Opinion
Case No. 03-40142-01/02-JAR
January 28, 2004
MEMORANDUM ORDER AND OPINION GRANTING IN PART MOTION TO AMEND CONDITIONS OF RELEASE
This matter comes before the Court on the government's Motion to Amend Conditions of Release (Doc. 30) set by the Honorable James O'Hara, United States Magistrate Judge for the District of Kansas. On December 30, 2003, Magistrate Judge O'Hara released both defendants on their own recognizance and declined the government's request to set a number of conditions of release. Pursuant to Title 18 United States Code, Section 3145(a)(1), the government requests that the Court: review and amend the conditions of release to add the following conditions:
(1) For defendant Wittig a $1,000,000 bond, with a 10% cash or surety deposit, which bond would be forfeited if the defendant committed any additional crimes while on release, or failed to appear at future proceedings as directed. For defendant Lake a $500,000 bond, with a 10% cash or surety deposit, which bond would be forfeited if the defendant committed any additional crimes while on release, or failed to appear at future proceedings as directed;
(2) Travel restrictions, unless prior authorization received from Pretrial Services Officer;
(3) Surrender of passport;
(4) Report to the Probation Office, pursuant to the Pretrial Service Officer's direction;
(5) If the defendants have not yet done so, report to the Federal Bureau of Investigation offices for fingerprinting and photographs;
(6) prohibition from engaging in purchase, sale or transfer of any real or personal property of any kind, or engaging in any monetary transaction, of a value of $10,000 or more, without first notifying the United States Attorneys Office and the United States Probation Office for the District of Kansas, and obtaining the approval of the District Court Judge presiding over this case; and
(7) provide to the United States Attorneys Office and the United States Probation Office for the District of Kansas, an accounting of the purchase, sale or transfer of any real or personal property of any kind, since January of 2002, of a value of $10,000 or more, which identifies the date of the transaction, the individual from whom or to whom the property was purchased, sold or transferred, the value of the transaction, and the use or location of the proceeds.
Upon the government's motion, 18 U.S.C. § 3145(a)(1) requires that the district court conduct a de novo review of a magistrate judge's order of release. The court has the discretion to conduct an evidentiary hearing if "necessary or desirable." Because neither the government nor the defendants seek an evidentiary hearing in this case, the Court exercises its discretion to conduct a review by considering the record and/or any additional information proffered by the parties. In this case the government proceeds by proffer, submitting to this Court the same exhibits submitted to the magistrate.
Judge O'Hara released these defendants pursuant to 18 U.S.C. § 3142(b), which allows pretrial release on personal recognizance or an unsecured bond subject to one condition, that the person not commit a crime while on release. The court must impose a bond under § 3142(b) unless it determines that such release will not reasonably assure the appearance of the defendant as required or that such release will endanger the safety of any other person or the community. In the event the court determines that a bond under § 3142(b) is insufficient to reasonably assure appearance and/or safety, the court must set a bond under § 3142(c). A bond set under § 3142(c) allows the court to impose additional conditions designed to reasonably assure the appearance of the defendant and/or ameliorate any danger to the safety of any person or the community. To that end, § 3142(c) includes a nonexhaustive list of thirteen conditions that a court may impose, in its discretion.
Release on personal recognizance or unsecured appearance bond — The judicial officer shall order the pretrial release of the person on personal recognizance, or upon execution of an unsecured appearance bond in an amount specified by the court, subject to the condition that the person not commit a Federal, State, or local crime during the period of release, unless the judicial officer determines that such release will not reasonably assure the appearance of the person as required or will endanger the safety of any other person or the community. 18 U.S.C. § 3142(b).
c) Release on conditions. — (1) If the judicial officer determines that the release described in subsection (b) of this section will not reasonably assure the appearance of the person as required or will endanger the safety of any other person or the community, such judicial officer shall order the pretrial release of the person — (A) subject to the condition that the person not commit a Federal, State, or local crime during the period of release; and (B) subject to the least restrictive further condition, or combination of conditions, that such judicial officer determines will reasonably assure the appearance of the person as required and the safety of any other person and the community. . . .
(i) remain in the custody of a designated person, who agrees to assume supervision and to report any violation of a release condition to the court, if the designated person is able reasonably to assure the judicial officer that the person will appear as required and will not pose a danger to the safety of any other person or the community; (ii) maintain employment, or, if unemployed, actively seek employment; (iii) maintain or commence an educational program; (iv) abide by specified restrictions on personal associations, place of abode, or travel; (v) avoid all contact with an alleged victim of the crime and with a potential witness who may testify concerning the offense; (vi) report on a regular basis to a designated law enforcement agency, pretrial services agency, or other agency; (vii) comply with a specified curfew; (viii) refrain from possessing a firearm, destructive device, or other dangerous weapon; (ix) refrain from excessive use of alcohol, or any use of a narcotic drug or other controlled substance, as defined in section 102 of the Controlled Substances Act ( 21 U.S.C. § 802), without a prescription by a licensed medical practitioner; (x) undergo available medical, psychological, or psychiatric treatment, including treatment for drug or alcohol dependency, and remain in a specified institution if required for that purpose; xi) execute an agreement to forfeit upon failing to appear as required, property of a sufficient unencumbered value, including money, as is reasonably necessary to assure the appearance of the person as required, and shall provide the court with proof of ownership and the value of the property along with information regarding existing encumbrances as the judicial office may require; (xii) execute a bail bond with solvent sureties; who will execute an agreement to forfeit in such amount as is reasonably necessary to assure appearance of the person as required and shall provide the court with information regarding the value of the assets and liabilities of the surety if other than an approved surety and the nature and extent of encumbrances against the surety's property; such surety shall have a net worth which shall have sufficient unencumbered value to pay the amount of the bail bond; (xiii) return to custody for specified hours following release for employment, schooling, or other limited purposes; and (xiv) satisfy any other condition that is reasonably necessary to assure the appearance of the person as required and to assure the safety of any other person and the community. 18U.S.C. § 3142(c)(1)(B).
See United States v. Cook, 428 F.2d 460, 461 (5th Cir. 1970)[restrictions placed on bail conditions "are left to the discretion of the issuing authority as long as those conditions are necessary to reasonably assure the appearance of the person as required"].
A defendant may be detained only in the event the court finds 1) by a preponderance of evidence, that there is no condition or combination of conditions that will reasonably assure the appearance of the defendant as required; or 2) the court finds by clear and convincing evidence that there is no condition or combination of conditions that will reasonably assure the safety of any person or the community. As the defendants posit, it is the government's burden to prove that there is no condition or combination of conditions that will assure appearance or safety. However, the defendants incorrectly posit that the government must prove risk of flight or risk of safety to the community before the court may impose any conditions of release. This is the burden of proof for detention; the statute expressly states the clear and convincing burden for detention on the basis of risk of danger to a person or community.
18 U.S.C. § 3142(f); United States v. Cisneros, 328 F.3d 610, 616 (10th Cir. 2003).
United States v. Cisneros, 328 F.3d at 616.
See United States v. Orta, 760 F.2d 887, 890-891 (8th Cir. 1985) (Noting that a judicial officer has four alternatives: release on personal recognizance or unsecured bond, release subject to certain conditions, temporary detention pending revocation of conditional release, or detention. And further stating, "The judicial officer most often will be deciding between the first and the second alternatives. The statutorily mandated progression from one choice to the next is critical: a judicial officer cannot determine that a detention hearing and the possible imposition of pretrial detention is appropriate merely by determining that release on personal recognizance will not `reasonably assure' the defendant's appearance at trial or `will endanger' the community. The judicial officer must also consider whether one of the codified conditions or any combination of the conditions will `reasonably assure' the defendant's appearance and the safety of the community." (citations omitted)).
The government does not request detention in this case, but rather requests the imposition of conditions under § 3142(c), based on a showing that the defendants' actions evidence that there is some risk of flight and some risk to the continued economic safety of the community. The court's imposition of conditions, if any, is based on a consideration of the factors delineated in § 3142(g):
(1) The nature and circumstances of the offense charged, including whether the offense is a crime of violence or involves a narcotic drug;
(2) the weight of the evidence against the person;
(3) the history and characteristics of the person, including —
(A) the person's character, physical and mental condition, family ties, employment, financial resources, length of residence in the community, community ties, past conduct, history relating to drug or alcohol abuse, criminal history, and record concerning appearance at court proceedings; and
(B) whether, at the time of the current offense or arrest, the person was on probation, on parole, or on other release pending trial, sentencing, appeal, or completion of sentence for an offense under Federal, State, or local law; and
(4) the nature and seriousness of the danger to any person or the community that would be posed by the person's release.
The government urges the Court to impose certain conditions with respect to both defendants, which it contends are reasonably necessary to ensure their appearance as required and the "continued economic safety of the community." With respect to the risk of flight, the government proffers evidence concerning the nature and circumstances of the offenses charged, the potential penalties the defendants face, and evidence about the defendants' dissipation of significant assets during the time of the government's investigation and since the inception of this prosecution. The defendants proffer evidence of the defendants' family ties, ties to the community, the defendants' demonstrated commitment to defending criminal charges as well as civil litigation; defendant Wittig points to his unblemished record of complying with the bond set in his other criminal case in this court. The parties do not dispute the facts proffered by one another, and the Court accepts the proffered facts as true. The facts material to the Court's determination of the propriety of imposing any condition or combination of conditions are as set forth below.
A number of facts suggest that there is little or no risk of flight by defendant Wittig, the former CEO of Westar Energy. Defendant Wittig has substantial roots in the community. He was born and raised in Kansas. He attended and graduated from the University of Kansas. He lives in Topeka with his wife and two children, in a home they own, and he has other family in the area. Defendant Wittig also has a proven track record of appearing for all required court appearances in Case No. 02-40140 in this Court.
A number of facts also suggest that there is little or no risk of flight by defendant Lake. Although he was employed by Westar in Topeka, defendant Lake does not have significant ties to this community. He has sold his residence here, and no longer resides in the area; in fact, he lives with his in-laws and owns no home. However, defendant Lake learned of Westar Energy's internal investigation in 1992, was interviewed on three occasions and provided documents requested by those conducting the investigation. For more than a year, defendant Lake was aware that he was under criminal investigation, and as early as August 2003, the prosecutor was advising defendant Lake's prior counsel that he could expect to be indicted by the end of 2003. Defendant Lake's actions do not belie his contention that he is eager to face these charges, just as he has eagerly participated in arbitration of civil matters concerning his employment and actions at Westar Energy.
On the other hand, there are facts suggestive of a risk of flight. Both defendants have engaged in a substantial liquidation of assets during the investigation and prosecution of this case. Defendant Wittig does not contest the government's proffer that he has liquidated approximately $2,671,027 in Westar stock as well as a co-operative apartment in New York City that he has previously valued conservatively at $5,500,000 and which contained jewelry, furs, silverware and artwork valued at nearly $2,000,000, and nearly half a million dollars in furnishings. Moreover, the government proffers that since his July 14, 2003 conviction on other charges, defendant Wittig has been attempting to sell a Birger Sandzen painting worth $125,000 that was formerly in his New York condominium. The indictment charges defendant Wittig with extracting more than $25 million from Westar during his tenure. While there may be a number of legitimate reasons for this activity, defendant Wittig offers no explanation for his liquidation of these assets, nor any information about the location of the proceeds. Liquidation of assets in the number of transactions and in the monetary amounts obviously may evidence an intent to marshal and liquidate assets in order to flee, as well.
Defendant Lake does not contest the government's proffer that in May 2003, he sold 20,000 shares of Westar stock worth $295,600. Defendant Lake explains that after Westar "effectively terminated" him, he sold his Topeka residence. He has also sold his other residence, at one time appraised at $2.2 million, and now lives with his in-laws and owns no home. Defendant Lake explains that he has been unemployed since he left Westar, has only a modest income from investments, and needed to advance over $400,000 in legal fees, as well, for representation in the arbitration and civil litigation arising out of his employment at Westar. Defendant Lake is alleged to have extracted more than $7,000,000 from Westar.
On balance, defendant Wittig's unexplained liquidation of more than $10 million in assets raises an inference of a risk of flight that is not outweighed by his appearance in this Court on other charges that carry substantially less severe penalties. On balance, defendant Lake's liquidation of over $2.5 million in assets is not fully explained by advancing $400,000 in legal fees, and having to pay living expenses while he resides, presumably rent free, with his in-laws. The bail investigation of defendant Lake concluded that he had only $1.3 million in a brokerage account and approximately $400,000 equity in a ranch. Yet in May 2001, defendant Lake listed nearly $12 million in assets, including two residences valued at $2,600,000. The Court is also mindful that defendant Lake has no familial or residential ties to this community; his only ties appear to be his status as a defendant in related civil litigation in this district.
These concerns, coupled with defendants' past and apparently present, access to cash or proceeds of liquidated assets, lead the Court to impose the least restrictive conditions it can fashion, that will reasonably assure these defendants' presence in this Court. With respect to both defendant Wittig and defendant Lake, the Court will impose a travel restriction, prohibiting any travel outside of this district, and in Lake's case Connecticut, except for appointments with the defendant's respective defense counsel in this criminal case, and any other pending criminal cases. Defendants may not travel otherwise, without first obtaining approval from the pretrial services office of the specific travel itinerary. The Court will also order that the defendants surrender any and all passports and visas; periodically report to the probation office, at the direction and discretion of the Pretrial Service Officer's direction; and if not already having done so, report to the Federal Bureau of Investigation offices for fingerprinting and photographs.
The government requests other conditions to address what it contends is a risk of continued economic safety to the community. Arguing that the defendants are dissipating assets, which impairs the collection of restitution and the forfeiture of assets if they are convicted, the government requests that the Court prohibit the defendants from "engaging in purchase, sale or transfer of any real or personal property of any kind, or engaging in any monetary transaction, of a value of $10,000 or more," without prior notice to the government and the Court; and that the Court require that defendants provide to the government and the Court "an accounting of the purchase, sale or transfer of any real or personal property of any kind, since January of 2002, of a value of $10,000 or more." Defendants protest that these requested conditions are extraordinary, unjustified and unduly restrictive; and that in seeking a past accounting, the government is attempting to discover evidence that the government would otherwise have the burden of proving at trial on the forfeiture count.
The government acknowledges that the statute does not mention such conditions, but argues that the conditions are reasonable and permissible under the catchall provision of § 3142(c)(1)(B)(xiv), which allows the court to tailor and impose "any other condition that is reasonably necessary . . . to assure the safety of any other person and the community." Setting conditions designed to protect the economic or pecuniary interests of a community may be reasonable in cases involving financial crimes committed by someone who may be a recidivist. But, there is no evidence that these defendants continue to engage in the type of acts they are alleged to have committed. Indeed, neither defendant is employed by Westar, nor holds an office that would give them the means to continue to commit the acts charged in the indictment. The government conceded to Judge O'Hara that it had no evidence suggesting that the defendants could repeat the conduct alleged in the indictment. And, although the government proffers evidence that these defendants have liquidated assets, that does not suggest that they are engaging in acts that risk the economic and pecuniary interests of the community.
United States v. Harris, 920 F. Supp. 132, 133 (D. Nev. 1996), quoting, S.Rep. No. 225, 98th Cong., 1st Sess., at 3 (1983), reprinted in 1984 U.S. Cong. Admin. News 3182, 3185 ("Often it is economic or pecuniary interests of a community rather than physical ones which are most susceptible to repeated danger by a released defendant.")
To be sure, where the charges include criminal forfeiture that is an indictment of the property itself, the government has an interest in locating and tracing property related to or acquired through alleged criminal conduct. However, the government must rely on its investigative means, as well as its rights to discovery granted under the Federal Rules of Criminal Procedure. As the defendants posit, the Bail Reform Act was never meant to be a discovery device. On the other hand, as defendants are undoubtedly aware, if they engage in transactions intended to dissipate or hide property subject to forfeiture, such acts will not be countenanced. If the government were to make a convincing showing, the Court would revisit the conditions it imposes today. And, if the defendants were convicted and the jury rendered a verdict in favor of forfeiture, the Sentencing Guidelines require an enhanced sentence for any obstruction of justice or court process.
For these reasons, the Court finds that the conditions of release should be amended pursuant to 18 U.S.C. § 3142(c). The bond set by Judge O'Hara, allowing release on the defendants' personal recognizance, remains the same, but in addition to the condition that the defendants not commit another local, state or federal crime while on bond, the Court imposes the following conditions with respect to defendant Wittig and defendant Lake.
IT IS THEREFORE ORDERED BY THE COURT that the government's Motion to Amend Conditions of Release (Doc. 30) is GRANTED IN PART as follows:
(1) Except for travel to and from meeting with their respective counsel in this case and any other pending criminal or civil cases, the Defendants may not travel outside their respective states of residence, without prior authorization by Pretrial Services Officer;
(2) Defendants shall surrender any and all passports not previously surrendered;
(3) Defendants shall periodically report to the Probation Office, at the direction and discretion of the Pretrial Services Officer; and
(4) Defendants shall (if not yet done so) report to the Federal Bureau of Investigation offices for fingerprinting and photographs.