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United States v. Jones

United States Court of Appeals, Seventh Circuit

December 21, 2016

United States of America, Plaintiff-Appellee,
Bruce Jones, Defendant-Appellant.

          Argued September 8, 2016

          Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. l:12-cr-00072-TWP-DML-l - Tanya Walton Pratt, Judge.

          Before Wood, Chief Judge, and Kanne and Hamilton, Circuit Judges.

          Hamilton, Circuit Judge.

          This appeal in a criminal case presents an unusual combination of offenses: health care fraud and unlawful possession of firearms and ammunition. Defendant Bruce Jones was both a family counselor and a firearms enthusiast who collected dozens of guns and thousands of rounds of ammunition. Jones had a prior felony conviction, so it was a federal crime for him to possess firearms and ammunition. The FBI discovered these weapons while investigating Jones for allegedly fraudulent health care billing. A federal grand jury charged Jones with three counts of possessing firearms and ammunition in violation of 18 U.S.C. § 922(g)(1) and one count of health care fraud in violation of 18 U.S.C. § 1347. The district court bifurcated the case for separate trials on the firearms charges and the health care fraud charge. The juries convicted Jones on all counts. The district court sentenced Jones to 90 months in prison on his fraud conviction and 100 months on each felon-in-possession conviction, with all terms to be served concurrently.

         Jones appeals and raises four distinct issues. First, he contends that the ex parte pretrial restraint of certain life insurance policies violated his Fifth and Sixth Amendment rights. Second, he argues that the district court erroneously denied his request for new counsel during his fraud trial. Third, he contends that he was denied the opportunity to testify at his fraud trial. Fourth, he challenges the court's sentencing guideline computation. We affirm in all respects.

         I. Pretrial Restraint of Assets

         Jones first challenges the pretrial restraint of six life insurance policies titled in his name. The government listed these policies in a forfeiture allegation in the controlling, second superseding indictment. On April 15, 2014, following Jones's conviction on the felon-in-possession charges but before his fraud trial, the government filed an ex parte application under 28 U.S.C. § 2461(c) and 21 U.S.C. § 853(e)(1)(A) to restrain those policies in anticipation of post-conviction forfeiture. The district court entered a restraining order that same day. Jones contends that the pretrial restraint violated his Sixth Amendment right to hire counsel of choice and his Fifth Amendment right to due process of law.

         Ordinarily, we review de novo questions of constitutional law. See Anderson v. Milwaukee County, 433 F.3d 975, 978 (7th Cir. 2006). But there is a wrinkle here: Jones did not object at the time that his life insurance policies were restrained. Nor did he raise an objection at any point during the district court proceedings even though the restraining order invited him to "petition for a pre-trial hearing if he can demonstrate that he has no other assets available with which to retain counsel" or if he could show that the restrained policies were "not subject to forfeiture." Where a defendant fails to lodge a timely objection before the district court, we review only for plain error, assuming the defendant has not actually waived the point. See United States v. Bickart, 825 F.3d 832, 837 (7th Cir. 2016) ("To demonstrate plain error, defendants must show: (1) an error or defect, (2) that is clear or obvious, (3) affecting the defendants' substantial rights. Even then, we have discretion to correct the error if it seriously impugns the fairness, integrity, or public reputation of the judicial proceedings, but we need not do so.") (citations omitted).

         To excuse his failure to raise this issue in the district court, Jones argues that the legal landscape shifted while his appeal was pending, creating an analytical path that was not available to him in 2014. Specifically, Jones points to Luis v. United States, 578 U.S. -, 136 S.Ct. 1083 (2016). In Luis, the Supreme Court held that the "pretrial restraint of legitimate, untainted assets needed to retain counsel of choice violates the Sixth Amendment." Id. at 1088 (plurality opinion) (emphasis added); see also id. at 1096 (Thomas, J., concurring in the judg- merit) (agreeing with plurality that a "pretrial freeze of untainted assets violates a criminal defendant's Sixth Amendment right to counsel of choice"). In so holding, the plurality distinguished two earlier cases in which the Court had found no Sixth Amendment defect in forfeiture proceedings. Id. at 1090-91 (plurality opinion). Compare Caplin & Drysdale, Chtd. v. United States, 491 U.S. 617 (1989) (post-conviction forfeiture that deprived defendant of funds he would have used to pay attorney did not violate Sixth Amendment because, pursuant to statute, title to funds vested in United States upon defendant's commission of crime), with United States v. Monsanto, 491 U.S. 600 (1989) (pretrial restraint that deprived defendant of tainted assets traceable to crime likewise did not violate Sixth Amendment).

         In Luis, unlike Caplin & Drysdale and Monsanto, the restraining order prevented the defendant from using her own untainted funds to hire counsel. Luis, 136 S.Ct. at 1090 (plurality opinion). The government's interest in Luis's untainted funds was similar to that of an unsecured creditor, who "someday might collect from a debtor's general assets" but "cannot be said to have any present claim to, or interest in, the debtor's property." Id. at 1092. Citing Luis, Jones argues that the government now bears the burden to demonstrate at the outset that the assets it wants to restrain are tainted.

         Jones may read Luis too expansively. Luis says nothing about timing or burden shifting. On the contrary, the government in that case conceded that the district court had restrained untainted funds. Id. at 1088. But even assuming without deciding that Jones's interpretation of Luis is correct, that case would have offered Jones at best an additional line of at- tack on the district court's restraining order. Under long-settled circuit law, the pretrial restraint of a defendant's assets "without affording the defendant an immediate, postrestraint, adversary hearing at which the government is required to prove the likelihood that the restrained assets are subject to forfeiture violates the due process clause to the extent that it actually impinges on the defendant's qualified sixth amendment right to counsel of choice." United States v. Moya-Gomez, 860 F.2d 706, 731 (7th Cir. 1988).[1] If the district court finds that the defendant has insufficient alternative assets with which to pay counsel, but the government fails to justify its retention of all the frozen assets, "then the court must order the release of funds in an amount necessary to pay reasonable attorneys' fees for counsel of sufficient skill and experience to handle the particular case." Id. at 730.

         Assuming that Jones's life insurance policies were not tainted by his fraud, and assuming further that he genuinely needed those assets to retain counsel, we cannot understand why he failed to invoke his right to an immediate hearing under Moya-Gomez. Conversely, if the life insurance policies were tainted, or if Jones had sufficient alternative assets available to him, then Luis would not have strengthened his litigating position. Either way, we find no plain error.

         In addition to a due process argument under Moya-Gomez, Jones could have presented a statutory argument based on the language of 21 U.S.C. § 853(e). The overwhelming majority of courts to consider the question have held that § 853(e) "conveys Congress's intent to authorize the restraint of tainted assets prior to trial, but not the restraint of substitute assets." United States v. Parrett, 530 F.3d 422, 431 (6th Cir. 2008); see also, e.g., United States v. Jarvis, 499 F.3d 1196, 1204 (10th Cir. 2007) ("[A]ll but one federal court of appeals to address the issue has determined the legislative silence regarding substitute property in § 853(e) precludes pre-conviction restraint of substitute property.").

         Jones points out that the government's ex parte motion asserted there was probable cause to believe that his life insurance premiums and contributions "constitute or derived from proceeds obtained from the health care fraud, or represent a substitute asset, and are therefore subject to forfeiture." Jones also notes that the government cited In re Billman, 915 F.2d 916, 921 (4th Cir. 1990), which held that a similar forfeiture statute, 18 U.S.C. § 1963, authorizes pretrial restraint of substitute assets. But we have never held as much. No controlling precedent barred Jones from asking the district court to construe § 853(e) as applying only to tainted assets, an argument that at least one district court in this circuit has accepted. See United States v. Toran, No. 13-30072, 2015 WL 1968698, at *7 (CD. 111. May 1, 2015).

         Thus, Jones could have advanced a constitutional argument, a statutory argument, or both in response to the re- straining order. Any one of these approaches could have delivered the same relief he believes he might have obtained under Luis. Jones forfeited his challenge to the restraining order by failing to object in the district court, so we review that order only for plain error.

         We find no plain error. Nothing in the record tends to show that the life insurance policies were not tainted by Jones's fraud. Further, it is unclear whether Jones even needed the life insurance policies to retain counsel.[2] A presentence investigation report prepared in December 2013 estimated Jones's net worth (exclusive of the insurance policies) at over half a million dollars. Granted, most of that net worth was attributable to real estate, and the government apparently filed notices of lis pendens against some of Jones's properties. But a lis pendens notice does not deprive real estate of all marketable value; it simply places successors in interest on notice of a potential competing claim. Further, it appears that at least two of the lis pendens notices were lifted in August 2014, well in advance of Jones's fraud trial.

         In any event, because Jones never objected to the restraint on his life insurance policies, the district court had no reason to probe these matters in an evidentiary hearing. The district court committed no plain error by entering the pretrial restraining order, which invited Jones to challenge it promptly if he thought there were grounds to do so. Having failed to do so, Jones is not entitled to relief based on his first argument.

          II. Request for Substitute Counsel

         Jones next argues that the district court improperly denied his request for new counsel during his fraud trial, which was the second of the two. He had an opportunity to explain his reasons for requesting substitute counsel, so we review the district court's denial for abuse of discretion. United States v. Harris, 394 F.3d 543, 551 (7th Cir. 2005). We consider such factors as the timeliness of the defendant's motion, the adequacy of the district court's inquiry into the motion, and whether the conflict resulted in a total lack of communication preventing an adequate defense. Id. at 552. No single factor is dispositive. If we find an abuse of discretion, we may nevertheless uphold the district court's decision "unless the defendant establishes that he was deprived of his Sixth Amendment right to effective assistance of counsel." United States v. Bjorkman, 270 F.3d 482, 500 (7th Cir. 2001).

         The record shows that Jones had a rocky relationship with his appointed attorney, Mark Inman, who is an experienced criminal defense lawyer in federal cases. Despite that rocky relationship, we conclude that the district judge did not abuse her discretion in denying Jones's request for substitute counsel. We do not reach the separate question whether Jones's Sixth Amendment right was compromised.

         Turning to the three factors identified in Harris, we consider first the timeliness of Jones's request. Jones asked for a new lawyer three weeks before his fraud trial was scheduled to begin. Three weeks is not much time to prepare for such a trial. We assume that if the district court had appointed a new lawyer an immediate request for a continuance would have been expected. Even so, we have previously recognized that requests for new counsel submitted several weeks before a critical proceeding may be timely under the circumstances. Compare United States v. Zillges, 978 F.2d 369, 372 (7th Cir. 1992) (request made one month before trial did not "represent[] a tactic to secure a continuance on the eve of trial"), and United States v. Ryals, 512 F.3d 416, 419 (7th Cir. 2008) (request three weeks before sentencing hearing was timely, particularly where breakdown in communication between attorney and client did not occur until after trial), with United States v. Hall, 35 F.3d 310, 313-14 (7th Cir. 1994) (request after defendant pled guilty and just ten days before sentencing hearing appeared to be an "effort to derail the sentencing that was fast approaching"), and United States v. Burgos, 539 F.3d 641, 646 (7th Cir. 2008) (request on morning of trial came too late).

         The second factor -adequacy of the inquiry-weighs in the government's favor. After receiving Jones's letter, the district judge referred the matter to a magistrate judge for a hearing. During that hearing, the magistrate judge gave Jones an opportunity to explain his concerns. The magistrate judge also heard from attorney Inman and from the government. In denying Jones's request, the magistrate judge explained that Jones's dispute with his lawyer primarily concerned trial strategy and that such disputes are insufficient grounds for replacement of appointed counsel. Jones renewed his request a week later. The district judge held an ex parte session in which Jones explained his complaints about Inman. At the end of the session, the judge denied Jones's renewed request. After the fraud trial but before sentencing, Jones asked once more for a new lawyer. The district judge delegated the request to a different magistrate judge who heard from both Jones ...

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