Opposition Brief — Boulware v. United States

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 restriet petitioner's right to cross-exam-

ine Kushivama on that point. See ¢bid. 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 faet-bonnd claim in the first instance.

See Pennsylvania Dept of Corr v. Yeskey, 524 US. 206,

212-213 (1998).

3. Finally, petitioner contends (Pet. 28-29) that the

forfeiture of the entire $195,814.80 loan from GECC vio-

lates the Eighth Amendment's Excessive Fines Clause

as interpreted in United States v. Bajakajian, 524 US.

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.” /d. at 534. 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 (1) the harm caused by the offense. /d

at 336-540,

As petitioner notes, the Eighth Circuit has concluded

that under Bajakajian a forfeiture order may be exces-

sive ander the Eighth Amendment if it is not reduced

when a defendant has returned a portion of the illegally

obtained assets. See Cneted States v. Hawkey, VAS F.5d

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

9

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. A384. 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, Ince. ve 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

FILEEN J. O'CONNOR

Assistant Attorney General

ALAN HECHUTKOPF

KAREN M. QUESNEL

Attorneys

JULY 2005

Petitioner does not argue in this Court that he is entitled to a

credit under 1S UUS.C. 982(a)(2).

@ FILED 7

SEP 142005

NO. 04-1468} OFFICE OF THE CLERK

PREME COURT, U.S.

IN THE SUPREME COURT OF THE UNITED STATES

MICHAEL BOULWARE, Petitioner,

VS.

UNITED STATES OF AMERICA, Respondent

On Petition For Writ Of Certiorari To The United

States Court of Appeals For The Ninth Circuit

REPLY BRIEF

ROBERT J. WATERS

~ Counsel of Record

2115 Main Street

Santa Monica, CA 90405

(310) 399-3259

DENNIS E. W. O’>CONNOR

Reinwald, O’Connor & Playdon, LLP

24" Floor, Makai Tower

733 Bishop Street

Honolulu, Hawaii 96813

(808) 524-8350

Counsel for Petitioner

MICHAEL BOULWARE

TABLE OF CONTENTS

PDISOMEINE is oc'ccvnctevsacedctawese cent |

CAT ATSI en 'vn os aed athe owen eee 10

TABLE OF AUTHORITIES

Cases Page

Federal Cases

Capitol Cities Cable, Inc. v. Krisp, 467 U.S. 691

De: Peay ee Dene Pere ae ren ann Cena One 9

Carlson v. Green, 446 U.S. 14 (1980) ................ 8

Commissioner v. Estate of Bosch, 387 U.S. 456 (1967) ..1

Crawford v. Washington, 541 U.S. 36 (2004) .......... s

Davis v. Alaska, 415 U.S. 308 (1974) ................ 8

Duignan vy. United States, 274 U.S. 195 (1927) ........ 8

Kyles v. Whitely, 514 U.S. 419 (1995) ................ 9

United States v. Boulware, 384 F.3d 794 (9" Cir. 2004) . . 2

United States v. Hawkey, 148 F.3d 920 (8" Cir. 1998) .. 10

United States v. Mendenhall, 446 U.S. 544 (1980) ...... 8

United States v. 3814 NW Thurman Street,

S60 OE TEST 0 CH TO sh ok a sea 10

Youakim v. Miller, 425 U.S. 231 (1976) ........... 8, 10

State Cases

Bremer v. Weeks, 104 Haw. 43, 85 P.3d 150 (2004) ..... 3

li

ARGUMENT

1. Petitioner contends this Court should grant a writ of

certiorari to determine whether the government is precluded

from relitigating the ownership of property in a federal

criminal tax prosecution which was the subject of a bona fide

state adversary proceeding, resulting in a civil judgment that

determined the property interests among the litigants. This

question was left unresolved in Commissioner v. Estate of

Bosch, 387 U.S. 456 (1967) outside of the estate-tax context.

The government’s brief in opposition argues that this

question is not presented in this case, noting that the United

States Court of Appeals for the Ninth Circuit (“Ninth

Circuit”) held that, even assuming that a state court’s

determination of ownership was binding in subsequent tax

cases, the Hawaii judgment did not resolve whether the

money belonged to Hawaiian Isles Enterprises, Inc. (“HIE”)

or petitioner because that determination was not at issue in

the lawsuit. Therefore, the significance of Bosch outside the

estate-tax context is not at issue in this case. Opp. Br. 6-7.

While recognizing that “(t]he state court did find that the

money in question belonged to HIE and that Lee had been

and was holding it in ‘constructive trust’ for HIE,” the Ninth

Circuit nevertheless erroneously concluded that “the

ownership of the money as between Boulware and HIE does

not appear to have been subject to adversarial testing.” Pet.

App. A1l6. The Ninth Circuit overlooked the fact that in the

state action, the litigants were Jin Sook Lee, HIE and

petitioner, each represented by separate counsel, and the heart

of the controversy was the ownership of the monies and

properties at issue.

The Hawaii judgment resulted from an shvemnéea

proceeding initiated by Lee, prior to petitioner’s indictment.

The Finding of Facts and Conclusions of Law from the

Hawaii judgment specifically found there was an agreement’

between Boulware, HIE, and Lee that the funds belonged at

all times to HIE, not Boulware. The jury’s answer to

question 10 on the special verdict form” established that the

funds belonged to HIE, not Boulware:

Question No. 10. Jin Sook Lee claims the cash and

checks delivered to her, during the period from

March, 1987 to May, 1994, by Michael Boulware and

Hawaiian Isles Enterprises were gifts. Michael

Boulware and Hawaiian Isles Enterprises claim the

monies were not gifts but were to be held by Jin Sook

Lee and to be returned when requested. State your

findings below:

The monies were gifts

to Jin Sook Lee Yes No_ v7

The monies belong

to Hawaiian

Isle Enterprises Yes of No

~ “3. There was a binding agreement between Plaintiff, Boulware

ae HIE to hold monies belonging to HIE to pay Mal Sun

Boulware for her marital interest in HIE. Pursuant to that

agreement, monies belonging to HIE were entrusted to Plaintiff

until such time the monies were needed to pay Mal Sun for her

interest in HIE. ER 86.

2 Reproduced in United States v. Boulware, 384 F.3d 794, 802

(9" Cir. 2004); Pet. App. A9-A10. Supp. ER 12-13.

2

If the jury had determined instead that the funds belonged

to Boulware, not HIE, its answer to whether the monies

belonged to HIE would have been “no,” not “yes.” The jury

also distinguished between Boulware and HIE with regard to

the $1,200,000 promissary note, in Final Finding 3.” ER 74-

75. Contrary to the Ninth Circuit’s conclusion, when the

totality of the findings in the judgment are viewed together,

the ownership of the money as between Boulware and HIE

was clearly the subject of adversarial testing. Boulware was

bound” by the state court judgment and could not thereafter

assert any property interest in the monies and properties.

Hence, the Ninth Circuit should have concluded that the state

court judgment’s determination of property interests was

adversarial and binding on the government in petitioner’s

7 “As to Count III, judgment in favor of

Defendant/Counterclaimant HA WAIIAN ISLES ENTERPRISES,

INC. and against Plaintiff on Plaintiff's claim on the August, 1993

promissory note in the amount of $1,200,000 and Plaintiff shall

take nothing on said claim against Defendant HAWAIIAN ISLES

ENTERPRISES, INC. Furthermore, as to Count III, judgment in

favor of Plaintiff and against Defendant/Counterclaimant

MICHAEL BOULWARE in the amount of $250,000 on Plaintiff's

claim on the August, 1993 promissory note in the amount of

$1,200,000[.]”

4

~ Under Hawaii law claim preclusion prohibits a party from

relitigating a previously adjudicated cause of action as weil as all

grounds of claim and defense which might have been properly

litigated in the first action but were not litigated or decided.

Bremer v. Weeks, 104 Haw. 43, 53, 85 P.3d 150, 160 (Haw. 2004).

Since petitioner, as a party to the action, is precluded as a matter of

state law from asserting any interest in the properties determined to

belong to HIE by the Hawaii judgment, the judgment determined

Boulware’s interest in the monies and properties at issue.

3

federal criminal prosecution.”

2. Although acquitted of the substantive false statement

counts, petitioner was convicted of conspiring with Lorin

Kushiyama to submit false invoices to General Electric Credit

Company (“GECC’”) to divert monies from HIE to petitioner

to avoid reporting those monies on his tax return.

Kushiyama’s intent in submitting the false invoices to GECC

was critical in determining whether a conspiracy existed.

The government maintains that the Ninth Circuit correctly

concluded that the district court did not impermissibly

prevent petitioner from asking Kushiyama whether he

“intended to submit false invoices to GECC.” Opp. Br. 7.

The government argues that the district court concluded that

petitioner’s question was irrelevant, because it understood

petitioner’s question, like the questions preceding it, to refer

to invoices prepared for third parties. Since petitioner’s

counsel could have rephrased the question or explained to the

district court that he was inquiring about the invoices at issue,

the government contends that the district court did not unduly

restrict petitioner’s right to cross-examine Kushiyama on that

point. Opp. Br. 7-8.

This argument should not be accepted. First, it is unclear

why the district court sustained the objection, as no “legal

ground” was articulated for the objection. 3 RT 59.° Second,

? As noted in petitioner’s Ninth Circuit reply/answering brief and

petition for panel rehearing, the government had actual notice of

and, as a creditor, had the opportunity to but did not object to the

Hawaii judgment serving as the basis for the settlement of Lee’s

bankruptcy proceeding prior to petitioner’s criminal prosecution.

* “Q. As far as these invoices, you are not the -- intending to

submit fake invoices to anyone, were you?

Mr. Osbome: Objection, your Honor.

The Court: Sustained. The objection is sustained.”

4

. although the district court was emphatic in sustaining this

objection, it did not articulate its reason for sustaining the

unspecified objection. Jd. While the government now

speculates that the objection was sustained on relevancy

grounds because the district court assumed the question was

directed to Kushiyama’s appraisals for others, neither the

government nor the district court articulated those grounds at

trial, although the government clearly knew how to do so. 3

RT 56, 57.7 Given that the question from defense counsel’s

point of view clearly referred to the Exhibits at trial and how

emphatic the court was in sustaining the objection, it is .

difficult to imagine that defense counsel would have been

given the opportunity to rephrase the question. Third, the

question was highly relevant even if defense counsel! had

intended to refer to invoices prepared by Kushiyama for

others. :

It is undisputed that Kushiyama’s specific intent to submit

false invoices was a critical element of the conspiracy to

submit false documentation to GECC. Kushiyama, however,

testified he had provided appraisals for Boulware, verifying

there was sufficient collateral listed in each appraisal

(invoice) to cover the amount of money financed by GECC.

When defense counsel attempted to question Kushiyama

about whether he intended to submit false invoices to GECC,

the trial court refused to permit this question. 3 RT 59. This

inquiry was critical because petitioner could not be guilty of

the conspiracy unless Kushiyama intended to deceive GECC.

The government’s reliance on the Ninth Circuit’s

explanation of the district court’s ruling is misplaced.

Although the Ninth Circuit correctly observed that

Y “ Prosecutor]: Objection to the relevance of other parties...

Objection to the relevance of what he did --”

5

Kushiyama had been asked about preparing invoices or

appraisals for other individuals, and objections had generally

been sustained to these questions, that observation was

irrelevant to the question posed to Kushiyama, challenged

here, referring to these invoices. 3 RT 59; footnote 6, supra.

During direct examination, the prosecution admitted into

evidence packages of invoices marked as Exhibits 36 and 45.

3 RT 37, 47-48. When defense counsel started cross

examining Kushiyama, he referred to these Exhibits, the

alleged false invoices, as “these invoices.” 3 RT 54, 55, 56,

and 58. While counsel asked Kushiyama about appraisals he

had prepared for other people, it was clear that counsel’s

reference to “these invoices” referred to the invoices admitted

into evidence and the question asked about submitting fake

invoices referred to those Exhibits.

The government mischaracterizes Kushiyama’s cross

examination. Opp. Br. 7. Most of the questions preceding

the question regarding Kushiyama’s intent refer to the

appraisal he gave for HIE’s equipment and whether he used

other forms to provide appraisals of equipment. 3 RT 57-58.

Kushiyama responded that he used the same types of

invoices as in this case and by using these invoices, it did not

mean that he was selling equipment to someone. 3 RT 59.

The district court sustained the government’s objection when

Kushiyama was asked if he had ever been asked to do

appraisals for anyone else other than HIE. When he was then

asked “[a]s far as these invoices,” if he intended “to submit

fake invoices to anyone,” the district court sustained the

government’s objection. 3RT 59. The questions immediately

following asked Kushiyama about the financing between HIE

and GECC and whether anyone called from GECC regarding

“these invoices.” 3 RT 59-60."

The government claims that petitioner’s argument that the

question at issue was relevant even if it was interpreted by the

district court as referring to invoices prepared for third

parties, was not presented to the district court or the court of

appeals and this Court should not pass on this claim in the

first instance. Opp. Br. 8. The argument, however, could not

have been presented to the district court during trial because

no explanation was given for the ruling. Once the Ninth

Circuit issued its opinion and stated that it was not completely

clear whether “these invoices,” referred to those prepared for

Boulware or to ones prepared for other customers, the

relevancy of invoices prepared for other parties was

addressed by petitioner in his petition for panel rehearing.

The Ninth Circuit observed that the district court was

under the “impression” that “these invoices” referred to

invoices for other parties and defense counsel did nothing to

disabuse him of this impression. Pet. App. A32. Therefore,

the Ninth Circuit reasoned that the limitation on the cross

examination of Kushiyama was not so severe as to amount to

a violation of petitioner’s Confrontation Clause rights. /bid.

But there was no specific finding by the Ninth Circuit with

respect to the precise meaning of the question put to

Kushiyama regarding any fraudulent intent on his part in

preparing the invoices.

After the Ninth Circuit offered some explanation for the

district court’s ruling, petitioner immediately pointed out the

relevancy of the question and its propriety with respect to

¥ Petitioner in his Petition for Certiorari incorrectly stated

Kushiyama never spoke to representatives of GECC. Pet. 26. In

fact, Kushiyama testified he was called by GECC when an error in

value was detected on these invoices. 3 RT 60

7

third parties as a proper subject of cross examination in his

petition for rehearing. Hence, the relevancy of the question

with respect to third parties and the district court’s limitation

of cross examination regarding Kushiyama’s fraudulent intent

in preparing the invoices for other parties is properly before

this Court.”

Whether Kushiyama used the forms labeled “invoice” to

submit “fake” appraisals or “invoices” for other individuals

was highly relevant. If he intentionally submitted fake

documents for others, this would support the inference he

intended to do so with the invoices admitted into evidence.

However, if he never submitted “fake” invoices or appraisals

for others, this was circumstantial evidence that he did not

intend to do so here. Clearly, petitioner was entitled to cross-

examine Kushiyama on this subject. Davis v. Alaska, 415

U.S. 308, 318 (1974); cf Crawford v. Washington, 541 U.S.

36, 614% (2004). The failure to allow this cross-examination,

whether or not the district court correctly understood the

question, denied petitioner his Sixth Amendment right to

cross examine Kushiyama because, under either interpretation

2 While Kushiyama’s intent with respect to third parties was

impliedly addressed when the petition for panel rehearing was

denied, this Court may, in any event, consider petitioner’s

Confrontation Clause claim in the first instance as an exceptional

case coming from the federal courts. United States v. Mendenhall,

446 U.S. 544, 551-552, n.5 (1980); Carlson v. Green, 446 U.S. 14,

17, n.2 (1980); Youakim v. Miller, 425 U.S. 231, 234 (1976) (per

curium); Duignan v. United States, 274 U.S. 195, 200 (1927).

1 “To be sure, the Clause's ultimate goal is to ensure reliability of

evidence, but it is a procedural rather than a substantive guarantee.

It commands, not that evidence be reliable, but that reliability be

assessed in a particular manner: by testing in the crucible of cross-

examination. The Clause thus reflects a judgment, not only about

the desirability of reliable evidence (a point on which there could

be little dissent), but about how reltability can best be determined.”

8

of the question, the cross examination was highly relevant and

critical to the charge and petitioner’s defense.

This is particularly true here where Kushiyama was never

asked by the prosecutor if he intended to defraud GECC or if

he agreed with Boulware to attempt to defraud GECC. Thus,

the jury could only rely on speculation to conclude that he

had conspired with Boulware. Petitioner was entitled by the

Confrontation Clause to expose this “speculation” as the

prosecution’s wishful thinking. 1 RT 108. The prohibited

questioning would have revealed that Kushiyama had no

intent to defraud anyone with the trial Exhibits, thereby

requiring petitioner’s acquittal on the conspiracy.

When the prejudicial spill over from the district court’s

failure to give binding effect to the state court judgment and

the unconstitutional restriction on cross-examination are

considered cumulatively, Kyles v. Whitely, 514 U.S. 419, 421-

422 (1995), it is clear that the conviction on Count 10 must be

reversed. When the conviction for Count 10 is reversed, this

requires the forfeiture in Count 15 to be vacated, because

there is no longer a predicate conviction for the forfeiture.

3. Count 15 sought forfeiture of $495,814.80, the amount

of money involved in the allegations regarding GECC, even

though that sum, with interest, had been repaid by HIE, and

HIE repaid by petitioner prior to June 1993. The government

argues that the Ninth Circuit did not address the issue whether

the forfeiture order violated the Eighth Amendment and the

Ninth Circuit’s decision does not present a conflict warranting

this Court’s review. Opp. Br. 8-9. Although the violation of

the Eight Amendment’s excessive fines clause was not

addressed by the Ninth Circuit, this Court may consider

petitioner’s Eighth Amendment claim in the first instance as

an exceptional case coming from the federal courts. Capitol

Cities Cable, Inc. v. Krisp, 467 U.S. 691, 697 (1984);

9