1.

3

However, a timely petition for rehearing operates to suspend the finality of a court of

4

appeals’ judgment. See Missouri v. Jenkins, 495 U.S. 33, 46-47 (1990); Supreme Court Rule

5

13.3. This in turn tolls the start of the period in which a petition for certiorari must be sought

6

until the earlier of the date upon which i) rehearing is denied or ii) a new judgment is entered by

7

the court of appeals. See Missouri, 495 U.S. at 46-47.

8

Armstrong concurs with the relevant procedural history as explained by the government

9

in its opposition. Under normal circumstances, Armstrong’s one year time limit to file a section

10

2255 motion would have started to run 90 days after the Ninth Circuit denied his pro se petition

11

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

12

04/24/02, 05/29/02, and 01/31/03. However, Armstrong never received notice from the Ninth

13

Circuit that his petition for rehearing was denied, which deprived him of the opportunity to file a

14

timely petition for certiorari and a timely section 2255 motion. The Court’s lack of notice to

15

Armstrong is evidenced by his counsel’s July 30, 2007 letter to the Ninth Circuit requesting the

16

Court to re-establish the date of the Order denying rehearing. [Exhibits, p. 1.]

17

The Ninth Circuit construed defense counsel’s letter as a motion to recall the mandate,

18

granted the motion, and recalled February 10, 2003 mandate. [Docket entry 4/22/08; Exhibits, p.

19

2.] Within this same order, the Court also withdrew its January 31, 2003 order denying rehearing

20

and then re-denied the petition for rehearing as of April 22, 2008. [Exhibits, p. 2.] Clearly, the

21

Ninth Circuit found that its failure to notice Armstrong his rehearing was denied in 2003 was an

22

extraordinary circumstance warranting the use of the Court’s power to recall its mandate and

23 24 ARMSTRONG’S REPLY IN SUPPORT OF 28 U.S.C. § 2255 MOTION

Page 3

1

thereby protect Armstrong’s constitutional rights. See Carrington v. United States, 503 F.3d

2

888, 891 (9th Cir. 2007).

3

Accordingly, Armstrong had until July 21, 2008 (90 days after the Ninth Circuit’s April

4

22, 2008 order denying rehearing) to file a petition for writ of certiorari. See Supreme Court

5

Rule 13.1, 13.3. Since Armstrong did not file a petition for certiorari, the one year statute of

6

limitation to file a section 2255 motion began to run on July 21, 2008. Armstrong’s section 2255

7

motion and his amended section 2255 motion were filed on April 22, 2009 and May 11, 2009

8

respectively. 1 Both motions were timely filed.

9 10

B.

Improper suppression of Brady material requires that Armstrong’s conviction be set aside.

11

1.

12

Armstrong complains of a pattern of Brady violations so profound that his conviction

Summary

13

must be set aside. In determining whether there has been a Brady violation, this Court must

14

consider whether the evidence was: (1) favorable to Armstrong, (2) suppressed by the

15

government and (3) material to the guilt or innocence of Armstrong. See U.S. v. Jernigan, 492

16

F.3d 1050, 1053 (9th Cir. 2007)(en banc). Evidence is favorable if it is exculpatory or

17

impeaches a prosecution witness, and suppression occurs when favorable evidence known to the

18

prosecution is not disclosed, either willfully or inadvertently. See Banks v. Dretke, 540 U.S. 668,

19

691 (2004). Evidence is exculpatory if it is “merely favorable to the accused,” a rather low

20

standard. See Gantt v. Roe, 389 F.3d 908, 912 (9th Cir. 2004). Evidence is material when

21

“there is a reasonable probability that, had the evidence been disclosed to the defense, the result

22 23 24

1

The amended motion was filed pursuant to the “matter of course” provision of Rule 15(a) of the Federal Rules of Civil Procedure and relates back to the earlier, April 22, date under Rule 15(c). See, e.g., Mitchell v. McCaughtry, 291 F. Supp.2d 823 (E.D. Wis. 2003). ARMSTRONG’S REPLY IN SUPPORT OF 28 U.S.C. § 2255 MOTION

Page 4

1

of the proceeding would have been different.” U.S. v. Bagley, 473 U.S. 667, 682 (1985). A

2

“reasonable probability” of a different result [exists] when the government’s evidentiary

3

suppression “undermines confidence in the outcome of the trial.” Id. at 678. “If the petitioner

4

establishes all three elements, the challenged conviction or sentence must be set aside.” U.S. v.

5

Lopez, ___ F.3d ___, WL 2501886, *4 (9th Cir., Aug. 18, 2009) (publication pending). As

6

Armstrong does not anticipate any serious debate that the subject evidence was “favorable to the

7

accused” and was suppressed, his argument in this Reply centers on the materiality of the

8

evidence.

9 2.

Legal Standard

10 The government’s constitutional duty is triggered by the potential impact of favorable but 11 undisclosed evidence, and a showing of materiality does not require demonstration by a 12 preponderance that disclosure of the suppressed evidence would have resulted ultimately in 13 Armstrong’s acquittal. See U.S. v. Bagley, 473 U.S. at 682. This specifically includes acquittal 14 because the jury accepted an explanation for the events that did not inculpate Armstrong. See id. 15 “Bagley’s touchstone of materiality is a “reasonable probability” of a different result, and the 16 adjective is important. The question is not whether the defendant would more likely than not 17 have received a different verdict with the evidence, but whether in its absence he received a fair 18 trial, understood as a trial resulting in a verdict worthy of confidence.” Kyles v. Whitley, 514 19 U.S. 419, 434 (1995). “The second aspect of Bagley materiality bearing emphasis here is that it 20 is not a sufficiency of evidence test. A defendant need not demonstrate that after discounting the 21 inculpatory evidence in light of the undisclosed evidence, there would not have been enough left 22 to convict.” Id., at 435; see also U.S. v. Golb, 69 F.3d 1417, 1430 (9th Cir. 1995) (Holding that 23 the ultimate question is whether there is a reasonable probability that, had the evidence been 24 ARMSTRONG’S REPLY IN SUPPORT OF 28 U.S.C. § 2255 MOTION

Page 5

1

disclosed, the result of the proceeding would have been different such that confidence in

2

outcome is undermined). The “final aspect of Bagley materiality to be stressed here is its

3

definition in terms of suppressed evidence considered collectively, not item by item.” Id., at 436.

4

This Court is to evaluate the cumulative effect of the suppressed evidence. See U.S. v. Blanco,

5

392 F.3d 382 (9th Cir. 2004). Brady applies even if the government “fails to grasp the

6

significance” of the suppressed evidence. Gantt v. Roe, 389 F.3d 908, 912 (9th Cir. 2004).

7 3.

The Undisclosed Prior Investigation

8 The most significant Brady violation in this case arises from the government’s failure to 9 disclose the existence of a recent, prior investigation of Hamilton Taft by AUSA Yamaguchi that 10 closed upon a lack of evidence of a federal crime. [Exhibits, p. 6, letter dated 9/23/1988 noting 11 prior investigation of Hamilton Taft by AUSA Yamaguchi who declined prosecution; Exhibits, 12 p. 8, letter dated 2/8/1991 referencing and reviewing prior investigation.] Neither the fact of 13 Yamaguchi’s investigation nor its exculpatory conclusion was disclosed to Armstrong before or 14 during trial. Indeed they were never disclosed but merely transmitted to him under FOIA. 15 Fortunately, the failure to disclose a prior favorable investigation is an oddity, but the Fifth 16 Circuit nonetheless had a recent opportunity to consider the matter in U.S. v. Fernandez, 559 17 F.3d 303 (5th Cir. 2009). There, a unanimous panel analyzed an undisclosed investigation under 18 the three familiar factors of Brady. The panel found that the fact of the investigation was 19 actually well-known during trial with only the results of the investigation remaining undisclosed. 20 The panel further found that the district judge conducted an in camera review of the results and 21 found no exculpatory material. Based upon these findings, the panel held that no Brady violation 22 occurred. 23 24 ARMSTRONG’S REPLY IN SUPPORT OF 28 U.S.C. § 2255 MOTION

Page 6

1

Here, of course, the prior Hamilton Taft investigation was clearly exculpatory yet was

2

never disclosed to Armstrong. Further, the Hamilton Taft situation is more troubling from a

3

policy perspective because, unlike the Fernandez investigation that looked for conduct which

4

violated a known law, the Hamilton Taft inquiry turned on whether known conduct could be

5

interpreted as violating a yet-unknown law. Indeed, a Baker & McKenzie opinion letter relied

6

upon by the government found that “[t]here does not appear to be any case law, regulation, or

7

statute dealing with an independent agent who actually pays over the taxes to the government.”

8

[Exhibits, p. 8, FBI letter dated 2/8/1991 referencing Baker & McKenzie opinion; Exhibits, p.

9

14, Baker & McKenzie opinion letter dated 10/29/1981.]

10

This suppression of material exculpatory evidence harmed Armstrong and benefitted the

11

government. The suppression of a recent, exculpatory investigation of Armstrong’s company

12

obviously implicates Brady. See U.S. v. Fernandez, 559 F.3d 303 (5th Cir. 2009); Reid v.

13

Simmons, 163 F. Supp.2d 81 (D. N.H. 2001). But the benefit to the government is also obvious

14

and casts doubt upon the fundamental fairness of Armstrong’s trial. See U.S. v. Boulware, 558

15

F.3d 971, 974 (9th Cir. 2009)(“Due process requires that criminal prosecutions comport with

16

prevailing notions of fundamental fairness and that criminal defendants be afforded a meaningful

17

opportunity to present a complete defense.”)

18

Here, the prosecution of Armstrong involved the presentation and explanation of complex

19

financial transactions to lay jurors who are, generally, ill-equipped to evaluate such evidence.

20

See U.S. v. Hinojosa, 958 F.2d 624 (5th Cir. 1992)(Holding Batson not implicated when the

21

structuring of financial transaction was at issue and all jurors without a high-school education

22

were struck); Memorex Corp. v. IBM Corp., 458 F. Supp. 423 (N.D. Cal. 1978) (approving court

23

fact-finding after jury disagreement in complex case); Bernstein v. Universal Pictures, Inc., 79

24 ARMSTRONG’S REPLY IN SUPPORT OF 28 U.S.C. § 2255 MOTION

Page 7

1

F.R.D. 59 (S.D. N.Y. 1978) (jury disallowed in complex case); In re U. S. Financial Securities

2

Litigation, 75 F.R.D. 702 (S.D. Cal. 1977) (same). Indeed, one of the key financial concepts at

3

issue in this case was actually decided after Armstrong’s indictment in a collateral bankruptcy

4

proceeding. Yet the suppression of the prior investigation completely relieved the government of

5

the heavy burden of explaining the conflict between the two investigations. [Exhibits, pp. 84-86,

6

Redacted FBI 302 revealing that Hamilton Taft’s operations at the time of the prior

7

investigation—under different ownership—showed the same characteristics as those for which

8

Armstrong was prosecuted].

9

As noted above, the suppression of a prior, exculpatory investigation is not a frequent

10

scenario in the case law. Nevertheless, it happened here and warrants a reversal of Armstrong’s

11

conviction.

12 4.

The Undisclosed Political Pressure

13 Had the government disclosed its prior investigation, the jury in this trial would have 14 faced the additional question of which investigation to believe—the September 1988 version or 15 the February 1991 version. One element that would have aided the jury’s determination, 16 however, was suppressed by the government; namely, the high level of political involvement at 17 the onset of the 1991 inquiry. [Exhibits, p. 19, Redacted FBI Memo of March 8, 1991]. This 18 memo describes the interplay between a disgruntled former Hamilton Taft employee, 2 the IRS, 19 the staffs of Sen. Boxer and Rep. Pelosi, the Wall Street Journal, and the FBI. On the last page 20 of this interesting memo, the writer discloses a conversation with AUSA Yamaguchi, who noted 21 22 23 24

2

After trial, the FOIA material delivered to Armstrong contained financial reports from the Hamilton Taft bankruptcy trustee. The financial reports included a listing of creditors’ claims and revealed that the disgruntled employee, at the time he was aiding and testifying for the government, was submitting a “whistleblower” claim of $110 million. [Exhibits, pp. 23-33 at page 33]. The impeachment value of this information is clear. ARMSTRONG’S REPLY IN SUPPORT OF 28 U.S.C. § 2255 MOTION

Page 8

1

the need for additional probable cause before seeking a search warrant for the Hamilton Taft

2

offices. About this same time, Hamilton Taft became engaged in a contractual dispute with one

3

of its clients, Federal Express. [Exhibits, p. 34, Original Complaint filed by Federal Express 3].

4

One week later, the Wall Street Journal publishes a negative article about Hamilton Taft, citing

5

the disgruntled employee. [Exhibits, p. 41]. FBI memoranda reveal that the employee was

6

directed to the Wall Street Journal by Nancy Pelosi. [Exhibits, p. 19]. The article was published

7

on Friday, March 15, 1991. On Sunday, March 17, two days after the article’s publication and

8

nine days after Yamaguchi’s statement that he lacked probable cause to pursue a warrant, the

9

DOJ published a press release detailing its investigation of Hamilton Taft. On April 3, 1991, two

10

weeks after the Federal Express filing, FBI Deputy Director Larry Potts sends a status report to

11

Howard Baker, then a director of Federal Express, and copies the report to individuals associated

12

with the staffs of Pelosi and Boxer. [Exhibits, p. 43]. This memo is the only communiqué

13

produced which reveals contact between Mssrs. Baker and Potts. All documents initiating the

14

involvement of Mr. Potts are missing, as are the follow-up reports promised in the memo. These

15

documents are one of several requests in a pending discovery motion.

16

In short, the investigation of Armstrong’s company began with the polite rebuffing of a

17

disgruntled former employee by an FBI agent on March 8 and quickly escalated to the Deputy

18

Director of the FBI sending a status report to a politically-influential director of Federal Express

19

(but not to any of its corporate officers) and to staff members of Pelosi and Boxer on April 3. It

20

must have been an exciting 26 days in the San Francisco field office. In its opposition, the

21

government criticizes Armstrong’s section 2255 motion as “conclusory” on this subject. To the

22 23 24

3

The Federal Express complaint is also interesting in that it describes Federal Express as trustee of the monies held by Hamilton Taft. This is in direct contrast to the position the company took at trial and the theory upon which Armstrong was convicted. ARMSTRONG’S REPLY IN SUPPORT OF 28 U.S.C. § 2255 MOTION

Page 9

1

contrary, an argument is not conclusory simply because it reaches a proper conclusion. Here, the

2

only conclusion supported by these facts is that a dispute between Hamilton Taft and Federal

3

Express received attention from the highest levels of Congress and the DOJ, and that this

4

attention was rained down upon USAO and FBI employees in San Francisco. As noted above, a Brady materiality analysis must consider the cumulative effect of the

5 6

suppressed evidence. See U.S. v. Blanco, 392 F.3d 382 (9th Cir. 2004). Under this standard, the

7

political influence both underscores and explains the government’s reversal on the question of

8

criminal culpability, which found no violation of federal law in 1988 but commenced a public

9

prosecution 30 months later. This suppression “undermines confidence in the outcome of the

10

trial,” and compels the reversal of Armstrong’s conviction. U.S. v. Bagley, 473 U.S. 667, 682

11

(1985).

12 5.

The Undisclosed Collusion with the Bankruptcy Trustee

13 During trial and upon direct appeal, one of the most contested issues was Armstrong’s 14 request for a “law of the case” instruction based upon the holding of the collateral bankruptcy 15 proceeding, In re Hamilton Taft, 53 F.3d 285 (9th Cir. 1995)(vacated as moot by reason of 16 settlement). The In re Hamilton Taft opinion reversed both the bankruptcy judge and the district 17 court judge (who was also the judge conducting Armstrong’s trial) and held that the deposits 18 transmitted to Hamilton Taft were owned by Hamilton Taft. See id., at 290. This is in contrast 19 to the views of the lower court and of the prosecution team, both of which considered the 20 deposits as owned by the Hamilton Taft clients, with Hamilton Taft operating as a “trustee” and 21 constrained by all the statutory, judicial, and common-law obligations associated with that 22 designation. 23 24 ARMSTRONG’S REPLY IN SUPPORT OF 28 U.S.C. § 2255 MOTION

Page 10

1

This significance of this issue is obvious in a prosecution that put forth as its central trial

2

theme the tale of a “high profile” executive who financed his lifestyle with other people’s

3

money. That theme was gutted when the Ninth Circuit held that the funds in question were

4

actually owned by Hamilton Taft. [Exhibits pp. 39-80 at pp. 78-79; Brief of AUSA Yamaguchi

5

acknowledging six adverse prosecutorial ramifications of a “law of the case” instruction and

6

asserting that such an instruction would amount to “a gutting of the government’s case.”]

7

Armstrong respectfully suggests that Mr. Yamaguchi analyzed the situation correctly and further

8

suggests that due process requires such an outcome when the prosecution’s theory proves

9

erroneous.

10

Turning now to the issue addressable under section 2255, Mr. Yamaguchi argued to the

11

trial court that In re Hamilton Taft was inapplicable to the instant trial because the government

12

was not a party to the bankruptcy proceeding and, regardless, In re Hamilton Taft had been

13

vacated. [Exhibits pp. 69-80 at pp. 71-72]. To the contrary, documents delivered to Armstrong

14

after trial show a close alignment between the prosecution team and the bankruptcy team, such

15

that the two are in privity for purposes of collateral estoppel. [Exhibits p. 83, FBI memo

16

describing a meeting between the lead prosecutor (Yamaguchi), the lead FBI agent (Hatcher),

17

and counsel for the bankruptcy trustee to “discuss prosecution strategy;” p. 81, redacted partial

18

FBI 302 wherein the unnamed witness stated the trustee was doing the work of the FBI.]

19

“Under collateral estoppel, once a court has decided an issue of fact or law necessary to

20

its judgment, that decision may preclude relitigation of the issue in a suit on a different cause of

21

action involving a party to the first case.” Dodd v. Hood River County, 59 F.3d 852, 863 (9th

22

Cir.1995). Under both California and federal law, collateral estoppel applies where it is

23

established that

24 ARMSTRONG’S REPLY IN SUPPORT OF 28 U.S.C. § 2255 MOTION

Page 11

1 2

(1) the issue necessarily decided at the previous proceeding is identical to the one which is sought to be relitigated; (2) the first proceeding ended with a final judgment on the merits; and (3) the party against whom collateral estoppel is asserted was a party or in privity with a party at the first proceeding.

3 Younan v. Caruso, 51 Cal. App. 4th 401, 406-07 (1996). Here, elements one and two are 4 established. Thus, the remaining inquiry turns on whether the suppressed evidence is probative 5 of the privity issue, such that the defense was deprived of the opportunity to argue collateral 6 estoppel. 4 “Defensive use occurs when a defendant seeks to prevent a plaintiff from asserting a 7 claim the plaintiff has previously litigated and lost against another defendant.” Parklane Hosiery 8 Co. v. Shore, 439 U.S. 322, 326 (1979). 9 Privity “is a legal conclusion designating a person so identified in interest with a party to 10 former litigation that he represents precisely the same right in respect to the subject matter 11 involved.” U.S. v. Schimmels, 127 F.3d 875, 881(9th Cir. 1997). Parties are in privity when they 12 are aligned such that the have the same legal interest. See Ferrell v. West Bend Mut. Ins. Co., 13 393 F.3d 786 (8th Cir. 2005); Jones v. S.E.C., 115 F.3d 1173 (4th Cir. 1997); Kunzelman v. 14 Thompson, 799 F.2d 1172 (7th Cir. 1986). 15 Here, suppression of FBI documents revealing collusion and cooperation between the 16 prosecution and the bankruptcy trustee deprived Armstrong of the opportunity to demonstrate 17 privity and invoke the mandatory strictures of collateral estoppel. The alignment in interests is— 18 and was—obvious: Armstrong’s conviction would allow the bankruptcy trustee to benefit from 19 more than $50 million in insurance proceeds triggered by criminal conduct. See Stanford 20 University Hosp. v. Federal Ins. Co., 1995, WL 912346, *1 (N.D. Cal. 1995)(not designated for 21 publication)(“Hamilton Taft did carry such a bond with Lloyds, with primary coverage of $20 22 23 24

4

While the term “law of the case” was a convenient moniker for the proposed instruction, that doctrine was never fully on point given that the appellate ruling arose in a different cause of action and was discretionary. By contrast, a collateral estoppel finding would have been binding. ARMSTRONG’S REPLY IN SUPPORT OF 28 U.S.C. § 2255 MOTION

Page 12

1

million and umbrella coverage of $30 million.). “The trustee's responsibility is to preserve and

2

maximize the value of the estate for the benefit of the parties in interest, and not to safeguard the

3

interest of the debtor’s principals.” In re ABA Recovery Service, Inc., 110 B.R. 484, 488 (Bankr.

4

S.D. Cal.1990).

5

But while the alignment in interests supports a collateral estoppel theory, the suppressed

6

evidence compels the invocation of that doctrine. Due process requires that, prior to utilization

7

of collateral estoppel, the party or its privy to be estopped had an opportunity to be heard in the

8

prior proceeding. See Parklane Hosiery Co. v. Shore, 439 U.S. 322, 327 n. 7 (1979). The

9

alignment in interests shows that the government and the trustee were in privity as to the

10

bankruptcy proceeding. However, the suppressed evidence takes this a step further and shows

11

that the government and the trustee coordinated their respective litigations such that the

12

government was bound by the judgment in the bankruptcy proceeding. For this reason, the

13

suppression of this evidence materially harmed Armstrong and his conviction must be set aside.

14

Finally, Armstrong briefly addresses the arguments in the trial court and upon direct

15

appeal that vacatur of the In re Hamilton Taft opinion ends the inquiry. Armstrong bases his

16

address on a plea to the equitable power of this Court to do justice in a habeas proceeding. See

17

Schlup v. Delo, 513 U.S. 298 (1995). Contrary to the arguments of the government and to the

18

overruled cases relied upon in support of those arguments, the Ninth Circuit lacked the power to

19

vacate its opinion. See U.S. Bancorp Mortgage Co. v. Bonner Mall P’ship, 513 U.S. 18, 29

20

(1994) (holding that “mootness by reason of settlement does not justify vacatur of a judgment

21

under review.”); compare Animal Legal Defense Fund v. Veneman, 490 F.3d 725 (9th Cir.

22

2007)(Distinguishing U.S. Bancorp in situations where en banc review had already been granted.

23 24 ARMSTRONG’S REPLY IN SUPPORT OF 28 U.S.C. § 2255 MOTION

Page 13

1

That is not the situation here, where petitions for review were filed but not ruled upon at the time

2

of settlement.)

3 C.

Fraud on the court requires that Armstrong’s conviction be set aside.

4 In opposing Armstrong’s complaints surrounding the 70 hours of late-disclosed audio 5 tapes, the government asserts that he has procedurally defaulted his claim. The government 6 misapprehends the issue. The issue is not whether, on the record before it, the trial court abused 7 its discretion in denying a continuance to allow review of the tapes. Instead, the issue is that the 8 record before the trial court included a) the oral assurance of Special Prosecutor Smetana and b) 9 the sworn affidavit of FBI SA Hatcher, both stating that the audio recordings were made by the 10 Dallas FBI office in connection with an unrelated investigation. [Exhibits, pp. 44-55 at p. 55 as 11 to Smetana; and pp. 56-59 at pp. 56-57 as to Hatcher.]. Both of these statements were lies. Not 12 “misrepresentations” or statements made with less than full knowledge, but direct and 13 unambiguous lies delivered with the intent that they influence a decision by this Court. 14 Documents recently delivered to Armstrong pursuant to a FOIA request reveal that both 15 the oral statement of Smetana and the affidavit of Hatcher were false and the tapes were actually 16 prepared by the Dallas FBI office at the express request of AUSA Yamaguchi in support of his 17 prosecution of the instant case. [Exhibits, p. 60]. 18 The Ninth Circuit has explained fraud on the court as follows: 19

21

“Fraud upon the court” should, we believe, embrace only that species of fraud which does or attempts to, defile the court itself, or is a fraud perpetrated by officers of the court so that the judicial machinery can not perform in the usual manner its impartial task of adjudging cases that are presented for adjudication.

22

In re Levander, 180 F.3d 1114, 1120 (9th Cir. 1999)(Recognizing the inherent power of a court

23

to set aside a judgment when a party deceives the court through perjury, and the perjury was not

20

24 ARMSTRONG’S REPLY IN SUPPORT OF 28 U.S.C. § 2255 MOTION

Page 14

1

discovered until after trial.) See also Weldon v. U.S., 225 F.3d 647 (2nd Cir. 2000)(Sotomayor,

2

J.)(Explaining that the submission of a false document is one form of fraud on the court.)

3

Of course, the late disclosure of the subject tapes implicates Brady. See U.S. v. Shaffer,

4

789 F.2d 682, 690 (9th Cir. 1986)(“If the arguably exculpatory statements of witnesses ... were

5

in the prosecutor's file and not produced, failure to disclose indicates the ‘tip of an iceberg’ of

6

evidence that should have been revealed under Brady.”) But the issue for the Special Prosecutor

7

and the FBI agent was not the content of the tapes; rather, the issue was opposition to a trial

8

continuance proposed by the defense. [Exhibits, pp. 61-68, trial transcript of hearing discussing

9

the volume of material and the time needed to review.]

10

To oppose that continuance, these men lied to the court. Armstrong cannot explain why

11

they lied, but lie they did. As noted above, this Court has the inherent power to set aside a

12

judgment obtained through fraud on the court. See In re Levander, 180 F.3d at 1120; In re

13

Intermagnetics America, Inc., 926 F.2d 912, 916 (9th Cir.1991)(finding fraud on the court

14

provided an appropriate remedy where an officer of the court made a false declaration.) The

15

actions of Smetana and Hatcher were inexcusable and “harmed the integrity” of this Court’s

16

judicial process. For this reason, the judgment obtained pursuant to that process must be set

17

aside.

18 CONCLUSION 19 For the foregoing reasons, Armstrong requests that this Court grant his petition under 20 section 2255 and set aside his conviction. 21 22 23 24 ARMSTRONG’S REPLY IN SUPPORT OF 28 U.S.C. § 2255 MOTION

Page 15

1

DATED: August 21, 2009

2

Respectfully submitted,

3

/s/ Bill Boyd

4

BILL BOYD

5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 ARMSTRONG’S REPLY IN SUPPORT OF 28 U.S.C. § 2255 MOTION

Signature Page