Friday, April 19, 2002
S.C. Upholds District Attorney’s Use of Expert Paid by Victim
Justices Rule 6-1 That Allegedly Defrauded City, Unlike Private Party, May Help Finance Prosecution
By KENNETH OFGANG, Staff Writer/Appellate Courts
A trial court is not required to disqualify a prosecutor’s office which has retained a forensic accountant compensated by the purported victim of the crime under investigation, a public entity, as a consultant, the California Supreme Court ruled yesterday.
In a 6-1 decision, with Justice Marvin Baxter writing for the majority and Justice Carlos Moreno the lone dissenter, the court upheld Orange Superior Court Judge Frank Fasel’s denial of a disqualification motion by Jeffrey Hambarian.
The court did not create a per se rule allowing the district attorney to accept financial assistance from other public entities. But the fact that a victim is a public entity rather than a private party with a special interest in the outcome of the prosecution is relevant in reviewing an order granting or denying disqualification, Baxter said.
“In this case, where the City’s goals appear to coincide with the District Attorney’s, the City has independent statutory authority to undertake the investigation, and the City does not appear to have any improper strategic interest in the prosecution, the superior court was within its discretion to find that any conflict of interest was not disabling.”
Hambarian is part of a family whose companies have held waste disposal contracts with the city of Orange for decades. He is charged with 65 counts of grand theft, presenting false claims, commercial bribery, breach of fiduciary duty, receipt of corporate property, filing false tax returns, and money laundering.
The charges grew out of an audit of one of Orange Resource Recovery Systems, Inc., one of the family companies. Orange Resource has a contract to process and recycle solid wastes and recyclable materials delivered by Orange Disposal Service, Inc., another Hambarian company.
The city used cost information supplied by Orange Resource to adjust trash collection rates.
Prosecutors and city officials claim that Hambarian was part of a massive fraud designed to artificially increase Orange Disposal’s costs and underreport Orange Resource’s salvage revenues, resulting in higher trash rates for customers and larger profits for the companies.
The Orange Police Department began investigating the case in April 1997. In July of that year, it retained a certified public accountant, Jeff Franzen, to assist in the investigation. Franzen’s contract specified that his duties include testifying in any civil or criminal proceedings arising out of the investigation.
The department subsequently determined that the investigation was too complex for it to complete, and it asked the district attorney to take over. The district attorney agreed, with the understanding that three detectives and Franzen would be assigned to his office, at the city’s expense, to assist.
The city later entered into an agreement with the Hambarian companies and other family members, who agreed to pay the city $9.8 million and to assign any claims they might have against Jeffrey Hambarian, who was a vice president of the companies.
A suit by the city against Jeffrey Hambarian, his wife, and his teenage son is pending.
In moving to disqualify the District Attorney’s Office, Hambarian’s lawyers charged that their arrangement with the city concerning Franzen’s role in the investigation and his compensation—more than $450,000 to date—created an irreconcilable conflict of interest.
They cited People v. Eubanks (1996) 14 Cal.4th 580, which upheld the disqualification of a prosecutor’s office from an investigation of alleged high-tech crime because it had relied on the putative victim to pay for the technical expertise needed to conduct the investigation, at a cost of about $13,000.
Fasel ruled that there was no conflict. The Fourth District Court of Appeal panel disagreed, but concluded in a split decision that the conflict was “not so grave as to render it unlikely that the defendant would receive fair treatment.”
Baxter, agreeing yesterday with the appellate panel majority, noted that a prosecutor can only be disqualified for conflict of interest, according to Penal Code Sec. 1424, if the conflict “would render it unlikely that the defendant would receive a fair trial.”
The standard of review, he added, is abuse of discretion.
The justice rejected the defense contention that the amount of Franzen’s compensation was sufficient, in itself, to establish a “grave” conflict.
In Eubanks, he noted, the court relied in part on the fact that the Santa Cruz District Attorney’s Office asked the complainant for financial assistance because it was facing severe budget constraints. In contrast, he said, there was no showing that the city’s assistance in the Hambarian case was of such great significance to the district attorney.
Besides, Baxter said, the city is in a very different position than a private victim. Eubanks, he noted, involved a situation where one of the defendants was the president of a competitor of the company paying for the investigation, thus creating a risk “that the prosecution itself could be used as a strategic weapon to disrupt and distract a competitor for reasons wholly unrelated to the public administration of justice.”
Orange, he contrasted, was not looking to help the Hambarians’ competitors, but to secure refunds for its citizens.
Moreno argued in dissent that the size of the city’s financial commitment, the fact that it had assumed expenses that would otherwise have been paid out of the district attorney’s budget, and the extensive involvement of Franzen in the preparation of the prosecution’s case raise the specter of unfairness.
The jurist also argued that the city is not a “disinterested public entity,” given that it has a pending suit against the defendant and has acquired other party’s claims against him. The city’s payment of Franzen’s expenses, Moreno said, is an investment designed to protect its civil claims.
The case is Hambarian v. Superior Court, 02 S.O.S. 1851.
Copyright 2002, Metropolitan News Company