Petition for Writ of Certiorari — Miller v. United States

Supreme Gourt, (8.

rit?

96 615 OCT 17 19%

OFFICE OF THE CLERK

In The

Supreme Court of the United States

October Term, 1996

CHARLES R. MILLER, JR.,

Petitioner,

UNITED STATES OF AMERICA,

Respondent.

Petition For Writ Of Certiorari To The

United States Court Of Appeals

For The Sixth Circuit

+

PETITION FOR WRIT OF CERTIORARI

¢

CHARLES R. Ray

Rosert S. Catz

211 Third Avenue North

Nashville, TN 37219-8288

(615) 256-2111

Counsel for Petitioner

October 17, 1996

I. QUESTIONS PRESENTED

1. Does a United States district court have pre-

sentencing guideline discretion to offer a convicted

defendant a reduced term of incarceration on condition

that he agree to make immediate restitution by drawing

down his pension benefits given the express anti-alien-

ability and spousal protection and waiver provisions of

the Employee Retirement Income Security Act?

2. May a United States district court, consistent

with the Fifth Amendment impose an additional eight-

year-period of incarceration when a convicted defendant

is unable, because of his economic inability at the time of

sentencing, to make immediate restitution in exchange

for a reduced period of incarceration?

Psa ce nate rene ne SOC I ene eE

il

Pe eae

TABLE OF CONTENTS

Page

I. QUESTIONS PRESENTED ...........-..+-+--. i

Il. OPINIONS BELOW .........----eeeeeeeceees 1

HI. JURISDICTION. ......... eee eccccccenccveces 1

IV. CONSTITUTIONAL AND STATUTORY PRO-

VISIOING. 6c cies ch oiep tend ee eee weekeene eens? 1

V. STATEMENT OF THE CASE............--+-- 2

VI. REASONS FOR GRANTING THE WRIT ..... 5

A. The Sixth Circuit’s Decision Below

Directly Conflicts With an Applicable

Decision of the Fourth Circuit and the

Supreme Court of New Jersey Which

Hold That Requiring a Criminal Defen-

dant to Turn Over Pension Benefits to Sat-

isfy Restitution Violates the Anti-

Alienability Provisions of ERISA Which

this Court Previously Held Creates no

Equitable Exception Even for Acts of

Criminal Misconduct.........0.sceecesess 3

1. ERISA’s Anti-Alienability Provision.. 5

2. ERISA’s Spousal Protection and

Waiver Provisions... 21.6 cenecscciets 10

B. The Sixth Circuit’s Judgment was Ren-

dered in a Manner That Conflicts with

Applicable Decisions of this Court Which

Clearly Establish That the Fifth Amend-

ment Prohibits a Sentencing Court From

Imposing an Enhanced Term of Imprison- |

ment on a Defendant Based Solely on Eco- }

nomic Inability to Make Immediate

Restate 6. one caesccacaseveeosaweusens 13

VE. CONDLOEION. (2.3 ca eee 19

Vil. APPIN. <j... vce App. i

ili

CITATIONS

CASES

Ablamis v. Roper, 937 F.2d 1450 (9th Cir. 1991)..... 6, 10

Barnett v. Hopper, 548 F.2d 550 (5th Cir. 1977)....... 16

Batson v. Batson, 769 S.W.2d 849 (Tenn. App. 1988) .... 11

Bearden v. Georgia, 461 U.S. 680 (1983)..... 4, 15, 16, 18

Frazier v. Jordan, 457 F.2d 726 (5th Cir. 1976) ..... 15, 18

Guidry v. Sheet Metal Workers National Pension

Fund, 493 U.S. 365 (1990)........... £3, 7,3) 16, 72

Heisler v. Jeep Corp., 807 F.2d 505 (6th Cir. 1986)..... 11

Hurwitz v. Sher, 982 F.2d 778 (2d Cir. 1992) ......... 10

Lincoln v. United States, 12 F.3d 132 (8th Cir. 1993) .... 16

Moore v. Phillip Morris Companies, Inc., 8 F.3d 335

eae ee opi ue wan dedbct ceases 10

Patterson v. Shumate, 504 U.S. 753 (1992) ............. 6

Pedro Enterprises v. Professional Administrators, 998

oe ) ne a ee 10

Retirement Fund Trust v. Franchise Tax Board, 909

Oe a tk ce be wececees 11

Shanbaum v. United States, 32 F.3d 180 (5th Cir.

RE ee a a ea gt ie Ghd deeds bees.ee 6

Shaw v. Delta Airlines, Inc., 463 U.S. 85 (1983)....... 12

State v. Pulasty, 642 A.2d 1392 (N.J. 1994)......... 9, 10

tame & Gord, 401 U.S. 39 (91971)... ie. 4, 15, 18

United States v. Derrick, 519 F.2d 1 (6th Cir. 1975) .... 13

United States v. Gaudet, 966 F.2d 959 (5th Cir. 1992)..... 9

CITATIONS — Continued

Page

United States v. Hines, 88 F.3d 661 (8th Cir. 1996) .... 16

United States v. Luster, 889 F.2d 1523 (6th Cir. 1989) .... 14

United States v. Parks, 89 F.3d 570 (9th Cir. 1996) .... 16

United States v. Sawaf, 74 F.3d 119 (6th Cir. 1996)..... 6

United States v. Smith, 47 F.3d 681 (4th Cir. 1995)

United States v. Voda, 994 F.2d 149 (1st Cir. 1993) ....14

Williams v. Illinois, 399 U.S. 235 (1970) .... 4, 15, 16, 18

MISCELLANEOUS

5th Amendment, United States Constitution

Ces ee Rep iet) Cem a Rea FA SS! A ae

29 UB.C. 3 a as es 2, 10, 11

39 USI 48 1... ae ee eee 2,5, 6

UPR 6 1A a a eee 5

S. Rep. No. 575, 98th Cong., 2d Sess. 12, reprinted

in 1984 U.S. Cong. & Ad. News 2547.......... 5 oe

Mansur, ERISA Preemption, Community Property,

and the Non-Employee Spouse: A Study in Con-

fused Equities, 30 HOUSTON L.REV. 1695 (1993) .... 13

Solomon, Beyond Preemption: Accomodation of the

Non-Employee Spouse Under ERISA, 31 HAST-

SMG Eas WER CR cis ae eh cas oe veda beh saoekal 12

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES C@URT OF APPEALS

FOR THE SIXTH CIRCUIT

Petitioner Charles R. Miller, Jr. respectfully prays that

a writ of certiorari issue to review the final judgment

entered by the United States Court of Appeals for the

Sixth Circuit on July 29, 1996, timely petition for rehear-

ing denied on September 5, 1996.

II. OPINIONS BELOW

The opinion of the United States Court of Appeals for

the Sixth Circuit is unreported. (App. 1) The order deny-

ing petitioner’s petition for rehearing with suggestion for

rehearing en banc is unreported. (App. 11) Both decisions

are reproduced in the appendix hereto.

Ill. JURISDICTION

The judgment of the United States Court of Appeals

for the Sixth Circuit was entered on July 29, 1996. The

order denying rehearing was entered on September 5,

1996. This petition for writ of certiorari was filed within

90 days of the denial of rehearing. This Court's jurisdic-

tion is invoked under 28 U.S.C. § 1254(1).

IV. CONSTITUTIONAL AND STATUTORY PROVI-

SIONS INVOLVED

Fifth Amendment:

No person shall be held to answer for a capital, or

otherwise infamous crime, unless on a presentment or

indictment of a Grand Jury, except in cases arising in the

land or naval forces, or in the Militia, when in actual

service in time of War or public danger; nor shall any

person be subject for the same offense twice put in jeop-

ardy of life or limb; nor shall be compelled in any crimi-

nal case to be a witness against himself; nor be deprived

of life, liberty, or property, without due process of law;

nor shall private property be taken for public use, with-

out just compensation.

The Employee Retirement Income Security Act of 1974 as

amended

29 U.S.C. § 1055(c):

(2) Each plan shall provide that an election[of

waiver] . . . shall not take effect unless -

(A)(i) the spouse of the participant consents in writing to

such election, (ii) such election (or form of benefits)

which may not be changed without spousal consent (or

the consent of the spouse expressly permits designation

by the participant without any requirement of further

consent by the spouse), and (iii) the spouse’s consent

acknowledges the effect of such election and is witnessed

by a plan representative or a notary public.

29 U.S.C. § 1056(d):

Benefits provided under the plan may not be assigned or

alienated.

V. STATEMENT OF THE CASE

On November 4, 1994 petitioner was convicted of

nine counts related to bank fraud of monies from the

Citizens Bank of Cookeville, Tennessee; 18 U.S.C. § 656

(Misapplication of Bank Funds); 18 U.S.C. § 1005 (False

Information on Bank Records); 18 U.S.C § 1344 (Aiding

and Abetting). United States v. Miller, No. 2-93-00018

(M.D. Tenn.).

On January 31, 1995 petitioner appeared before the

district court for a sentencing hearing. At hearing the

following colloquy ensued between the district judge,

petitioner and defense counsel:

And I’m going to bargain with you, Mr. Miller.

You show assets in an IRA of $462,520.76. You

show a bank account of $3,266.18. You owe

$32,000 in attorneys fees. You have unencumbered

assets totaling. . . . well, your total assets are

$551,000; your net worth is $518,000; Your

monthly cash flow is $5,682. Now, I’ve give (sic)

you a 15 year sentence. I’ll reduce that sentence

to 7 years provided you pay $100,000 within 10

days. If you don’t pay the $100,000, you get the

whole 15 years. You can make restitution now. You

have the assets to do it. If you don’t do it, your

full sentence goes. If you do it, I’ll reduce the

sentence to a total of 7 years.

(Emphasis added).

As petitioner did not in fact have a total of $100,000

in “unencumbered” assets available to him to imme-

diately satisfy the restitution “bargain” proposed by the

district court, he was sentenced to 8 additional years of

imprisonment. On February 2, 1995 petitioner filed a

timely notice of appeal to the United States Court of

Appeals for the Sixth Circuit under 28 U.S.C. § 1291.

On July 29, 1996 the Sixth Circuit affirmed the district

court’s sentencing order of 15 years even though the

record before the court established that petitioner could

not, at the time of sentencing, satisfy the district court's

$100,000 restitution/7 years imprisonment proposal with-

out drawing down his pension benefits covered by the

express anti-alienability and spousal waiver provisions of

the Employee Retirement Income Security Act of 1974

(ERISA). 29 U.S.C. §§ 1055(c) & 1056(d)(1). When peti-

tioner could not satisfy the restitution “bargain” the dis-

trict court enhanced his sentence to 15 years

imprisonment which violated both ERISA as interpreted

by this Court in Guidry v. Sheet Metal Workers National

Pension Fund, 493 U.S. 365 (1990) as well as the Fifth

Amendment of the United States Constitution which pro-

hibits the sentencing of a criminal defendant to an

enhanced term of incarceration based solely on economic

inability to pay a fine or restitution as firmly and clearly

established by the Court’s trilogy of Williams v. Illinois,

399 U.S. 235 (1970), Tate v. Short, 401 U.S. 395 (1971),

Bearden v. Georgia, 461 U.S. 660 (1983).

een

VI. REASONS FOR GRANTING THE WRIT

A. The Sixth Circuit’s Decision Directly Conflicts

With an Applicable Decision of the Fourth

Circuit and the Supreme Court of New Jersey

Which Hold that Requiring a Criminal Defen-

dant to Draw Down Pension Benefits in Order

to Satisfy Restitution Would Violate the

Express Anti-Alienability Provisions of ERISA

Which this Court Previously Held Creates no

Equitable Exception Even for Acts of Criminal

Misconduct.

1. ERISA’s Anti-Alienability Provision

On direct appeal to the Sixth Circuit the petitioner

argued that the lesser sentencing option of 7 years pre-

sented to him by the district court regarding the immedi-

ate payment of $100,000 in restitution constituted an

illegal sentence as it violated the anti-alienability provi-

sions of the Employee Retirement Income Security Act of

1974 as amended (ERISA), 29 U.S.C. § 1056(d)(1) and the

Court’s holding in Guidry v. Sheet Metal Workers National

Pension Fund, 493 U.S. 365 (1990). ERISA provides that

“each pension plan shall provide that benefits provided

under the plan may not be assigned or alienated.” 29

U.S.C. § 1056(d)(1). (Emphasis added). Binding regula-

tions promulgated by the Secretary of the Treasury fur-

ther prohibit the involuntary transfer of benefits from

qualified plans by requiring that “benefits provided by

the plan may not be anticipated, assigned, alienated, or

subject to attachment, garnishment, levy, execution or

other legal or equitable provisions.” 26 C.F.R.

§ 1.40(a)-13(b)(1). The only exceptions to the anti-aliena-

tion provisions of ERISA apply to taxes owed to the

United States, United States v. Sawaf, 74 F.3d 119 (6th Cir.

1996), Shanbaum v. United States, 32 F.3d 180 (5th Cir.

1994) and ERISA proceeds awarded to a spouse by a state

court that issues a “qualified domestic relations order” in

divorce proceedings for child support, alimony and divi-

sion of property. 26 U.S.C. §§ 401, 414 (Tax Code); 29

U.S.C. § 1056(d)(3) (ERISA). Ablamis v. Roper, 937 F.2d

1450, 1454 (9th Cir. 1991).

Under Guidry the Court held that the imposition of a

constructive trust on a convicted union official’s pension

benefits violated the anti-alienability provisions of

ERISA, 29 U.S.C. § 1056(d)(1) noting that it is not “appro-

priate to approve any generalized exception either for

employee malfeasance or for criminal misconduct to

ERISA’s prohibition on the assignment or alienation of

pension funds.” Guidry, supra at 376. (Emphasis added)

See also, Patterson v. Shumate, 504 U.S. 753 (1992) (denying

inclusion of ERISA pension benefits in a bankrupt estate).

The issue presented to the Court is an important

question of federal law regarding the appropriate inter-

play between congressional policy to protect pension

benefits under ERISA from alienation and the sentencing

power of the courts to impose monetary fines and restitu-

tion orders in criminal cases in order to compensate

victims of crime. In United States v. Smith, 47 F.3d 681 (4th

Cir. 1995), the defendant entered a plea agreement which

called for a 21 month sentence and a recommendation

that the sentencing court order restitution. The district

court conditioned acceptance of the plea agreement upon

defendant providing restitution from his ERISA plan by

requiring him to liquidate his pension fund in order to

make immediate restitution. Relying on Guidry the Smith

court reversed:

In the case at hand the Government attempted

to draw down his benefits due under the plans

as a lump sum and turn it over intact as restitu-

tion. Upon discovering that Smith was eligible

for lump sum benefits as they are paid to

him. ... The government should not be allowed

to do indirectly what it cannot do directly; it

cannot require Smith to turn over his lump sum

distribution, nor can require him to turn over

his benefits as they are paid to him directly.”

Understandably, there may be a natural distaste

for the result we reach here. The statute, how-

ever is clear.”, 493 U.S. at 377... . The restitution

order in this case clearly required Smith to relin-

quish his pension benefits. The district court

stated, “Well, he will be paying amounts, or

pension [sic] and, once those sums are in his

hands, it seems to me that they are subject to the

existing order of this court announced today.”

That approach is impermissible. Smith cannot be

forced to relinquish his ERISA benefits for resti-

tution.

Id. at 684.

Without reasoned analysis the Sixth Circuit sum-

marily disposed of this important question of law regard-

ing the power of a sentencing court to reach ERISA

pension benefits to satisfy a court imposed fine or restitu-

tion order in three short conclusory paragraphs even

though this Court held in Guidry that ERISA clearly cre-

ated no equitable exception for criminal misconduct:

Finally, we turn to defendant’s sentence, which

is based on statutes in effect prior to the enact-

ment of the Sentencing guidelines. The first

issue raised by defendant involves a bargain

proposed by the district court: if defendant paid

$100,000 in restitution within ten days, his sen-

tence would be reduced from fifteen to seven

years of imprisonment. According to defendant,

this proposal represented an illegal sentence

because the only possible source from which the

money could be obtained was his pension bene-

fits.

Before addressing the technical aspects of

this contention, we note that such bargains are

generally ill-advised because they discriminate in

favor of individuals with assets. While the dis-

trict court has an understandable interest in

helping the victims of crime to obtain restitu-

tion, in doing so it must not appear that one can

simply buy one’s way out of punishment that

would befall a less affluent defendant. This kind

of concern was one impetus behind adoption of

the Federal Sentencing Guidelines and we rec-

ognize that this type of scenario will not arise in

prosecutions of crimes committed since their

enactment.

Despite these policy reservations, the pro-

posal offered by the district court does not, con-

trary to defendant’s contentions, represent an

illegal sentence. Although the court referred to

defendant’s individual retirement account in

calculating his unencumbered assets it did not

specify that the restitution be paid from those

funds and thus the sentence does not run afoul

of either the anti-alienability provision of

ERISA, 29 U.S.C. § 1056(d)(1), or Guidry v. Sheet

Metal Workers National Pension Fund,

493 U.S. 365 (1990).

(App. 9) (Emphasis added)

The Sixth Circuit’s decision misapprehends both the

facts and the applicable provisions under ERISA. In

doing so it disregarded the Court’s holding in Guidry,

supra at 377, that shields ERISA pension funds from alien-

ation even for acts of criminal misconduct, and simply

ignored the Fourth Circuit’s well reasoned opinion in

United States v. Smith, supra. Accord, State v. Pulasty, 642

A.2d 1392, 1393-94 (N.J.1994) (ERISA anti-alienability

provision prohibits restitution drawn down from pro-

tected pension benefits). Cf., United States v. Gaudet, 966

F.2d 959, 963-64 (5th Cir. 1992) (Not plain error for district

court to order restitution from protected ERISA pension

benefits).

In rejecting petitioner’s anti-alienability argument

the Sixth Circuit placed undue reliance on the district

court's failure to “specify that the restitution be paid”

from his pension benefits funds, notwithstanding that the

source for retrieving the total amount required of the

petitioner to seal the “ill-advised” sentencing “bargain”,

could only be satisfied by drawing down his pension

benefits. The district court pre-conditioned the imposi-

tion of the lesser sentence on petitioner making an imme-

diate payment of $100,000 payment within ten days. The

district court noted that petitioner had “unencumbered”

assets totaling $551,000 of which $462,520.76 represented

funds in pension benefits. That left petitioner with only

$88,479.24 in non-pension fund assets to apply towards

10

the district court’s proposed $100,000 restitution “bar-

gain.” The district court had full disclosure of petitioner’s

assets from the presentence report, and was aware that

the only conceivable way he could satisfy the ’

ill-advised” bargain was by drawing down his pension

benefits, a sentencing approach that is “impermissible”

under Guidry as interpreted by the Fourth Circuit in

United States v. Smith and by the Supreme Court of New

Jersey in State v. Pulasty.

‘generally

2. ERISA’s Spousal Protection and Waiver

Provisions

The district court’s restitution proposal is clearly

impermissible under a separate provision of ERISA which

was not before the Court in Guidry. At the time of the

sentencing hearing petitioner only had $88,479.24 in

unencumbered assets available to him. Under ERISA, 29

U.S.C. § 1055(c) petitioner was not free to liquidate his

pension benefits to apply towards the $100,000 restitution

bargain proposed by the district court absent his wife’s

specific and valid written waiver of her federally pro-

tected legal interest in ERISA protected retirement bene-

fits. Moore v. Philip Morris Companies, Inc., 8 F.3d 335, 340

(6th Cir. 1993); Hurwitz v. Sher, 982 F.2d 778, 780-783 (2d

Cir. 1992); Pedro Enterprise v. Professional Administrators,

998 F.2d 491, 494 (7th Cir. 1993); Ablamis v. Roper, 937 F.2d

1450, 1454-1455 (9th Cir. 1991).

In 1984 Congress amended ERISA by enacting the

Retirement Equity Act (REA), Pub.Law 98-397, 98 Stat.

1426, to afford greater protection to women who worked

in the home and contributed significantly to the family’s

11

financial security by insuring that they would be pro-

vided the ability to obtain pension benefits upon their

husband’s death or divorce. Pension Equity For Women:

Hearings on H.R. 2100 before the Sub.Comm. on Labor-

Management Relations of the Committee on Education

and Labor, 98th Cong., Ist Sess. 26 (1983). See, S. Rep. No.

575, 98th Cong., 2d Sess. 12, reprinted in 1984 U.S. Cong.

& Ad. News 2547, 2558. Heisler v. Jeep Corp., 807 F.2d 505,

509 (6th Cir. 1986) (ERISA amended to eliminate ineq-

uities “by providing for automatic survivor benefits to

spouses of vested participants in order to better afford

protection to women dependent on their husband’s earn-

ings and at the mercy of death and divorce”).

REA specifically affords protection to spouses by

requring pension benefit plans to provide for automatic

survivor benefits. Once a participant becomes vested

under the benefit plan, and has earned a vested non-

forfeitable right to any portion of the accrued benefit, the

spouse is assured of receiving a survivor’s annuity on the

participant’s death, at least 50% of the decedent’s benefit.

The spouse’s right to a survivor’s annuity may be waived

only if the non-participant agrees in writing which must

be notarized or executed in the presence of the plan

administrator. 29 U.S.C. § 1055(c).

Furthermore, under Tennessee law pension benefits

are not “owned” by a married retirement plan participant

as separate property but are jointly owned by a husband

and wife as part of the marital estate. Batson v. Batson, 769

S.W.2d 849, 857 (Tenn.App.1988). Nor is Tennessee law

preempted by REA as it is a “state law of general applica-

tion with only a ‘tenuous’ effect on an ERISA plan.”

Retirement Fund Trust v. Franchise Tax Bd., 909 F.2d 1266,

12

1274 (9th Cir. 1990) (quoting Shaw v. Delta Airlines, Inc.,

463 U.S. 85, 100 n.21 (1983).

At the time the sentencing “bargain” was proposed

by the district court, petitioner did not have the unilateral

power under ERISA and Tennessee law to draw down

monies from his pension benefits, absent his wife’s writ-

ten waiver and consent. Congress enacted REA to rec-

ognize “the statutes of marriage as an economic

partnership” and to “improve the delivery of retirement

benefits and provide for greater equity under private

pension plans for workers and their spouses and depen-

dents.” S.REP. No. 575 at 1, reprinted in 1984 U.S.Cong. &

Admin. News at 2547. The “equity” concerns embodied

in REA were to insure and safeguard the provision of

benefits to spouses and dependents reliant upon the

employee for support which in most cases is the single

largest asset of the family. Solomon, Beyond Preemption:

Accommodation of the Non-Employee Spouse Under ERISA,

31 HASTINGS L.J. 1021, 1021 (1980).

It is clear that the petitioner cannot be punished

further by having to serve an additional 8 years of incar-

ceration solely for a legislative enactment of a considered

policy choice expressly mandated by Congress designed

to protect spouses from the erosion of their marital and

federally protected interest in ultimately receiving ERISA

pension benefits. ERISA unambiguously reflects congres-

sional policy to safeguard pension income for plan partic-

ipants and their dependents, even though it prevents

third parties such as victims of crime from securing resti-

tution for the harms done to them. Guidry, supra at 376. To

permit a criminal court to reach protected pension bene-

fits as was attempted here would defeat congressional

13

policy to ensure that spouses and dependents of plan

participants share in pension benefits accumulated dur-

ing the marriage. See generally, Mansur, ERISA Preemption,

Community Property, and the Non-Employee Spouse: A Study

in Confused Equities, 30 HOUSTON L. REV. 1695,

1720-1727 (1993).

Accordingly, the harsher sentence imposed by the

district court must be vacated and remanded for resen-

tencing as the relevant information before the sentencing

court was applied without due regard for the factors

appropriate to the proposed sentencing bargain by

“improper considerations . . . in determining the sen-

tence.” United States v. Derrick, 519 F.2d 1, 3 (6th Cir.

1975).

B. The Sixth Circuit’s Judgment was Rendered in

a Manner that Conflicts with Applicable Deci-

sions of this Court Which Prohibit a Sentenc-

ing Court Under the Fifth Amendment from

Imposing an Enhanced Term of Imprisonment

on a Defendant Based Solely on his Inability

to Make Immediate Restitution.

The enhanced sentence of 8 additional years

imprisonment actually imposed by the district court is

unconstitutional as petitioner did not have sufficient

funds available to him at the time of sentencing to imme-

diately satisfy the $100,000 restitution “bargain” as the

only possible source of the $100,000 was $88,479.24 in

unencumbered assets with the remaining $11,520.76

shortfall coming from his pension benefits. While reject-

ing petitioner’s ERISA argument the Sixth Circuit none-

theless squarely framed the constitutional issue before

14

this Court by observing “that such bargains are generally

ill-advised because they discriminate in favor of individuals

with assets ...” it nonetheless held that “the [district

court] . . . did not specify that restitution be paid from

those [pension] funds. ...” (App. __) (Emphasis added).

It is true that the district court “did not specify that

restitution” was to be made from petitioner’s pension

funds. Nonetheless, the pre-sentence report reviewed by

the district court when it presented the sentencing “bar-

gain” to the petitioner in open court, established that he

lacked sufficient assets available to him to immediately

and fully pay the $100,000 in restitution in exchange for

an 8 year lesser term of imprisonment unless the peti-

tioner was to draw down pension fund assets which

under ERISA he could not do absent his wife’s written

consent See, United States v. Voda, 994 F.2d 149, 155 (1st

Cir. 1993) (a defendant can rely on the PSR to establish

his inability to pay).

Thus, the $100,000 restitution “bargain” offered to

the petitioner by the district court discriminates against

those class of convicted defendants with insufficient

resources “to simply buy one’s way out [of prison] that

would befall a less affluent defendant.” (App. 9). Beyond

the Sixth Circuit’s expressed “policy reservation” dis-

crimination based on economic status clearly implicates

the Due Process Clause of the Fifth Amendment. While

economic disadvantage is not a suspect classification,

[United States v. Luster, 889 F.2d 1523, 1527 (6th Cir.

1989)], this Court has consistently instructed, in a clear

line of unbroken decisions, sentencing courts to “squint

hard at any [state action] that deprives a man of his

liberty, his right to remain free” based solely on one’s

15

inability to pay a fine. Williams v. Illinois, 399 U.S. 263, 263

(1970).

The Court’s trilogy of Williams v. Illinois, supra, Tate v.

Short, 401 U.S. 395 (1971) and Bearden v. Georgia, 461 U.S.

660 (1983) when applied to this case require this Court to

invalidate the enhanced sentence imposed by the district

court as violative of the Fifth Amendment. In Williams v.

Illinois, supra at 263 the Court held that the Equal Protec-

tion Clause prohibits the state from incarcerating a defen-

dant for a longer period of imprisonment because of his

inability to pay by converting a fine into imprisonment,

thereby working an “invidious discrimination on the

basis of economic status.” Williams is followed by Tate v.

Short, supra at 397-398, where the Court held that a sen-

tencing court could not subject a defendant to imprison-

ment when the sentencing statute provided that a fine

was the only permissible penalty for those individuals

able to pay. The Court held that this sentencing practice

constituted the same invidious discrimination as the

unconstitutional defect in “Williams also adheres in jailing

an indigent for inability to pay a fine.” Id. Finally in Bearden

v. Georgia, supra at 672 the Court held that it was funda-

mentally unfair under the Due Process Clause for the

state to revoke a defendant's probation and imprison him

based solely on his non-willful failure to pay a fine or restitu-

tion.

Although the precise factual backdrop presented

herein has never been considered by this Court, the Fifth

Circuit invalidated a sentencing statute that required a

defendant to pay a fine immediately or suffer incarcera-

tion. Frazier v. Jordan, 457 F.2d 726, 728 (5th Cir. 1976). The

Frazier court held a sentencing statute unconstitutional as

16

it creates two disparately treated classes: those who [can]

satisfy a fine immediately and upon its levy, and those

who can only pay over a period of time. Id. See also,

Barnett v. Hopper, 548 F.2d 550, 553 (5th Cir. 1977), vacated

as moot, 439 U.S. 1041 (1978) (once court determines that

incarceration is inappropriate and that a fine would suf-

fice, imprisonment could not then be imposed based on

inability to pay that fine).

Recently, the Ninth Circuit held that a U.S. Sentenc-

ing Guideline as applied to the sentence imposed on the

defendant violated the “fundamental fairness guaranteed

by the Due Process Clause of the Fifth Amendment.”

United States v. Parks, 89 F.3d 570 (9th Cir. 1996). In Parks,

the district court added an additional eight months to his

sentence under the Guidelines because he was still under

sentence of a legal financial obligation of a state court to

pay a fine at the time he committed the federal offense.

The Parks court vacated the sentence under Williams, Tate

and Bearden as the defendant “may be receiving an addi-

tional eight months on this sentence due to poverty. Such

a result is anathema to the Constitution.” Id. at 573. See

also, United States v. Hines, 88 F.3d 661, 664 n.4 (8th Cir.

1996) (to impose as a condition of supervised release the

immediate payment of a fine if the defendant’s ability to

pay is based upon post-supervised release income vio-

lates the Sentencing Guidelines and Bearden v. Georgia);

Lincoln v. United States, 12 F.3d 132, 133 (8th Cir. 1993)

(Bearden constitutional safeguards protect indigent defen-

dant at the time enforcement proceedings as individual

cannot be punished by incarceration based on inability to

pay fine).

17

The financial information contained in petitioner’s

pre-sentence report reviewed by the district court estab-

lishes that the proposed sentencing “bargain” would

have required the petitioner to spend down his pension

benefits in order for him to turn over $100,000 in restitu-

tion within 10 days of sentencing as pre-conditioned by

the court. Without more, the Sixth Circuit recognized that

such sentencing bargains are “generally ill-advised”

because they discriminate in favor of defendants with

sufficient assets to meet an immediate restitution order.

While the sentencing “bargain” is certainly “ill advised”,

the enhanced term of imprisonment from 7 to 15 years

actually imposed by the district court was based solely on

petitioner’s inability to pay $100,000 in restitution within

10 days of sentencing and for no other reason, and is

therefore unconstitutional under the Fifth Amendment.

Once the district court made a judicial determination that

a term of 7 years of imprisonment plus restitution was an

appropriate alternative sentence, it could not, consistent

with fundamental fairness and equal protection as

embodied in the Fifth Amendment, impose the sentence

of an additional 8 years when petitioner lacked sufficient

resources to make immediate restitution within 10 days.

Petitioner’s inability to pay the full amount forthwith or

suffer an enhanced term of incarceration of 8 additional

years is anathema to the Constitution as it is clear that

petitioner’s economic status was the sole basis for the

sentencing court’s imposition of the 15 year term of

imprisonment.

Finally, it should not go unnoticed by this Court that

at the time of his sentencing the petitioner had a fixed

“monthly cash flow of $5,628.” With that amount of

18

money available each month combined with other non-

ERISA assets belonging to the petitioner, it is evident that

the sentencing court had a number of other available

methods to it for requiring restitution as an alternative to

the immediate payment of $100,000 in exchange for a

lesser period of imprisonment. As noted by the Fifth

Circuit in Frazier:

[w]e hold that the penal and deterrent effect

of the immediate fine may be achieved through

the alternative device of installment payments,

appropriately calculated and perhaps through

other measures which the {sentencing courts] in

their wisdom, may devise. Imprisonment of

those who cannot pay their fines immediately is

not necessary to promote the state’s compelling

interest in effective punishment and deterrence

of crime.

457 F.2d at 730.

The constitutional defects condemned in Williams,

Tate and Bearden are apparent here as this petitioner suf-

fers from invidious discrimination in violation of the

Fifth Amendment where a wealthier defendant could

have made full restitution. The district court’s sentence of

8 additional years of imprisonment was imposed on peti-

tioner because he did not have $11,520.76 in available

unencumbered assets to satisfy the $100,000 restitution

proposal, a result clearly condemned by Williams and its

progeny. From these decisions several fundamental prin-

ciples emerge: courts must exercise greater sentencing

scrutiny that affect indigents in a manner which does not

discriminate and punish based solely on inability to pay;

19

any disparate treatment in sentencing cannot be arbi-

trarily imposed solely on economic status, particularly

where adequate alternatives to achieve the same objective

are readily available. The enhanced sentence of 8 addition

years imposed on petitioner does violence to these princi-

ples.

VII. CONCLUSION

For the foregoing reasons the petitioner prays that a

writ of certiorari issue to review the decision of the Sixth

Circuit and vacate the decision below and remand for

resentencing in a manner consistent with ERISA and the

Due Process Clause of the Fifth Amendment.

Respectfully submitted,

CHARLES R. Ray

Ropert S. Catz

211 Third Avenue North

Nashville, TN 37201

(615) 256-2111

Counsel for Petitioner

October 17, 1996

App. i

Page

Vill. APPENDIX

1. Opinion, Miller v. United States, No. 95-5298 (6th

ths SOM SY OU, SUNN cons kee de ore okey App. 1

2. Order Denying Petition for Rehearing with Sug-

gestion for Rehearing En Banc, United States v.

Miller, No. 95-5298 (6th Cir. September 5,

Re RAK eA ak KAI VL a ee App. 11

App. 1

NOT RECOMMENDED FOR FULL-TEXT

PUBLICATION

Sixth Circuit Rule 24 limits citation to specific situations.

Please see Rule 24 before citing in a proceeding in a court

in the Sixth Circuit. If cited, a copy must be served on

other parties and the Court.

This notice is to be prominently displayed if this decision

is reproduced.

NOT RECOMMENDED FOR PUBLICATION

No. 95-5298

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

UNITED STATES OF ) ON APPEAL FROM THE

AMERICA, UNITED STATES

DISTRICT COURT FOR

THE MIDDLE DISTRICT

)

Plaintiff-Appellee,

v. ) OF TENNESSEE

)

)

)

CHARLES R. MILLER, JR. OPINION

Defendant-Appellant. (Filed July 29, 1996)

BEFORE: NORRIS and SUHRHEINRICH, Circuit

Judges; WELLS, District Judge.*

PER CURIAM. Defendant, Charles R. Miller, Jr., chal-

lenges his conviction for various counts related to bank

fraud. After careful consideration of both the record and

the arguments advanced by defendant, we conclude that

* The Honorable Lesley Brooks Wells, United States District

Judge for the Northern District of Ohio, sitting by designation.

App. 2

his contentions of error are misplaced. We therefore

affirm both his conviction and his sentence.

I.

The issues raised in this appeal do not require a

recitation of the facts. In the few instances where back-

ground information is necessary, it will be supplied in the

context of our discussion of the legal issue.

1. Pre-Indictment Delay

Defendant first contends that his Fifth Amendment

right to due process was compromised by the seven years

that elapsed between the commission of the alleged

crimes and the return of the indictment.

The Supreme Court has recognized that the Due Pro-

cess Clause of the Fifth Amendment plays but a limited

role in protecting against pre-indictment delay. United

States v. Lovasco, 431 U.S. 783, 789 (1977). This circuit has

read Lovasco to require a two-part showing by a defen-

dant alleging that such a delay adversely affected his

right to due process. First, the delay must have caused

substantial prejudice to his right to a fair trial. Second, he

must demonstrate that the government intentionally used

the delay to gain a tactical advantage. United States v.

Brown, 959 F.2d 63, 66 (6th Cir. 1992).

Defendant recognizes that his burden is substantial

and therefore urges us to modify the second prong of the

Brown test to include negligent conduct on the part of the

government in bringing an indictment. See United States v.

Copley, 774 F.2d 728, 730 n. 2 (6th Cir. 1985) (dictum), cert.

App. 3

denied, 475 U.S. 1049 (1986). Defendant’s argument is

unpersuasive. As the Court recognized in Lovasco,

encouraging a rush to indictment would have the delete-

rious effect of increasing the likelihood of unwarranted

charges being filed and would add to the time during

which defendants stand accused but untried. 431 U.S. at

791. Moreover, such a requirement would make it overly

difficult for prosecutors to develop cases, such as the one

now before us, that involve more than one participant.

431 U.S. at 792-93. Thus, both the government and inno-

cent defendants stand to lose substantially if the prosecu-

tion feels that it must seek an indictment at the first

opportunity or risk having the charges dismissed as stale.

As Lovasco makes clear, the applicable statutes of limita-

tion remain a defendant’s primary protection against pre-

indictment delay. 431 U.S. at 789.

Miller maintains that he suffered actual prejudice due

to a fading memory, a missing witness, loss of crucial

documents, and deposition testimony that he gave in the

interim. As we have previously observed, dimming mem-

ory alone is insufficient to establish prejudice. See United

States v. Duncan, 763 F.2d 220, 222 (6th Cir. 1985). More-

over, the district court, which had an opportunity to

observe defendant’s testimony, found that “the memory

of witnesses was not materially impaired.”

As for the missing documents and absent witness,

defendant has failed to show how their absence preju-

diced his cause. Not only do they go to tangential issues,

it appears from the record that the relevant information

could have been established by other means.

App. 4

Finally, though we need not reach the second prong

of the Brown test, we note that defendant has not even

alleged that the government engaged in use of the pre-

indictment delay for tactical reasons, which is presum-

ably why he urged this court to adopt the less onerous

negligence standard.

In sum, we hold that defendant has failed to establish

either prejudice or impermissible motive on the part of

the government and thus failed to make out a viable due

process claim.

2. Admissibility of an Audiotape

Defendant next takes issue with the district court’s

decision to admit into evidence a tape recording made by

John Meatte, an indicted co-conspirator who pleaded

guilty prior to defendant's trial. During the period when

the illegal activity allegedly occurred, Miller and Meatte

acted as presidents of Citizens Bank and Commonwealth

Industries, Inc., respectively. The indictment charges that

the two men, along with other confederates, engaged in a

prolonged conspiracy to defraud Citizens Bank.

Without revealing the fact, Meatte made the tape at

issue while talking to defendant on the telephone. It

consists of approximately one minute of a thirty minute

conversation. Defendant filed a motion in limine to

exclude it as untrustworthy and violative of 18 U.S.C.

§ 2511(2)(d). Intercepting communications “for the pur-

pose of committing any criminal or tortious act” violates

§ 2511(2)(d), and evidence of such an interception is not

admissible under 18 U.S.C. § 2515.

App. 5

During the evidentiary hearing held to resolve the

matter, Meatte testified that he made the recording not as

blackmail but as “insurance” regarding the terms of cer-

tain promised loans to Commonwealth. He went on to

explain that the details of the loans were complicated and

that a primary reason for the recording was so that he

could make sure that the loans were made out in the

correct amounts.

This court has observed that “when the purpose of an

interception is to make or preserve an accurate record of

a conversation in order to prevent future distortions by a

participant, the interception is legal.” United States v.

Underhill, 813 F.2d 105, 110 (6th Cir.), cert. denied, 482 U.S.

906 (1987). We review the district court’s determination

that a proffered tape was made for a legitimate purpose

for clear error. Traficant v. Commissioner, 884 F.2d 258, 266°

(6th Cir. 1989). Furthermore, the burden rests with the

party seeking to exclude the tape to prove that it was

made for an impermissible purpose. Id. In this case, the

testimony at the hearing supports a view that, while

Meatte may have sought to protect his own interest, he

did not do so with either criminal or tortious intent.!

We likewise reject defendant's contention that the

district court abused its discretion in admitting the tape

1 We note in passing that, had the tape been made in

furtherance of the conspiracy to defraud, defendant would not,

as a co-conspirator, be entitled to invoke the protection of 18

U.S.C. § 2511(2)(d). Underhill, 813 F.2d at 112; moreover, this

circuit recognizes a “clean hands” exception to 18 U.S.C. § 2515.

United States v. Murdock, 63 F.3d 1391, 1404 (6th Cir. 1995), cert.

denied, 116 S. Ct. 1672 (1996).

App. 6

because it lacked the proper indicia of trustworthiness.

See United States v. Scarborough, 43 F.3d 1021, 1024 (6th

Cir. 1994); United States v. West, 948 F.2d 1042, 1044 (6th

Cir. 1991) (declaring taped conversations admissible

unless incomprehensible portions render them untrust-

worthy as a whole), cert. denied, 502 U.S. 1109 (1992). In

this case, defendant’s argument is not that the tape is

inaccurate but that it does not contain the entire conver-

sation. Meatte testified as to how and why he made the

recording. Given that the tape represented an accurate,

unedited recording of that brief portion of their conversa-

tion, we cannot conclude that the trial court abused its

discretion in permitting its introduction.

3. Jury Instruction

Defendant requested that the district court charge the

jury with the entire language of 18 U.S.C. § 1005. The

court declined because the statute includes four ways in

which an individual can violate the statute. In this case,

defendant was charged with making or causing false

information to be recorded on the books and records of

Citizens Bank, a violation that cannot be sanitized by the

approval of the board of directors.

We affirm the reasoning of the district court on this

issue.

4. Allen Charge

It is beyond dispute that this case was closely con-

tested. An earlier trial ended in a hung jury; and, after

two days, the jury in the second trial sent a note to the

App. 7

court that it was deadlocked. In response, the district

court chose to give an Allen charge.

Defendant does not quarrel with the substance of the

charge and also concedes that the decision to give such

an instruction rests within the sound discretion of the

trial court. Rather, he argues that the timing resulted in

coercion, coming as it did after ten days of trial and two

days of deliberation.

While we have cautioned courts contemplating an

Allen charge to take heed that the instruction not be

coercive, see, e.g., In re Ford, 987 F.2d 334, 340 (6th Cir.),

cert. denied, 506 U.S. 862 (1992), we have never held that

the mere timing of an otherwise properly worded charge

can render it per se coercive. In this case, the Allen charge

tracked language explicitly approved by this court. See

United States v. Clark, 988 F.2d 1459, 1468 (6th Cir.), cert.

denied, 114 S. Ct. 105 (1993). Furthermore, we find defen-

dant’s related contention that the district court interjected

itself into the trial in such a way as to aid the government

utterly unsubstantiated by our review of the record.

5. Supplemental Instructions

During the second day of deliberations, the jury sent

a request to the court: “Please provide to the jurors a

clearer explanation of the role ‘intent’ plays in our deci-

sion making process. Is intent to be the main point or the

method by which he carried out the transactions being

considered.”

In response the trial judge reread the jury the ele-

ments of bank fraud, misapplication of bank funds, and

App. 8

false entry, as well as the standard Sixth Circuit instruc-

tion on state of mind. The court declined defense coun-

sel’s request to repeat the good faith portion of the

instruction, noting that the jury had already been given

the charge and could reread it.

This court reviews the manner in which the district

court responds to jury questions for abuse of discretion.

United States v. August, 984 F.2d 705, 712 (6th Cir. 1992),

cert. denied, 114 S. Ct. 158 (1993). We have observed that,

“When a jury indicates confusion about an important

legal issue, it is not sufficient for the court to rely on more

general statements in its prior charge.” United States v.

Nunez, 889 F.2d 1564, 1568 (6th Cir. 1989).

However, defendant does not argue that the court

should have given the jury a more precise definition of

intent. Rather, he simply believes that all of the earlier

instructions, including the good faith instruction, should

have been given. In our view, the instructions repeated by

the district court properly responded to the question

posed by the jury and did not emphasize the govern-

ment’s case to defendant’s prejudice.

6. Sentencing

Finally, we turn to defendant’s sentence, which is

based on statutes in effect prior to the enactment of the

Sentencing Guidelines. The first issue raised by defen-

dant involves a bargain proposed by the district court: if

defendant paid $100,000 in restitution within ten days,

his sentence would be reduced from fifteen to seven years

of imprisonment. According to defendant, this proposal

represented an illegal sentence because the only possible

App. 9

source from which the money could be obtained was his

pension benefits.

Before addressing the technical aspects of this con-

tention, we note that such bargains are generally ill-

advised because they discriminate in favor of individuals

with assets. While the district court has an understand-

able interest in helping the victims of crime to obtain

restitution, in doing so it must not appear that one can

simply buy one’s way out of punishment that would

befall a less affluent defendant. This kind of concern was

one impetus behind adoption of the federal Sentencing

Guidelines and we recognize that this type of scenario

will not arise in prosecutions of crimes committed since

their enactment.

Despite these policy reservations, the proposal

offered by the district court does not, contrary to defen-

dant’s contentions, represent an illegal sentence.

Although the court referred to defendant's individual

retirement account in calculating his unencumbered

assets, it did not specify that the restitution be paid from

those funds and thus the sentence does not run afoul of

either the anti-alienability provision of ERISA, 29 U.S.C.

§ 1056(d)(1), or Guidry ~. Sheet Metal Workers Nat'l Pension

Fund, 493 U.S. 365 (1990).

The second contention of error involves a release

from Citizens Bank to defendant, his wife, and the trustee

of his bankruptcy estate, renouncing all claims against

them. Defendant raised the issue by way of a Fed. R.

Crim. P. 35(c) motion to correct an illegal sentence, argu-

ing that the court’s order of restitution to Citizens Bank

iia i a

:

5

App. 10

in the amount of $8,881,763.69 was illegal in light of the

release.

While we agree with the parties that the district court

had jurisdiction to entertain the motion, remand is not

required because it is clear from the record that, even had

the district court considered the release, it could still have

imposed the order of restitution. Simply put, an order of

restitution imposed in the wake of a criminal conviction

does more than simply satisfy a monetary dispute

between two parties: it also contains a punitive element

designed to deter such conduct. See generally Kelly v.

Robinson, 479 U.S. 36, 52-53 (1986). Furthermore, there is

nothing in the record to indicate that defendant paid any

money to Citizens Bank in exchange for the release and

thus double recovery - in the unlikely event that the

entire $8,881,763.69 is ever repaid — is not at issue.

For the foregoing reasons, the conviction and sen-

tence are hereby affirmed.

oth Moe Sates

/

App. 11

No. 95-5298

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

UNITED STATES OF AMERICA, )

Plaintiff-Appellee,

) ORDER

= ) (Filed

CHARLES R. MILLER, JR., 7 Sept. 5, 1996)

Defendant-Appellant. )

BEFORE: NORRIS and SUHRHEINRICH, Circuit

Judges; and WELLS,’ District Judge.

The court having received a petition for rehearing en

banc, and the petition having been circulated not only to

the original panel members but also to all other active

judges of this court, and no judge of this court having

requested a vote on the suggestion for rehearing en banc,

the petition for rehearing has been referred to the original

panel.

The panel has further reviewed the petition for

rehearing and concludes that the issues raised in the

petition were fully considered upon the original submis-

sion and decision of the case. Accordingly, the petition is

denied.

ENTERED BY ORDER OF THE COURT

/s/ Leonard Green

—_ Leonard Green, Clerk

* Hon. Lesley Brooks Wells, United States District Judge for

the Northern District of Ohio, sitting by designation.