Thursday, February 8, 2007

Get Your Theory of Prosecution Right at the Start

In a criminal prosecution, it's important for the government to think through the theory of its case at the start and not shift things around once the evidence is in.  That is certainly not what happened in United States v. Milwitt, a bankruptcy fraud case in which prosecutors did not prove the theory charged in the indictment, leading to a reversal of the conviction by the Ninth Circuit.  John Milwitt engaged in a rather simple scheme by buying an ad in the local San Francisco Yellow Pages advertising himself as a landlord-tenant attorney when in fact he had never gone to law school.  He attracted several clients who were having problems with their landlords.  He had them withhold their rent payments and secretly filed bankruptcy petitions on their behalf, listing the cases as pro se filings.  As these things are wont to do, the scheme unraveled and he was charged with fraud, in this case bankruptcy fraud in violation of 18 U.S.C. Sec. 157.  That provision, enacted in 1994, makes it a crime to engage in a scheme or artifice to defraud by filing a bankruptcy petition, a different offense than than the older bankruptcy crime statute, 18 U.S.C. Sec.152, which reaches misstatements to the bankruptcy court.  The government's indictment alleged that Milwitt defrauded the landlords of their legal right to the rents, but at trial the evidence was that the tenant-clients were the victims of the scheme because the landlords lost nothing that they were otherwise entitled to receive.

The Ninth Circuit reversed the conviction (here), noting that Sec. 157 is similar to the mail and wire fraud statutes.  According to the opinion, "The specific intent to deceive or defraud element of the mail and wire fraud crimes requires the prosecution to prove that the defendant intended to defraud an identifiable individual."  The court found that the variance between the indictment's allegations that the landlords were the victims and the proof that the tenant-clients were the victims meant the government had not introduced sufficient evidence for the conviction, resulting in a reversal with no retrial of the charge.  The Ninth Circuit held:

[W]hen the government rested its case, it had presented no proof that there was a scheme to defraud the landlords, much less that the bankruptcy petitions had been filed as a means of executing or concealing the scheme. Rather, the evidence showed that the tenants were likely justified in not paying the landlords; that the fraudulent scheme was one by Milwitt to deprive the tenants of money by fraudulently representing to them that he was representing their interests against the landlord; and that the purpose of the bankruptcy filing was to conceal the fraud from the tenants.

While the government likely could have convicted Milwitt under Sec. 152 for making false statements to the bankruptcy court, and perhaps even the mail and wire fraud statutes if it identified the tenant-clients as the victims, in this case its use of the bankruptcy statute may have made the case more complicated than it should have been.  Milwitt is a good lesson in the need to prove the crime that is charged. (ph)

Fraud, Prosecutions | Permalink

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did you notice that it took the 9th circuit one year to issue this opinion Did Milwitt sit in prison the entire time?

Posted by: Moe Levine | Feb 8, 2007 12:07:56 PM

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