Boulware v. United States - Opposition

No. 04-1468

In the Supreme Court of the United States

Michael Boulware, petitioner

v.

United States of America

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

Paul D. Clement
Solicitor General
Counsel of Record
Eileen J. O'Connor
Assistant Attorney General
Alan Hechtkopf
Karen M. Quesnel
Attorneys
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217

QUESTIONS PRESENTED

1. Whether the court of appeals erred in concluding that a state jury verdict did not resolve whether certain funds belonged to petitioner.

2. Whether the district court violated the Con frontation Clause when it sustained an objection during petitioner's cross-examination of a government witness.

3. Whether the forfeiture of the entire proceeds of petitioner's conspiracy to make false statements to a federally insured financial institution violated the Eighth Amendment's Excessive Fines Clause.

In the Supreme Court of the United States

No. 04-1468

Michael Boulware, petitioner

v.

United States of America

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. A1- A36) is reported at 384 F.3d 794 (9th Cir. 2004).

JURISDICTION

The judgment of the court of appeals was filed on September 14, 2004. A petition for rehearing was denied on February 1, 2005 (Pet. App. B1). The petition for a writ of certiorari was filed on May 2, 2005. The jurisdic tion of this Court is invoked under 28 U.S.C. 1254(1).

STATEMENT

On November 29, 2001, a jury found petitioner guilty on five counts of filing false tax returns, in violation of 26 U.S.C. 7206(1), four counts of tax evasion, in violation of 26 U.S.C. 7201, and one count of conspiring to make a false statement to a federally insured financial institu tion, in violation of 18 U.S.C. 371. The court of appeals affirmed in part, reversed in part, vacated the sentence, and remanded the case for further proceedings consis tent with its opinion.

1. a. Petitioner was the founder, chief executive offi cer, and part-owner of Hawaiian Isles Enterprises, Inc. (HIE), a Hawaiian corporation dealing in tobacco distri bution, coffee processing and sales, arcade games, vend ing machines, and bottled water. Between 1989 and 1993, petitioner diverted millions of dollars from HIE and failed to report or to pay taxes on this income. Pet. App. A3-A4, A30-A31.

b. In addition, in 1992 petitioner engaged in a scheme, with Lorin Kushiyama, to obtain a loan for HIE from General Electric Credit Company (GECC), an or ganization insured by the Federal Deposit Insurance Corporation, by submitting fraudulent invoices. Specifi cally, Kushiyama prepared invoices listing equipment that he purportedly leased to HIE, and GECC would pay the invoices for HIE; the equipment on the invoices, however, was already owned by HIE. Pet. 4. Under this arrangement, GECC paid Kushiyama $495,814.80, and Kushiyama gave these proceeds to petitioner. Pet. App. A4.

c.Petitioner, who was seeking to divorce his wife, purportedly intended to use the money diverted from HIE and acquired from GECC to buy out his wife's in terest in HIE. Upon learning about this plan, peti tioner's girlfriend, Jin Sook Lee, requested that she hold the funds until petitioner accumulated enough money to acquire his wife's interest. By 1994, petitioner had col lected $5 million, enough money to purchase his wife's interest. Lee, however, refused to return the money to petitioner. Pet. 4-5.

In 1994, after petitioner had become aware of the IRS investigation, petitioner and HIE filed claims in Hawaii state court against Lee, seeking the return of the money on the ground that it belonged to HIE. In 1997, after a trial, a jury found by a special verdict that the money transferred to Lee did not constitute a gift to her and that the money belonged to HIE. Pet. App. A9.

2.In 2000, petitioner was charged with, inter alia, five counts of filing false tax returns, in violation of 26 U.S.C. 7206(1), and four counts of attempted tax eva sion, in violation of 26 U.S.C. 7201. He also was charged with four counts of making false statements to a feder ally insured financial institution, in violation of 18 U.S.C. 1014 (2000 & Supp. II 2002), and one count of conspiring to make such statements, in violation of 18 U.S.C. 371, for his scheme to obtain a loan from GECC. The indict ment also sought forfeiture of the proceeds of the loan under 18 U.S.C. 982(a)(2)(A).

Before trial, petitioner moved to adopt as controlling the Hawaii state court's determination that the money that had been transferred to Lee belonged to HIE and therefore was not taxable income to him. The court de nied petitioner's motion. The court explained that the state judgment did not establish that petitioner did not own the money, because the state case dealt only with ownership of the funds as between Lee and HIE and did not determine ownership as between HIE and peti tioner. Pet. App. A10. Furthermore, on the govern ment's motion, the court excluded all evidence of the state court's verdict, concluding that it was not relevant to "the ultimate issues of the case." Id. at A11.

On November 29, 2001, the jury found petitioner guilty on all nine tax counts. It also found him guilty of conspiring to make false statements to a federally in sured financial institution, but acquitted him of the sub stantive false statements counts. The court sentenced petitioner to 36 months of imprisonment on each of the false tax return counts, 51 months of imprisonment on each of the tax evasion counts, and 51 months of impris onment on the conspiracy count, with all sentences run ning concurrently. Pet. App. A3. The court also ordered petitioner, who had waived a jury trial on the forfeiture count, to forfeit the entire $495,814.80 loan from GECC, rejecting petitioner's argument that he should receive a credit for the amount of the loan that had already been repaid to GECC.

3. The court of appeals affirmed in part, reversed in part, vacated the sentence, and remanded. Pet. App. A1-A35.

a.The court reversed petitioner's conviction for fil ing false tax returns and for attempted tax evasion. The court rejected petitioner's argument that the Hawaii state judgment precluded the government from reliti gating that the money that had been transferred to Lee belonged to HIE, from which it would follow that the funds were not taxable income to petitioner. The court held that, even if state court determinations about own ership are binding for federal tax purposes, the Hawaii court's decision did not resolve whether the money con stituted income to petitioner, because the state court decision determined ownership of the funds as between Lee and HIE, and not as between petitioner and HIE. Pet. App. A15-A16. The court held, however, that the district court had committed reversible error by exclud ing the state court judgment as irrelevant, because the judgment corroborated petitioner's testimony that the funds were owned by HIE. Id. at A22-A25.

The court of appeals affirmed petitioner's conviction for conspiring to make a false statement to a federally insured institution. It rejected petitioner's argument that the district court had violated the Confrontation Clause by sustaining the government's objection during petitioner's cross-examination of Kushiyama to the fol lowing question: "As far as these invoices, you are not the-intending to submit fake invoices to anyone, were you?" The court of appeals explained that this question had come after a series of irrelevant questions about whether Kushiyama had prepared invoices for other parties, and that the district court had clearly under stood this question also to refer, not to invoices prepared for petitioner, but to invoices prepared for third parties. Observing that defense counsel could have rephrased the question or explained to the district court that he was inquiring about the invoices in this case, the court of appeals concluded that petitioner's right to confront Kushiyama had not been violated. Pet. App. A31-A32.

The court vacated petitioner's sentence on the con spiracy count, however, directing that petitioner be sen tenced in accordance with Blakely v. Washington, 124 S. Ct. 2531 (2004). Pet. App. A33.

Finally, the court of appeals affirmed the forfeiture order. The court rejected petitioner's argument that the forfeiture order should be reduced by the amount GECC had been repaid, explaining that nothing in 18 U.S.C. 982(a)(2) entitled petitioner to a credit for the repay ment. Pet. App. A33-A34.

b.Judge Silverman dissented in part. Pet. App. A35-A36. In his view, the Hawaii judgment was irrele vant to whether petitioner owned the money diverted to Lee. He therefore would have affirmed all of peti tioner's convictions.

ARGUMENT

Petitioner raises three challenges to the court of ap peals' decision in this case. First, he argues (Pet. 6-15) that the court erred in rejecting his claim that the state court judgment precluded the government from reliti gating the ownership of the money transferred to Lee. Second, he claims (Pet. 15-28) that the district court erred by improperly limiting his cross-examination of Kushiyama. Finally, he maintains (Pet. 28-29) that the forfeiture order violates the Eighth Amendment's prohi bition against excessive fines. These claims do not war rant review.

1.Petitioner contends that this Court should grant a writ of certiorari to resolve whether Commissioner v. Estate of Bosch, 387 U.S. 456 (1967), which holds that federal courts, in assessing federal estate tax liability, are not bound by state probate court determinations about property interest, applies outside the estate-tax context. That question, however, is not presented in this case.

In this case, the court of appeals held that, even as suming that a state court's determination of ownership was binding in subsequent tax cases, the Hawaii judg ment did not resolve whether the money belonged to HIE or petitioner. Pet. App. A15-A16. Thus, the signif icance of Bosch outside the estate-tax context is not at issue in this case. Although petitioner disputes what the state court resolved, that fact-bound contention does not warrant this Court's review.

In any event, the court of appeals' conclusion was correct. The dispute in the Hawaii case was whether Lee had received the money as a gift or whether she had been given the money to hold in trust for HIE. In re solving that dispute, the jury determined only that HIE had a better claim to the money than Lee did. Pet. App. A16. The jury did not determine whether the money belonged to HIE or petitioner, because that was not an issue in the lawsuit.

2.Petitioner next argues (Pet. 15-28) that the dis trict court violated the Confrontation Clause when, dur ing his cross-examination of Kushiyama, it sustained the government's objection to his question "[a]s far as these invoices, you are not the-intending to submit fake in voices to anyone, were you?" According to petitioner (Pet. 27), this purported error, when combined with the court's purported error in refusing to give preclusive effect to the state jury verdict, requires that his convic tion be reversed.

Petitioner's fact-bound contention that the district court violated his right to confront Kushiyama does not warrant this Court's review. Contrary to petitioner's contention (Pet. 21), the court of appeals correctly con cluded that the district court did not impermissibly pre vent petitioner from asking Kushiyama whether he "in tended to submit false invoices to GECC." This Court has recognized that "trial judges retain wide latitude insofar as the Confrontation Clause is concerned to im pose reasonable limits on such cross-examination based on concerns about * * * interrogation that is repetitive or only marginally relevant." Delaware v. Van Arsdall, 475 U.S. 673, 679 (1986). In this case, as the court of appeals explained, the district court concluded that peti tioner's question was irrelevant, because it understood petitioner's question, like the questions preceding it, to refer to invoices prepared for third parties. Petitioner's counsel could have rephrased the question or explained to the district court that he was inquiring about the in voices at issue in this case. The district court therefore did not unduly restrict petitioner's right to cross-exam ine Kushiyama on that point. See ibid. Although peti tioner contends (Pet. 24-25) that the question was rele vant even if it did refer to invoices prepared for others, petitioner did not present that argument to the district court or to the court of appeals, and this Court should not pass on that fact-bound claim in the first instance. See Pennsylvania Dep't of Corr. v. Yeskey, 524 U.S. 206, 212-213 (1998).

3.Finally, petitioner contends (Pet. 28-29) that the forfeiture of the entire $495,814.80 loan from GECC vio lates the Eighth Amendment's Excessive Fines Clause as interpreted in United States v. Bajakajian, 524 U.S. 321 (1998). In Bajakajian, this Court held that "a pu nitive forfeiture violates the Excessive Fines Clause if it is grossly disproportional to the gravity of a defen dant's offense." Id. at 334. In applying that test, the Court considered (1) whether the offense leading to for feiture was related to other illegal activities; (2) whether the defendant fit into the class of persons for whom the statute was designed; (3) the other possible penalties for the offense; and (4) the harm caused by the offense. Id. at 336-340.

As petitioner notes, the Eighth Circuit has concluded that under Bajakajian a forfeiture order may be exces sive under the Eighth Amendment if it is not reduced when a defendant has returned a portion of the illegally obtained assets. See United States v. Hawkey, 148 F.3d 920, 928 (1998). In this case, however, the court of ap peals did not address whether the forfeiture order vio lated the Eighth Amendment; the only argument that petitioner made and that the court considered about forfeiture was whether 18 U.S.C. 982(a)(2) entitled peti tioner to a credit. Pet. App. A34.1 The court of appeals' decision therefore does not present a conflict warranting this Court's review. Moreover, this Court should not consider petitioner's Eighth Amendment claim in the first instance. See Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 697 (1984).

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

Paul D. Clement
Solicitor General
Eileen J. O'Connor
Assistant Attorney General
Alan Hechtkopf
Karen M. Quesnel
Attorneys

JULY 2005

1 Petitioner does not argue in this Court that he is entitled to a credit under 18 U.S.C. 982(a)(2).