Thursday, September 3, 2009
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Court Upholds Conviction of Man in $20 Million Scam
By SHERRI M. OKAMOTO, Staff Writer
The Ninth U.S. Circuit Court of Appeals yesterday upheld the conviction of a Northern California man who, together with his business partner, bilked over 700 individuals of approximately $20 million in a fraudulent investment scheme.
Affirming John Hickey’s 97-month sentence, the panel held that neither Hickey’s two interlocutory appeals nor the statute of limitations had divested the district court of jurisdiction to proceed with the trial.
In the early 90s, Hickey and his business partner began collecting money for two real estate development funds from investors, promising to develop land in California’s Napa and Sonoma valleys and resell the property for a profit.
However, these investors were allegedly duped by false representations regarding land title, guarantees, and securitization of the funds and the purported development plan eventually devolved into a Ponzi scheme.
The Securities and Exchange Commission filed a civil enforcement action against Hickey in 1994, resulting in a consent decree that included a $1.1 million disgorgement payment. The investors also obtained an as-yet-unpaid $10 million civil judgment.
Double Jeopardy
Hickey was indicted on charges of mail and securities fraud in 1997 and filed a motion to dismiss the indictment, contending that trying him criminally after the SEC civil enforcement action would amount to double jeopardy.
U.S. District Judge Maxine M. Chesney found no merit to his claim, but she declined to find that Hickey’s double jeopardy claim was frivolous, which allowed Hickey to immediately appeal.
While the appeal was pending, the case was reassigned to Judge William H. Alsup.
The appellate court issued a writ of mandate in August 2004 and then recalled the writ that October. In December, Alsup ruled on Hickey’s double jeopardy claim, finding that the district court retained jurisdiction to proceed despite the recall of the mandate and the argument was frivolous.
Hickey then filed a second interlocutory appeal insisting that district court had been divested of jurisdiction between the time the mandate was recalled and reissued, and that it lacked jurisdiction to try him while his second interlocutory appeal was pending.
Writing for the appellate court, Judge M. Margaret McKeown noted that the district court had heard some pretrial matters during the period between the mandate being recalled and then reissued, but the case did not proceed to trial until after the mandate had been reissued.
“The reality is that the district court in Hickey’s case made no pathbreaking rulings” in addressing the pretrial matters, McKeown said, based on her review of the docket. Because Hickey’s interlocutory appeal was ultimately unsuccessful, she reasoned any claimed error in proceeding with those pretrial matters was harmless.
But she cautioned against the manner in which the district court had proceeded, emphasizing that any district court who acts before mandate has issued or after mandate has been recalled “risks acting without jurisdiction and wasting judicial resources.”
No Interlocutory Review
Hickey’s second effort to supplant the district court’s jurisdiction by an interlocutory appeal also failed since Alsup’s determination that the district court had jurisdiction to proceed with pretrial matters was not subject to interlocutory review, McKeown said.
The jurist then turned to Hickey’s statute of limitations defense, which was based on his assertion that two superseding indictments which omitted the securities fraud charges contained in the original indictments stopped the tolling of the statute of limitations as to those charges.
McKeown disagreed, explaining that an indictment tolls the statute of limitations as to all charges contained in that indictment and that multiple indictments may simultaneously be pending against the same defendant in the same case.
“Hickey’s assertion that a superseding indictment that omits a charge against a defendant is essentially the same as dismissing that charge is inconsistent with criminal procedure,” McKeown said. “Either the charges remain pending or they have been dismissed, and the only way for the government to achieve dismissal is via leave of the court.”
As the government had not obtained permission to dismiss any of the charges against Hickey and the intervening indictments contained the same factual allegations as the original indictments, she reasoned that Hickey was fairly on notice that he could be tried for any of the offenses contained in any of the indictments.
Because all of the indictments remained pending until trial and the factual predicates were unchanged, McKeown concluded that the omission of a charge contained in the first indictment by the superseding indictments did not stop the tolling of the statute of limitations as to that charge.
McKeown also rejected Hickey’s claims based on the Speedy Trial Act, the district court’s evidentiary rulings, and asserted instructional error as well as the challenges to his sentence.
Judge Stephen Reinhardt and Senior Judge John T. Noonan joined McKeown in her decision, but Reinhardt said he did so “reluctantly,” in his separate concurrence.
“[B]oth in and out-of-circuit, ‘superseding’ has been given a meaning in the context of a criminal indictment that is the direct opposite of its meaning in every other known context,” he complained.
Reinhardt proposed using “second indictment” or “first additional indictment” to describe an indictment that follows the original indictment, but does not “supersede” it, arguing that there is “no reason, rational or otherwise, to treat the word ‘superseding’ as meaning ‘not replacing,’ as we have done before and as we do again here.”
The case is United States v. Hickey, 05-10004.
Copyright 2009, Metropolitan News Company