Opposition Brief — Kegley v. United States

No. 91-1104

Jun the Supreme Court of the Anited States

OCTOBER TERM, 1991

WILLIAM DALE KEGLEY AND

{,AURIE JANE LUTTRELL, PETITIONERS

Vv.

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

KENNETH W.STARR

Solicitor General

ROBERTS. MUELLER, III

Assistant Attorney General

VICKIS. MARANI

Attorney

Department of Justice

Washington, D.C. 20530

(202) 514-2217

QUESTION PRESENTED

Whether the Due Process Clause requires that the gov-

ernment have “reasoned grounds” to believe that a person

has engaged or will engage in criminal activity before the

government may initiate a criminal investigation of that

person.

en Lee lO OD eee ee

(1)

:

3

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TABLE OF CONTENTS

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TABLE OF AUTHORITIES

Cases:

Hampton v. United States, 425 U.S. 484 (1976) oe.

United States v. Allibhai, 939 F.2d 244 (5th Cir. 1991),

cert. denied, No. 91-751 (Jan. 27, 1992)... eee ee eeees

United States v. Chin, 934 F.2d 393 (2d Cir. 1991)...

United States v. Driscoll, 852 F.2d 393 (3d Cir. 1988).............

United States v. Gamble, 737 F.2d 84 (3d Cir. 1988) .0.......0.....

United States v. Jacobson, 916 F.2d 467 (8th Cir. 1990),

re, ermmnreee, BEET. CL. RGIS (IDOE) n.....0..cssssceccsesenssncsencsessnse

United States v. Jannotti, 673 F.2d 578 (3d Cir.), cert.

I Rs IED 0 BODIED cep cesonsivecsesesnesisovssonsesevsssenessesenesenses

United States v. Jenrette, 744 F.2d 817 (D.C. Cir. 1984),

re, Meeeeee, ST e 17.25. BOD CUDGB).....cccesccssssecescsccescosessseseoseseseoees

United States v. Miller, 891 F.2d 1265 (7th Cir. 1989) ............

United States v. Myers, 635 F.2d 932 (2d Cir.), cert. denied,

os cc caceluéngionesicanvesiantnased

United States v. Osborne, 935 F.2d 82 (4th Cir. 1991)...

United States vy. Payner, 447 U.S. 727 (1980) oo. eee eeeeeees

United States v. Russell, 411 U.S. 423 (1978) occ cece

United States v. Thoma, 726 F.2d 1191 (7th Cir.), cert.

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(III)

Constitution and statutes: Page

U.S. Const. Amend. V (Due Process Clause).................::0.200008 6

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18 U.S.C. 1029 (b)(1)

In the Supreme Court of the Giuted States

OCTOBER TERM, 1991

No. 91-1104

WILLIAM DALE KEGLEY AND

LAURIE JANE LUTTRELL, PETITIONERS

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 on rehearing en

banc, Pet. App. C1-C6, is reported at 923 F.2d 764. The

panel opinion of the court of appeals, Pet. App. Al-A33,

is reported at 889 F.2d 806.

JURISDICTION

The judgment of the en bane court of appeals was

entered on January 23, 1991. The petition for a writ of

certiorari was filed on August 8, 1991, and is accord-

ingly out of time under Rule 13.1 of the Rules of this

Court. The jurisdiction of this Court is invoked under

28 U.S.C. 1254(1).

(1)

2

STATEMENT

After a jury trial in the United States District

Court for the Central District of California,

petitioners were convicted of conspiring to possess

and traffic in unauthorized and counterfeit credit card

drafts, in violation of 18 U.S.C. 1029(a)(1)-(3), and

attempting to traffic in counterfeit drafts, in violation

of 18 U.S.C. 1029(a)(1) and (b)(1). They were sentenced

to probation. A panel of the court of appeals reversed

their convictions, but on rehearing the en bane court

of appeals affirmed.

1. In 1980, petitioner Kegley operated a telemarket-

ing business named the Complimentary Vacation

Club, which offered vacation packages at discount

prices. Kegley received payment for the vacation

packages through credit card drafts that customers

authorized to purchase the packages. He opened an

account with the Bank of America of Taiwan, where

he deposited the drafts. The bank later canceled his

account and returned the drafts, which he retained.

Pet. App. A4-A5; Pet. 8.

The Secret Service subsequently set up a fictitious

business named Aloha Imports to investigate illegal

activities in telemarketing. The Service hired

tichard Barker, who was awaiting sentencing on a

conviction for credit card fraud, to solicit prospective

clients for illegal credit card draft transactions.

Sarker had previously conducted telemarketing

transactions with Kegley and offered to help Kegley

factor his credit card drafts. Pet. App. A5-A6; Pet. 9.)

“Factoring” describes a practice in which a merchant who

does not have a valid credit card account with a bank sells the

drafts at a discount to a merchant who does have such an

account. The authorized merchant deposits the drafts and

receives payment from the bank. Factoring authorized credit

card drafts is not necessarily illegal, but it may violate the

3

On March 12, 1987, an undercover agent at Aloha

Imports, using the name David Young, called Kegley

to discuss the possibility of processing credit card

drafts. Kegley said that he had quite a few drafts that

were “a little bit old.” He also said that some of the

drafts were invalid. Young replied that he could

process the drafts, and he suggested that they meet

the next day to negotiate the division of the proceeds.

Pet. App. A6-A7.

Kegley brought petitioner Luttrell to the meeting

with Young. Kegley introduced [Luttrell as his

business associate. Luttrell took notes during the

meeting, which the Secret Service recorded and

videotaped. Young and Kegley discussed how the

factoring scheme would work. Young represented

that he owned a company in Honolulu and that he

could deposit the drafts in Seutheast Asia through

connections that he had there. Pet. App. A7.

Kegley agreed that his merchant iinprint should be

removed from the drafts, and he did not object when

Young proposed changing the amounts on the drafts

so that Kegley and Young could receive a greater

return. Young told Kegley that the drafts would be

deposited into a merchant’s account and that the

money would be wired to Young’s account within 24

hours thereafter. Young announced that in three days

he would fly to Honolulu and then to Singapore to

factor the drafts. Kegley was hesitant and

acknowledged the illegality of the scheme. Nev-

ertheless, petitioners agreed to participate. They

arranged for Luttrell to collect the money from the

transaction. At the end of the meeting, petitioners

merchant’s contract with the bank. Pet. App. A6_ n.3.

Factoring unauthorized credit card drafts is illegal. Jbid. See

1X U.S.C. 1029.

4

gave Young nearly $1 million in credit card drafts.

Pet. App. A8.

On the morning that Young was to fly to Singapore,

Kegley called Aloha Imports, and an undercover agent

answered. After asking questions about Young and

Aloha Imports, Kegley told the agent that he wanted

to cancel the transaction. Kegley also sent a

Mailgram to that effect. The agent informed Young,

who called Kegley and pretended to be in Singapore.

Kegley told Young that he did not want anything to do

with the operation and that Young should keep

Kegley’s share of the proceeds. Young replied that it

was too late, that the drafts had already been

processed, and that Kegley’s share was $800,000.

Kegley told Young to keep the money. Pet. App. A&-

AQ.

2. Petitioners moved the district court to dismiss

the indictment on the ground that the government’s

investigative methods in this case constituted

outrageous government conduct, but the district

court denied the motion. Pet. App. Al8, A381. The

court did, however, instruct the jury on the defense of

entrapment. The jury rejected that defense and

convicted petitioners. Jd. at A9-A10.

4. A panel of the court of appeals accepted petition-

ers’ claim of outrageous government conduct, wolding

that “police officers violate constitutional norms

when, without reasoned grounds, they approach

apparently innocent individuals and provide them with

a specific opportunity to engage in criminal conduct.”

Pet. App. A26-A27.2 In the panel’s view, there was

“absolutely no evidence on the trial record that the

Secret Service possessed any information linking

“ Petitioners appealed their convictions on several other

yrounds, which the panel rejected. Pet. App. Al0-A24, A382.

Petitioners do not renew those contentions in this Court.

_

2)

[petitioners] or their business with illegal activity.”

Id. at A25. Nor, the panel observed, was there “any

testimony on the record that the police were aware of

criminal! activity involving unknown members of a

discrete class or group of which [petitioners] might

be a part.” [bid.

The panel acknowledged the importance of using

undercover agents in the investigation of “ongoing

activities” and stated that it was “generally reluctant

to disagree with the government on matters of law

enforcement policy.” Pet. App. A29. The panel never-

theless found the governmental interest in

conducting “suspicionless” investigations to be

“weak at best.” /bid. The panel characterized such

investigations as “inefficient” and “arbitrary,” and it

cited the use of informants—who, it observed, “dof |

not always obey the niceties of police protocol”—as

deserving of special scrutiny. Jd. at A30.

The court noted, however, that “[t|he trial record

contains hints that the Secret Service may in fact

have had a factual basis for targeting” petitioners,

and it therefore remanded the case to the district

court to “determine whether the government had

reasoned grounds for approaching [petitioners] and

offering them the opportunity to participate in a

criminal scheme.” Pet. App. A31-A382.

4. The court granted the government’s suggestion

of rehearing en bane and vacated that portion of the

panel’s judgment requiring the government to have

“reasoned grounds” to believe that a person has

engaged or will engage in criminal activity before the

government may initiate a criminal investigation of

that person. Pet. App. C2-C3. In “explicitly rejecting”

that requirement, the court explained that it was

“followling] four of our sister circuits”—namely, the

Second, Third, Tenth, and District of Columbia

Circuits. /d. at C3.

6

Judge Pregerson dissented. He agreed with the

panel’s analysis of petitioners’ outrageous

government conduct claim. Pet. App. C4. While

acknowledging that in the instant case there was “no

indication that the police acted out of any personal

animus against the defendants or that the police

randomly and arbitrarily targeted [them],” Judge

Pregerson thought that the police “should not be

allowed to hire informants simply to go out on fishing

expeditions to find targets for undercover sting

operations.” Jd. at C5. Like the panel, Judge

Pregerson would have remanded the case to the

district court for findings as to whether the govern-

ment, before it contacted petitioners, had reason to

believe that they “were likely to engage in criminal

activities.” Id. at C5-C6.

ARGUMENT

Petitioners argue that their convictions must be

set aside because the government lacked “reasoned

grounds” to believe at the outset of its investigation

that petitioners had been or would be involved in

criminal activity. Pet. 12-17. Contrary to petitioners’

claim, no such “reasoned grounds” are required.

The courts of appeals are in agreement that the

Due Process Clause does not impose a requirement

on the government that it must have “reasoned

grounds” or reasonable suspicion that a person has

committed or will commit an offense before it may

commence an investigation of that person. United

States v. Allibhai, 9389 F.2d 244, 248-249 (5th Cir.

1991), cert. denied, No. 91-751 (Jan. 27, 1992); United

States v. Osborne, 935 F.2d 32, 35-36 (4th Cir. 1991);

United States v. Chin, 934 F.2d 3898, 396-398 (2d Cir.

1991); United States v. Jacobson, 916 F.2d 467, 469 (8th

Cir. 1990) (en bane), cert. granted on other grounds,

111 S. Ct. 1618 (1991) (No. 90-1124); United States v.

7

Miller, 891 F.2d 1265, 1269 (7th Cir. 1989); United

States v. Driscoll, 852 F.2d 84, 87 (3d Cir. 1988);

United States v. Jenrette, 744 F.2d 817, 824 & n.13

(D.C. Cir. 1984), cert. denied, 471 U.S. 1099 (1985);

United States v. Gamble, 737 F.2d 853, 860 (10th Cir.

1984); United States v. Thoma, 726 F.2d 1191, 1198

(7th Cir.), cert. denied, 467 U.S. 1228 (1984); United

States v. Jannotti, 673 F.2d 578, 609 (3d Cir.) (en bane),

cert. denied, 457 U.S. 1106 (1982); United States v.

Myers, 685 F.2d 932, 940-941 (2d Cir.), cert. denied, 449

U.S. 956 (1980).

There is no merit to petitioners’ argument that the

government must have reasonable suspicion before it

may investigate a person. Although the government’s

investigations are normally motivated by suspicion of

illegal conduct, a person “has no constitutional right

to be free of investigation.” United States v. Jacobson,

916 F.2d at 469. Thus, when “the conduct of the

investigation itself does not offend due process, the

mere fact that the investigation may have commenced

without probable cause does not bar the conviction of

those who rise to its bait.” United States v. Driscoll,

852 F.2d at 87 (quoting Jannotti, 673 F.2d at 609).

* Petitioners contend that the reasonable suspicion question

presented by their certiorari petition is “identical” to the issue

before this Court in Jacobson v. United States, No. 90-1124,

and thus “may properly be addressed and resolved at the same

time.” Pet. 16-17. Petitioners are incorrect. In Jacobson, this

Court limited its grant of certiorari to the question whether

petitioner was entrapped as a matter of law. Petitioner and

amici in Jacobson discussed the reasonable suspicion question

presented by the certiorari petition in this case, and we

responded to those arguments, but only after pointing out that

the issue was not properly before the Court. Because the Court

did not grant review in Jacobson to decide the reasonable

suspicion question, this Court need not hold the petition in this

case pending the Court’s decision in Jacobson.

’e)

This Court has never held, or even suggested, that

government initiation of an investigation without

prior suspicion of wrongdoing violates due process.‘

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

ROBERT S. MUELLER, III

Assistant Attorney General

~ . VICKI S. MARANI

Attorney

MARCH 1992

' This Court noted in United States v. Russell, 411 U.S. 4238,

131-432 (1973), that “we may some day be presented with a

situation in which the conduct of law enforcement agents is so

outrageous that due process principles would absolutely bar the

government from invoking judicial processes to obtain a con-

viction.” The Court held, however, that no such due process

Violation was shown in that case. The Court has never found an

investigative technique to be so offensive as to violate due

process and to prohibit the government from prosecuting the

defendant, in spite of several invitations to do so. See Hampton

v. United States, 425 U.S. 484 (1976); United States v. Payner,

447 U.S. 727, 787 1.9 (1980).

US GUVcKNMENI PRINTING OFFICE 1992-312-324/45351