Second DCA Asks Florida Supreme Court To Rule On Drug Statute’s Constitutionality

On September 28, 2011, Floridas Second District Court of Appeal (“2nd DCA”) asked the Florida Supreme Court to rule on the constitutionality of Floridas Drug Abuse Prevention and Control law, § 893.13 Fla. Stat. in the case of State v. Adkins. A copy of the 2nd DCAs opinion can be read here. As we previously reported, on July 27, 2011, Judge Mary Scriven of the United States District Court for the Middle District of Florida declared the law unconstitutional under the United States Constitution as a violation of due process because it eliminated mens rea as an element of felony delivery of a controlled substance thus making the law a strict liability offense.

The federal courts decision has opened the floodgates to litigation in pending drug cases in Florida and has led to uncertainty for criminal defendants for two main reasons. First, because the United States and Florida are separate sovereigns, the rulings of federal courts other than the U.S. Supreme Court are generally not binding on state courts. Second, because neither the Florida Supreme Court nor any District Court of Appeal has ruled on the constitutionality of § 893.13, the Circuit Courts of Florida (the tribunals responsible for adjudicating felony criminal cases) have no binding precedent to rely upon in determining whether § 893.13 is constitutional.

As a result, the Circuit Courts have split on the issue as to whether § 893.13 violates the 14th Amendment. In fact, as noted in the 2nd DCAs Certification Order, in certain circuits, such as the Eleventh Judicial Circuit in Miami-Dade County, conflict exists within the different felony divisions with some judges adopting Judge Scrivens opinion and declaring the statute unconstitutional while others finding the Middle District of Floridas rationale unpersuasive because the precedent relied upon by that court was distinguishable.

In certifying the question of whether § 893.13 is constitutional, the 2nd DCA stated that because it would be the only district court of appeals to have ruled on the constitutionality of the drug law, its “decision would be binding statewide and could affect literally thousands of past and present prosecutions throughout the state.” The 2nd DCA noted that while the Florida Supreme Court prefers to resolve cases after multiple district courts have issued opinions, given the volume of the cases involved and the fact that the issue has been “fully briefed and thoroughly discussed” in trial court proceedings, it would be appropriate for the Supreme Court to decide this issue.

Although the 2nd DCA certified the question to the Supreme Court as one of “great public importance” pursuant to Fla. R. App. P. 9.125, it should be noted that because the Florida Supreme Court is a court of limited jurisdiction, the Court can choose not to decide the issue under  Article V § 3 of the Florida Constitution as jurisdiction over such certified questions is not mandatory.

Fuerst Ittleman will continue to track the progress of this matter with a keen eye as its final resolution could affect all strict liability offenses. The white collar criminal defense lawyers at Fuerst Ittleman are experienced in handling even the most complex cases where clients are facing allegations of criminal actions. The attorneys of Fuerst Ittleman have defended clients in cases involving numerous general intent and strict liability offenses including money laundering violations found at 18 U.S.C. § 1957, the operation of unlicensed money transmitting businesses found at 18 U.S.C. § 1960, and violations of the FDCA under 21 U.S.C. §§ 331 and 333 as well as prosecutions of corporate officials for FDCA violations under the Park Doctrine. For more information regarding Fuerst Ittlemans white collar criminal defense practice, contact an attorney today at contact@fidjlaw.com.

Recent Crackdown On “Commercial Marijuana Industry” A Concerted Effort By DOJ And IRS

On October 7, 2011, federal prosecutors announced that California-based medical marijuana dispensaries cannot shelter themselves from criminal prosecutions under federal law by claiming they are compliant with the states Compassionate Use Act. As we previously reported, over the past several months federal authorities have increased their efforts at prohibiting a growing medical marijuana industry because, although 15 states currently allow for the use of medical marijuana, marijuana remains prohibited under federal law. Additionally, prosecutors are now alleging that medical marijuana dispensaries violate the California Compassionate Use Act: "It is important to note that for-profit, commercial marijuana operations are illegal not only under federal law, but also under California law. While California law permits collective cultivation of marijuana in limited circumstances, it does not allow commercial distribution through the store-front model we see across California."

The announcement comes as 38 medical marijuana dispensaries were sent letters by the DOJ explaining that the operation of medical marijuana store-fronts violates the federal Controlled Substances Act. The AP reported that the letters advised the business owners, and their landlords, that the businesses have 45 days to cease operations or they will be subject to federal criminal prosecution and civil penalties. By focusing their efforts on store owners and their landlords, federal prosecutors are taking aim at the “sale, distribution, and cultivation” of medical marijuana and not the individual consumers.

The DOJ letters were issued only days after the IRS ruled that Harborside Health Center, the largest dispensary in California, owed $2.5 million in back taxes. In finding that Harborside owed back taxes, the IRS ruled that medical marijuana dispensaries are not allowed to deduct normal business expenses, such as payroll and rent. The IRS based its decision on § 280E of the Internal Revenue Code which disallows deductions in the trade or business of trafficking controlled substances. As explained by the IRS in a series of letters to Congress in December 2010:

Section 280E of the Code disallows deductions incurred in the trade or business of trafficking in controlled substances that federal law or the law of any state in which the taxpayer conducts the business prohibits. For this purpose, the term “controlled substances” has the meaning provided in the Controlled Substances Act. Marijuana falls within the Controlled Substances Act. See Californians Helping to Alleviate Medical Problems, Inc. v. C.I.R., 128 T.C. No. 14 (2007). The United States Supreme Court has concluded that no exception in the Controlled Substances Act exists for marijuana that is medically necessary. U.S. v. Oakland Cannabis Buyers Co-op., 532 U.S. 483 (2001).

While the threat of criminal prosecution and asset seizure for marijuana distribution are severe, the IRS ruling could have an equally devastating impact on the industry.

The attorneys at Fuerst Ittleman, PL have extensive experience dealing with administrative law, regulatory compliance, and white collar criminal defense. You can reach an attorney by emailing us at contact@fidjlaw.com.

Scientists Appeal Ruling Allowing Federal Funding for Embryonic Stem Cell Research

On September 19, 2011, two scientists who have been challenging government funding of human embryonic stem cell (hESC) research filed their Notice of Appeal in the U.S. Court of Appeals for the District of Columbia Circuit, seeking relief from the District Courts July 27, 2011 Order dismissing their complaint and attempting to revive their case to block federal funding of hESC research.

As previously reported, the District Court granted the governments Motion for Summary Judgment in July. In granting summary judgment and dismissing the Plaintiffs claims, the Court found that the National Institute of Health (NIH) Guidelines, which permit federal funding for hESC research, did not violate federal law. While the Plaintiffs argued that the Guidelines violated the 1996 Dickey-Wicker Amendment, which prohibits funding for “research in which a human embryo or embryos are destroyed,” the Court found that the NIH Guidelines do not violate this mandate because embryos are not actually subject to destruction during such research. Found here, the Court reasoned as follows:

The NIH reasonably concluded that the Dickey-Wicker Amendment prohibited federal funding for research projects “in which” human embryos are knowingly subjected to risk, such as preimplantation genetic diagnosis, but did not prohibit research projects, such as embryonic stem cell research, that do not involve embryos and so cannot knowingly subject them to risk “in” the research.

Because the Court found that the Guidelines promulgated by NIH were a permissible interpretation of the Dickey-Wicker Amendment, the Court concluded that the Guidelines did not contravene federal law and dismissed the Plaintiffs claims. While it is yet to be seen what the plaintiffs in the case will argue its appeal, Fuerst Ittleman will continue to closely monitor the progress in this case, as well as other issues pertaining to stem cell research.

If you have any questions pertaining to NIH Guidelines, or stem cell funding issues generally, contact Fuerst Ittleman PL at contact@fidjlaw.com.

Federal Prosecutors Take Aim At Corporate Officers For FDCA Violations With Revived Use Of The Park Doctrine

Although criminal sanctions against corporate officers for violations for the Food, Drug & Cosmetic Act (FDCA) have been on the books since 1938, federal prosecutors have taken aim at corporate executives personally with renewed vigor through the use of the “responsible corporate officer doctrine,” better known as the Park doctrine.

As we previously reported here and here, the Park Doctrine is named after a Supreme Court case called United States v. Park, 421 U.S. 658 (1975). In that case, Acme Markets, Inc. and Park, its president, in his personal capacity, were charged with violating § 301(k), now 21 U.S.C. § 331 (k), of the FDCA because interstate food shipments being held in Acme’s Baltimore warehouse were contaminated by rodents. At Parks trial, the trial court instructed the jury that, although Park need not have personally participated in the activity which cause the violation, he must have had "a responsible relationship to the issue" in order to be convicted. The jury convicted Park on all counts.

In affirming his conviction, the Supreme Court, noted that food and drug laws have historically been applied to persons by virtue of their managerial position if the person ultimately had the power to prevent the alleged unlawful act. Id. at 670-672. As a result, corporate executives have an affirmative duty to ensure the safety of their corporations products under the FDCA. Today, based on that decision, an executive may be criminally prosecuted for violations of the FDCA if he or she had, by reason of his or her position in the corporation, responsibility and authority to either prevent in the first instance, or promptly correct the violation.

The Park Doctrine does not require that the corporate officer be aware of wrongdoing within the company. Instead, these offenses are “strict liability” misdemeanors, and the government is only required to prove that the prohibited act occurred and that the executive had the authority to prevent or correct it. (More information on strict liability offenses can be found in our previous report here.) Additionally, should a corporate officer be convicted under the Park Doctrine, any subsequent violations of the FDCA are treated as felonies under 21 U.S.C. 333, even without proof that the defendant acted with the intent to defraud or mislead.

Initially used by the government in the 1960s and 1970s to regulate insanitary conditions in food warehouses, the Park Doctrine has reemerged as a tool for federal prosecutors in enforcement of misbranding and adulterated drug offenses. Although the FDAs position is that “misdemeanor prosecutions, particularly those against responsible corporate officials, can have a strong deterrent effect on the defendants and other regulated entities,” the practical effects of such prosecutions can be devastating. Indeed, a misdemeanor conviction can serve as a basis for exclusion from participation in numerous federal programs.

The Purdue Fredrick Co. case is an example of the potential collateral consequences of Park Doctrine prosecutions. In Purdue Fredrick, the corporation pled guilty to a felony count of misbranding OxyContin with the intent to defraud or mislead. Prosecutors alleged that the company falsely claimed that OxyContin was less addictive and less subject to abuse than other pain medications. Additionally, federal prosecutors sought Park Doctrine misdemeanor misbranding charges against the CEO, the general counsel, and the medical director of Purdue Fredrick. Ultimately, the three corporate officers pled guilty, were sentenced to probation, and disgorged millions of dollars of income.

However, soon after the officers entered their guilty pleas, the U.S. Department of Health and Human Services excluded the three officers from any participation in federal health care programs for 12 years because their convictions were based on fraud and the unlawful manufacture of a controlled substance. HHSs decision was upheld by the United States District Court for the District of Columbia and is currently on appeal. As a consequence of this exclusion, the corporate officers will be unable to engage any in business which participates in federal health care programs such as Medicare and Medicaid.

The FDA and white collar criminal defense lawyers at Fuerst Ittleman are experienced in handling even the most complex cases where clients are facing allegations of criminal actions. Fuerst Ittleman attorneys have represented clients in a variety of FDA-related criminal investigations and prosecutions including violations of the FDCA under 21 U.S.C. §§ 331 and 333 as well as prosecutions of corporate officials for FDCA violations under the Park Doctrine. For more information regarding Fuerst Ittlemans white collar criminal defense practice, contact an attorney today at contact@fidjlaw.com.

Patient Protection and Affordable Care Act Challenges Often Turn On Interpretation of the Court’s Commerce Clause Jurisprudence

On September 13, 2011, the United States District Court for the Middle District of Pennsylvania issued its decision finding that the individual mandate provision of the Patient Protection and Affordable Care Act (PPACA) exceeded Congresss authority under the Commerce Clause and therefore is unconstitutional. As discussed in a recent Forbes article, this decision is merely one in a long line of District and Circuit opinions on the constitutionality of the PPACA. Ultimately, the individual mandate provision the PPACAs constitutionality will turn on the interpretation of two bedrocks of Commerce Clause precedent, Wickard v. Filburn, 317 U.S. 111 (1942) and Gonzales v. Raich, 545 U.S. 1 (2005). A copy of the Forbes article can be read here.

Generally speaking, Congresss power under the Commerce Clause extends to three broad categories. First, Congress may regulate the channels of interstate commerce. Second, Congress may regulate and protect the instrumentalities of interstate commerce. Finally, Congress may regulate activities that have a substantial effect on interstate commerce. See United States v. Lopez, 514 U.S. 549, 558 (1995). It is within this third category that Congresss Commerce Clause authority is pressed to its “outer limits” and is often the subject of judicial challenge. See Id. at 557. Such is the case with the PPACA.

In Wickard, the Supreme Court held that Congress could regulate the production of home grown wheat meant solely for personal use under its Commerce Clause power. In so holding, the Court found that although Filburns activities were entirely local, such activities, when taken in the aggregate, had a substantial effect on the national market for wheat. In the annals of Commerce Clause jurisprudence, Wickard v. Filburn represents the high-water mark for Congressional power.

More than 60 years later,    in Gonzales v. Raich, the Supreme Court upheld Congresss authority under the Commerce Clause to prohibit the possession of home-grown marijuana intended solely for personal use, even when such possession was allowed by state law. Similar to the Courts rationale in Wickard, the Raich Court found that the production of marijuana substantially affects supply and demand in the national market; therefore the regulation was “squarely within Congress commerce power.” The Court went on to hold that “Congress can regulate purely intrastate activity that is not itself Ëœcommercial . . . if it concludes that failure to regulate that class of activity would undercut the regulation of the interstate market in that commodity.” Raich, at 18. Both Raich and Wickard stand for an expansive and broad reading of Congresss power under the Commerce Clause.

In finding that the PPACAs individual mandate was unconstitutional, Judge Conner distinguished the mandate from the economic regulations at issue in Wickard and Raich. The Court found that unlike the laws at issue in Wickard  and Raich, which allowed people to not engage in regulated conduct and thereby stay beyond the reach of the statute, PPACAs mandate requires people to become active participants in the health insurance market regardless of whether heath services will be used. As explained by Judge Conner:

Congress can reach the personal production of wheat “ a clear activity affecting the interstate market “ in an effort to stabilize the wheat market. Congress cannot, however, in order to stabilize that market, force the purchase of wheat by individuals who decide to forego wheat or wheat products, even if Congress legitimately determines that an individuals decision not to purchase wheat or wheat products inhibits the governments ability to regulate or stabilize the wheat market. Similarly, Congress may lawfully regulate the interstate market for health insurance and health services, but Congress cannot require individuals who choose not to purchase health insurance or individuals who are not currently seeking or receiving services in the health care market to purchase health insurance in order to stabilize the health insurance market. Congress cannot mandate or regulate in anticipation of conduct that may or may not occur.

Bachman v. U.S. Department of Health and Human Service, et. al., at 36.

The Court went on to find that an uninsured individuals conduct has no effect on conduct Congress sought to regulate under the Commerce Clause until such time that: 1) the individual obtains health care services; and 2) the individual does not pay for the services received. The Court stated that “the mere status of being without health insurance, in and of itself, has absolutely no impact on interstate commerce . . . at least not any more so than the status of being without any particular good or service.” Id. at 38. As a result, “current Commerce Clause precedent does not permit Congress to reach a pre-transaction stage in anticipation of participation in a market. . . .”Id. at 40.

Ultimately, it is likely that the final decision as to the constitutionality of the individual mandate of the PPACA will be made by the Supreme Court. Such a decision has the potential to reshape Congresss power to regulate individuals and businesses under the Commerce Clause regardless of its outcome. Fuerst Ittleman will continue to monitor the litigation challenging the PPACA and its effects on Commerce Clause jurisprudence. For more information, please contact us at contact@fidjlaw.com.

Google Agrees to Forfeit $500 Million As Part of Non-Prosecution Agreement

On August 19, 2011, Google entered into a non-prosecution agreement with the United States Department of Justice to settle allegations that the search engine knowingly and improperly assisted Canadian online pharmacies in advertising prescription drugs and controlled substances that targeted the United States in violation of  21 U.S.C. § 952 and 21 U.S.C. § 331 though its AdWords advertising program. As part of the non-prosecution agreement, Google agreed to forfeit $500 million to the United States government. A copy of the non-prosecution agreement can be read here.

Generally speaking, the Food, Drug, and Cosmetic Act (“FDCA”) prohibits pharmacies located outside the United States from selling and shipping prescription drugs to consumers in the U.S. See 21 U.S.C. § 331(a) and (d). One of the more popular ways for international pharmacies to engage in business with U.S. consumers is via the internet. Federal prosecutors alleged that since 2003 Google has been aware of the illegality of prescription drug sales by online Canadian pharmacies advertising on its AdWords program. (AdWords is an online advertisement program run by Google which allows advertisers to post ads, for a fee, that specifically target selected regions or countries for business.) The non-prosecution agreement also alleges that Google knew that many of these online pharmacies distributed prescription drugs and controlled substances through their websites without valid prescriptions from a doctor. Additionally, federal prosecutors allege that between 2003 and 2009, Google provided customer support to these online pharmacy advertisers to optimize their ads and improve the effectiveness of their websites.

As a result of these allegations, Google agreed to forfeit $500 million to the federal government. The $500 million total includes both the revenues earned by Google from the advertisements as well as the estimated revenues the online Canadian pharmacies received through the sale of drugs to American customers. Google has also agreed to enhance its compliance program for online ads. Upon learning of the governments investigation, Google made several changes to its advertising policies regarding online pharmacies. Google has since required all online pharmacies to be certified by either the National Association Boards of Pharmacy in the US or the Canadian International Pharmacy Association. Additionally, Google now prohibits foreign online pharmacies from advertising in the United States on AdWords. Google has also brought suit against several pharmaceutical advertisers for violating its advertising rules.

The governments non-prosecution agreement with Google may signal a new approach at combating illegal drug trafficking. In this case, though Google was not involved in the actual sale, distribution, or transfer of drugs from foreign pharmacies to the United States, the Department of Justice has treated Google as an aider and abettor of these pharmacies, and thus liable for the unlawful conduct of the pharmacies. However, it should also be noted that because this is a non-prosecution agreement and not a plea bargain, no judicial approval is needed for its terms. Therefore, it is conceivable that had Google not agreed to enter into this agreement, federal prosecutors may not have been able to obtain an indictment and conviction.

Lawyers at Fuerst Ittleman are experienced in representing individuals and corporations facing scrutiny from the government regarding regulatory and white collar criminal allegations. For more information regarding Fuerst Ittlemans white collar criminal defense practice, contact an attorney today at contact@fidjlaw.com.

4th DCA Rules: Real Time Cell Phone Location Tracking Does Not Violate 4th Amendment

On September 7, 2011, the Florida Fourth District Court of Appeal upheld a lower court ruling that law enforcement did not violate the Fourth Amendment by using “real time” cell site location information (“CSLI”) to track the movements and location of a suspect on public roads. A copy of the Courts Opinion can be read here.

In this case, the defendant, Shawn Alvin Tracey, was the subject of a narcotics investigation when law enforcement filed an application for an order authorizing the installation and use of a pen register and a trap and trace device to enable law enforcement to see who Tracey was calling and who was calling him. (A “pen register” is a device or process that records or decodes dialing, routing, addressing, or signaling information transmitted by an instrument or facility from which a wire or electronic communication is transmitted, but such information does not include the contents of any communication. A “trap and trace device” is a device or process that captures the incoming electronic or other impulses that identify the originating number or other dialing, routing, addressing, or signaling information reasonably likely to identify the source of a wire or electronic communication, but such information does not include the contents of any communication.) See § 934.02, Fla. Stat. However, neither the application nor the Order granting the use of the pen register and trap and trace device mentioned the collection of and use of CSLI.

CSLI works as follows: “Cell phones whenever on, now automatically communicate with cell towers, constantly relaying their location information to the
towers that serve their network and scanning for the one that provides the strongest signal/best reception. This process, called Ëœregistration, occurs approximately every seven seconds.” See Tracey v. Florida, No. 4D09-3565, at 3 (Fla. 4th DCA September 7, 2011). As a customer location changes, their cell phone will search for and communicate with multiple towers. Cell phone companies track which cell phone towers are serving a phone. CSLI can accurately place the location of a cell phone within 200 feet in urban areas. Accuracy improves to within 50 feet when via the built in GPS feature of most phones. As a result, the real time location of any cell phone can be traced.

In this case, law enforcement used the CSLI of Traceys phone to track his movements from the west coast of Florida to several known and suspected drug stash houses. Upon observing Traceys movements the officers stopped and arrested Tracey for driving with a suspended license. The subsequent search uncovered a kilogram brick of cocaine in his car. Prior to trial Tracey moved to suppress any evidence obtained as a result of law enforcement using CSLI arguing that: 1) law enforcement exceeded the scope of the Courts surveillance order; 2) electronic surveillance statutes do not authorize the surveillance of CSLI; and 3) probable cause is required in order for law enforcement to use CSLI.

In finding that the lower court properly allowed the evidence into trial, the Court noted that it was bound to follow U.S. Supreme Court precedent in interpreting the Fourth Amendment. In United States v. Knotts, 460 U.S.276 (1983), the U.S. Supreme Court held: “A person traveling in an automobile on public thoroughfares has no reasonable expectation of privacy in his movements from one place to another.” As such, the Court found that because the case “concerns the governments tracking of an individuals location on public roads, this case does not involve a Fourth Amendment violation.”

The Court noted that “a compelling argument can be made that CSLI falls within a legitimate expectation of privacy. . . . Location information can be extraordinarily personal and potentially sensitive, revealing Ëœprecisely the kind of information that an individual wants and reasonably expects to be private.” However, while people “may maintain an expectation of privacy with respect to their location in private areas,” because the location tracked was that of a person on a public road, no such expectation of privacy existed.

Additionally, the Court found that although law enforcement failed to meet the burden necessary to allow for electronic monitoring, “under Florida law the exclusionary rule is not a remedy” for such violations. Rather, the criminal and civil penalties found in Chapter 934 of the Florida Statutes provide the exclusive remedy for such violations. See §§ 934.21, Fla. Stat., 934.27, Fla. Stat.

While the decision was based on historical US Supreme Court precedent, the case provides an illustrative example of how the Court must balance expectations of privacy against enhanced search capabilities of law enforcement because of technological advances. This principle is applicable in a variety of proceedings, including the white collar criminal cases in which Fuerst Ittleman attorneys regularly appear. For more information regarding Fuerst Ittlemans white collar criminal defense practice, contact an attorney today at contact@fidjlaw.com.

11th Circuit Overturns Sanctions Levied Against Federal Prosecutors

On August 29, 2011, the United States Court of Appeals for the Eleventh Circuit, in a divided decision, overturned a $602,000 sanction and public reprimand of federal prosecutors for prosecutorial misconduct. The 11th Circuit held that the district court abused its discretion when it “imposed sanctions against the United States for a prosecution that was objectively reasonable.” The Circuit Court also held that Judge Gold (of the United States District Court for the Southern District of Florida in Miami) violated the due process rights of the two lead federal prosecutors when he issued public reprimands without notice of charges and an opportunity to be heard. Additionally, the Courts opinion may have reshaped the bounds of prosecutorial conduct sanctionable under the Hyde Amendment. A copy of the 11th Circuits opinion can be read here.

The sanctions and reprimand were ordered by Judge Gold in 2009 for actions federal prosecutors took in the case of United States v. Ali Shaygan. Dr. Shaygan was a pain-management doctor who was indicted on 23 counts of distribution of controlled substance outside the scope of his medical practice in violation of 21 U.S.C. § 841(a)(1). However, Dr. Shaygan filed a motion to suppress statements made after his arrest because D.E.A. agents continued questioning after Dr. Shaygan invoked his right to counsel. In reaction to the motion to suppress, lead federal prosecutor Sean Cronin warned defense attorneys that “pursing the motion to suppress would result in a Ëœseismic shift” in the case against Shaygan. Id. at 7.

Following the prosecutors “seismic shift” comments, the government filed a superseding indictment of 141 counts. Prosecutors also began a collateral investigation into Dr. Shaygans defense team for witness tampering. During its investigation, federal prosecutors enlisted Dr. Shaygans former patients as confidential informants and authorized them to tape phone conversations with the defense attorneys. However, prosecutors failed to comply with internal policy of the U.S. Attorneys Office because they did not receive authorization for the investigation or the recordings from the United States Attorney. Additionally, the prosecutors failed to turn over discovery related to witness tampering investigation.

Ultimately, the jury found Dr. Shaygan not guilty on all counts. However, following the trial, Judge Gold ordered the federal prosecutors trying the case, Mr. Cronin and Ms. Andrea Hoffman, to appear for a sanctions hearing. As a result, Judge Gold ordered the United States to pay $601,795.88 in attorneys fees to the defense and publicly reprimanded both attorneys.

The basis for Judge Golds award of attorneys fees was the Hyde Amendment. The Hyde Amendment, which was passed as part of the Appropriations Act of 1998, permits the court, in a criminal case, to award to the defendant, if he is the prevailing party, reasonable attorneys fees where the court finds the position of the United States was “vexatious, frivolous, or in bad faith.” Judge Gold found that the prosecutors acted in bad faith following the motion to suppress when they filed the superseding indictment, launched the witness tampering investigation, and violated discovery rules by failing to disclose the information of the investigation to the defense.

In reversing Judge Golds Order, the 11th Circuit held that the District Court applied an incorrect legal standard for awarding fees under the Hyde Amendment. The 11th Circuit found that subjectively motivated ill-will of an individual prosecutor “alone cannot support a sanction against the United States under the Hyde Amendment.” Id. at 28. Instead, bad faith is viewed under an objective standard. As such, as long as a prosecutor had an “objective reasonable basis” in law, i.e. not frivolous, and fact, i.e. not vexatious, an award of attorneys fees under the Hyde Amendment is improper. Id. at 30-32. The Court stated: “A rule that would allow a determination of bad faith whenever a prosecutor uses harsh words, such as Ëœseismic shift, and harbors some ill-will toward the defense would chill the ardor of prosecutors and prevent them from prosecuting with earnestness and vigor. The Hyde Amendment was not intended to do that.” Id. at 37.

The 11th Circuit also disagreed with Judge Golds reasoning that discovery violations alone can support an award for attorneys fees under the Hyde Amendment. Rather, the decision of whether the position of the United States is sanctionable should be based on the case as a whole. Id. at 41. The Court also held that the District Court denied the prosecutors due process when publically reprimanding them: “Due process requires that the attorney (or party) be given fair notice that his conduct may warrant sanctions and the reasons why.”

Judge Edmondson of the Eleventh Circuit dissented from the Courts majority opinion regarding its interpretation of whether the award for attorneys fees was appropriate under the Hyde Amendment. Judge Edmondson wrote that the phrase “or bad faith” in the Hyde Amendment “covers, and was intended to cover, prosecutorial positions beyond those positions that are baseless or exceed constitutional constraints: the limit that [the majority] imposes.” Id. at 49. According to Judge Edmondson, the Hyde Amendment encompasses not only instances where prosecutors lack a reasonable basis in law and fact, but also situations where prosecutors pursue objectively reasonable prosecutions motivated by ill-will. “The idea that litigation can be conducted in a manner that is both proper in form and, at the same time, wrongful “ because of the bad ulterior motive for which the litigation is used “ is no innovative idea in the law. . . . I have little doubt that a crafty lawyer can act with improper motive and, at the same time, appear to stay technically within the outside borders of the law.” Id. at 52 n. 5.

The Miami Herald has reported that Dr. Shaygans defense attorneys will seek a rehearing before the 11th Circuit en banc. The Miami Heralds article can be read here.

This decision raises interesting issues involving the bounds of sanctionable prosecutorial conduct in criminal investigations. Fuerst Ittleman will continue to monitor the progress of these issues in this case. For more information, contact us at contact@fidjlaw.com.

Del Monte Prepares for Suit Against Oregon

On August 29, 2011, Del Monte began taking steps to sue the State of Oregons Public Health Authority (PHA) and one of its senior officials. After suing the FDA last week, the company filed a notice to sue letter, alerting the State that it will be pursuing legal action in relation to allegations of tainted cantaloupes. According to Del Monte, Oregons PHA and its officials had insufficient evidence to link Del Monte cantaloupes to an outbreak of Salmonella Panama.

We previously reported on Del Montes suit challenging an import alert issued by U.S. Food and Drug Administration (FDA). According to Del Monte, the FDA placed an Import Alert on all cantaloupes being imported from Guatemala because of the possible link to a salmonella outbreak earlier this year. As alleged by Del Monte, the Import Alert was unlawful because the Agency had insufficient evidence that the cantaloupes imported from Guatamala were contaminated. While Del Montes arguments against the State of Oregon are expected to be similar to those made against the FDA, the notice to sue letter is just the first step in what could become a long legal battle concerning the allegedly tainted fruit.

For more information on FDA enforcement measures or import compliance, please contact us at contact@fidjlaw.com.

OFAC Announces Settlement With JPMorgan Chase Bank N.A. For Multiple Violations

On August 25, 2011, the Office of Foreign Assets Control (“OFAC”) of the United States Department of the Treasury announced that it had reached a settlement with JPMorgan Chase Bank, N.A. for alleged violations of multiple sanctions programs related to doing business with Cuba, Iran, Sudan, and Liberia as well as sanctions programs designed to prohibit the support of terrorism and the proliferation of weapons of mass destruction. As part of the settlement agreement, JPMorgan has agreed to remit $88,300,000 to OFAC. The settlement is the largest ever paid by a U.S. financial institution for sanctions violations. A copy of OFACs press release can be read here.

Of the numerous violations alleged to have been committed by JPMorgan, OFAC determined that three were “egregious.” The egregious violations included violations of the Cuban Assets Control Regulations, the Weapons of Mass Destruction Proliferators Sanctions Regulations, and the Reporting, Procedures, and Penalties Regulations. The Cuban Assets Control Regulations (“CACR”) generally prohibits U.S. banking institutions from accepting transfers of credits and funds of a Cuban nationals Cuban assets. See 31 C.F.R. § 515.201. (More information about the CACR can be found on OFACs website here.) OFAC alleged that between December 12, 2005 and March 31, 2006, JPMorgan processed 1,711 wire transfers of approximately $178.5 million for Cuban nationals in violation of the CACR. Additionally, OFAC alleged that JPMorgan was alerted by another financial institution of possible violations as early November 2005. OFAC alleged that JPMorgan investigated, found that the transfers were in fact in violation of the CACR and failed to self-report the violations to OFAC and take steps to prevent violations from recurring.

OFAC also alleged violations of the Weapons of Mass Destruction Proliferators Sanctions Regulations (“WMD Sanctions”). Under the WMD Sanctions program, all property and interests in property of persons and businesses who have been identified by regulation, that are in the United States, are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in. See 31 C.F.R. § 544.201. According to OFAC, JPMorgan violated the WMD Sanctions when it made a loan of $3 million to a bank that then used the borrowed funds to issue a line of credit to purchase a vessel affiliated with the Islamic Republic of Iran Shipping Lines, which is subject to WMD Sanctions and therefore blocked. OFAC found this violation to be egregious because, despite voluntarily self disclosing to OFAC, JPMorgan withheld its self-disclosure for over 3 months from the time it learned of the violation and received repayment of the loan after its self-disclosure without OFAC authorization.

The final “egregious” violation was a violation of the Reporting Procedures and Penalties Regulations (“RPPR”). The RPPR, found at 31 C.F.R. Part 501, establishes the standard reporting and recordkeeping requirements, as well as the procedures governing transactions pursuant to the various economic sanctions programs operated by OFAC. OFAC alleged that between November 8, 2010 and March 1, 2011, JPMorgan failed to produce numerous documents in its possession in response to an OFAC administrative subpoena and repeatedly asserted that no such documents were in its possession. However, OFAC investigations, which included communications with third-party financial institutions, revealed multiple responsive documents that were still in JPMorgans possession that had not been turned over. As a result of OFACs investigation, JPMorgan subsequently produced more than 20 additional responsive documents. Similar to its CACR violation, JPMorgan did not self disclose the violation to OFAC.

In determining that JPMorgans violations were egregious, OFAC determined as follows: “JPMorgan is a very large, commercially sophisticated financial institution, and [its] managers and supervisors acted with knowledge of the conduct constituting the apparent violations and recklessly failed to exercise a minimal degree of caution or care with respect to [its] U.S. sanctions obligations.”

The JPMorgan settlement provides an illustrative example of the multiple complex sanctions schemes with which financial institutions must comply. If you have questions pertaining to the numerous OFAC sanctions programs, or for questions on how to ensure that your business maintains regulatory compliance at both the state and federal levels please contact us at contact@fidjlaw.com.