United States 2nd Circuit Court of Appeals Reports
U.S.A. v. GIFFEN, 05-5782-CR (2nd Cir. 12-8-2006) UNITED
STATES OF AMERICA, Appellant, v. JAMES H. GIFFEN,
Defendant-Appellee. No. 05-5782-CR. United States Court of
Appeals, Second Circuit. Argued: January 25, 2006.
Decided: December 8, 2006.
Interlocutory appeal by the government from an order of the
United States District Court for the Southern District of
New York (William H. Pauley, III, J.), denying the
government`s motion to preclude the defendant from raising
a public authority defense at trial. Appeal dismissed for
lack of appellate jurisdiction.
WILLIAM J. SCHWARTZ, Kronish Lieb Weiner & Hellman LLP
(Steven M. Cohen, Matthew E. Beck, Kevin Galbraith, of
counsel, New York, NY, for Defendant-Appellee.
PETER G. NEIMAN, Assistant United States Attorney, Southern
District of New York (Stephen J. Ritchin, Celeste L.
Koeleveld, Assistant United States Attorneys, Michael K.
Atkinson, Fraud Section, Criminal Division, United States
Department of Justice, of counsel; Michael J. Garcia,
United States Attorney, on the brief), New York, NY, for
Appellant.
Before: WALKER, LEVAL, SOTOMAYOR, Circuit Judges.
LEVAL, Circuit Judge.
The government brings interlocutory appeal from an order of
the United States District Court for the Southern District
of New York (William H. Pauley III, J.) denying the
government`s motion in limine to preclude defendant James
H. Giffen from advancing a public authority defense at
trial. We dismiss for lack of appellate jurisdiction.
Background
I. The Indictment
Giffen, a United States citizen, was indicted on August 4,
2003, by a grand jury in the Southern District of New
York.[fn1] Giffen is the Chairman of the Board, Chief
Executive Officer, and principal shareholder of Mercator
Corporation, a merchant bank based in New York. From 1995
to 1999, Giffen and Mercator advised the Republic of
Kazakhstan on oil and gas deals, and negotiated several
major deals on the Republic`s behalf. The indictment
charges Giffen with bribing Kazakh officials in violation
of the Foreign Corrupt Practices Act (“FCPA”) 15 U.S.C.
§ 78dd-2; defrauding the Republic of Kazakhstan in
violation of the mail and wire fraud statutes, 18 U.S.C.
§§ 1341, 1343, and 1346; money laundering to
further and conceal the bribery and fraud, in violation of
18 U.S.C. §§ 1956 and 1957; and tax-related
offenses in violation of 26 U.S.C. §§ 7206
and 7212, and 18 U.S.C. § 371.
The indictment alleges that Giffen paid more than eighty
million dollars in bribes to the President of Kazakhstan
and two other Kazakh officials. The indictment alleges that
Giffen created Swiss bank accounts in the names of offshore
companies owned by the officials or members of their
families. According to the indictment, Giffen made payments
into those accounts from fees that he and Mercator received
in oil deals they brokered for the Republic, as well as
from escrow accounts holding payments due the Republic from
oil transactions. According to the indictment, these
deposits were bribes, disguised in some cases as loans or
as payments of the fees of consultants who had helped
negotiate oil deals for Kazakhstan. The indictment alleges
that funds in these accounts were used to pay personal
expenses of Kazakh officials and their families, such as
tuition, jewelry purchases, vacations, and credit card
bills. The indictment also alleges that Giffen “purchased
luxury items, including fur coats, jewelry, speed boats,
and snowmobiles, and provided those items free of charge to
senior Kazakh officials,” and that he “spent a portion of
the funds diverted from the oil transactions on luxury
items, including millions of dollars in jewelry.”
The indictment asserts that by these acts Giffen violated
the FCPA and also defrauded the Republic of Kazakhstan. The
theory of the fraud allegations is that the money used to
bribe the Kazakh officials belonged to Kazakhstan, and that
Giffen participated in a fraudulent scheme to divert these
moneys to the personal enrichment of the Kazakh officials.
The indictment further alleges that Giffen engaged in money
laundering to further and conceal the bribery and fraud.
Finally, the indictment alleges that Giffen conspired to
defraud the United States of its rightful tax revenues by
concealing from the Internal Revenue Service (“IRS”) moneys
he received, and by helping other United States taxpayers
to conceal income from the IRS.
In March 2004, Giffen moved under Federal Rule of Criminal
Procedure 16(d)(2)(a) to compel the government to produce
documents in the possession of certain government agencies
that discussed Giffen and Mercator. Giffen asserted that he
had been in regular contact with personnel of those
agencies and wished to explore a public authority defense
to the charges in the indictment. On July 2, 2004, the
district court granted Giffen`s motion to compel, reasoning
that Giffen “provides sufficient details from publicly
available sources that describe his involvement in
Kazakhstan on behalf of the United States government” to
entitle him to discovery. The district court noted the
government`s acknowledgment “that it reviewed documents
relating to Giffen and Mercator” at government agencies
“during the course of its investigation,” and the district
court stated that “Giffen is entitled to review those
classified documents to assess the viability of a public
authority defense.”
II. The Classified Information Procedures Act
On July 28, 2004, the government invoked the Classified
Information Procedures Act (“CIPA”), 18 U.S.C. app. 3,
which governs the handling of classified information in
district court proceedings. CIPA § 3 authorizes the
district court, upon motion by the United States, “to
protect against the disclosure of any classified information
disclosed by the United States to any defendant in any
criminal case in a district court of the United States.”
CIPA § 4 regulates the discovery of classified
materials:
The court, upon a sufficient showing, may authorize the
United States to delete specified items of classified
information from documents to be made available to the
defendant through discovery under the Federal Rules of
Criminal Procedure, to substitute a summary of the
information for such classified documents, or to
substitute a statement admitting relevant facts that the
classified information would tend to prove.
Under CIPA § 5(a), a defendant who intends to
disclose classified information at trial must give notice
to the government of the information he or she intends to
disclose:
If a defendant reasonably expects to disclose or to cause
the disclosure of classified information in any manner in
connection with any trial or pretrial proceeding involving
the criminal prosecution of such defendant, the defendant
shall, within the time specified by the court or, where
no time is specified, within thirty days prior to trial,
notify the attorney for the United States and the court in
writing. Such notice shall include a brief description of
the classified information.
CIPA § 6 prescribes the procedures to be followed by
the district court when determining the admissibility of
classified information. Section 6(a) requires the district
court, upon motion by the government, “to conduct a hearing
to make all determinations concerning the use, relevance,
or admissibility of classified information that would
otherwise be made during the trial or pretrial proceeding.”
Under Section 6(c)(1), if the court authorizes the
disclosure of classified information, the United States may
move that, instead of disclosure, the court order “the
substitution for such classified information of a statement
admitting relevant facts that the specific classified
information would tend to prove” or “the substitution for
such classified information of a summary of the specific
classified information.” Section 6(c) provides that “[t]he
Court shall grant such a motion of the United States if it
finds that the statement or summary will provide the
defendant with substantially the same ability to make his
defense as would disclosure of the specific classified
information.” If the court declines to permit such a
substitution, and the government objects to disclosure of
the classified information, the presumptive remedy is
dismissal of the indictment. If the court concludes,
however, that “the interests of justice would not be served
by dismissal of the indictment” the court may take other
steps, such as dismissing certain counts in the indictment,
finding against the United States on particular issues to
which the classified information is related, or precluding
the testimony of witnesses. CIPA § 6(e)(2). Finally,
of particular relevance to this appeal, CIPA § 7(a)
provides for interlocutory appeal by the United States
“from a decision or order of a district court in a criminal
case authorizing the disclosure of classified information,
imposing sanctions for nondisclosure of classified
information, or refusing a protective order sought by the
United States to prevent the disclosure of classified
information.”
III. Giffen`s Proffer and the Government`s Motion to
Preclude
Pursuant to CIPA § 4, the government began to
provide sets of classified government documents to the
court for in camera and ex parte review. In some instances
the court ordered the government to turn over classified
materials to Giffen. In other instances, the court
permitted the government to turn over to Giffen redacted
versions or summaries of the documents, some of which were
still classified.[fn2] The district court also set a
pretrial schedule for determining what classified
information, if any, would be admissible at trial. It
instructed Giffen to submit a CIPA § 5 proffer of the
classified evidence he hoped to introduce at trial.
According to the district court`s scheduling order, that
proffer would also include the defendant`s notice of a
public authority defense as required by Federal Rule of
Criminal Procedure 12.3.[fn3]
On January 10, 2005, Giffen submitted a proffer of the
classified information he wished to reveal at trial in
support of his public authority defense. In support of the
Rule 12.3 notice, Giffen asserted that he acted “with the
intention of furthering the national interest of the United
States and in reliance on his ongoing communications with”
government agencies, and “not with the fraudulent and
corrupt intent with which he is charged.” He also asserted
that “[h]is belief that his conduct was neither fraudulent
nor corrupt, and that it was approved by the American
government was confirmed by [a government agency`s]
repeated exhortations to remain close to the President of
Kazakhstan and by our government`s continued reliance on
him in sensitive situations.”
Most of the proffer does not relate directly to the events
at issue in the indictment. Rather, Giffen describes
decades of assistance that he gave to the United States,
often as an unofficial conduit between leaders of the
United States and the Soviet Union. He also details
extensive assistance that he gave to the United States
government, first as a source of information regarding
political and economic developments in the Soviet Union,
and in recent years, in Kazakhstan. Giffen recounts being
regularly debriefed by United States government officials,
and claims that “by the time of the transactions at the
heart of the indictment, Mr. Giffen understood himself to
be working not only for the government of Kazakhstan, but
also for . . . United States government agencies.” Giffen`s
notice and proffer then turns to the conduct alleged in the
indictment. Because Giffen`s precise claims go to the heart
of this appeal, we quote from his document at length:
Starting in late 1995 or early 1996, as part of these
debriefings, Mr. Giffen disclosed to [an agency of the
U.S. government] the existence of the Swiss accounts at
issue in this case. . . . Mr. Giffen explained that
President Nazarbaev had approved the creation of the
off-shore accounts as a way to assure that a small
percentage of the revenue received from the oil and gas
transactions was not diverted by the Kazakh parliament on
what the President believed to be unnecessary
expenditures. He revealed that President Nazarbaev wanted
this money to be under his control and available to pay
for reform programs initiated by the government,
consultants` fees and other expenses as the President saw
fit. He told [U.S. officials] that bankers at Credit
Agricole Indosuez (then Banque Indosuez) had suggested
that, if Kazakhstan wanted to have funds available so that
they could be spent quickly and confidentially, Credit
Agricole could create “off-balance sheet” corporate
accounts to hold the funds. The Credit Agricole bankers
proposed that these accounts be owned by foreign
corporations but controlled by Kazakh officials. Mr.
Giffen told the [agency] that President Nazarbaev
instructed him to have several of these accounts opened
with Credit Agricole Indosuez, and that Nazarbaev
himself had met with the Credit Agricole bankers.
He described to the [United States] officials how there
was one central account into which funds were collected
and various sub-accounts to which the money was then
dispersed. Mr. Giffen explained that while these accounts
were owned by foreign corporations, they were controlled
by Kazakh officials . . . all of whom Mr. Giffen believed
acted on instruction from President Nazarbaev. During
these meetings, Mr. Giffen explained that, in order to
maintain the secrecy of the accounts, non-transparent
transactions were created to move the proceeds of several
oil deals. Thus, in connection with the Tengiz [oil]
transaction, Mr. Giffen specifically informed [a United
States agency official] that Kazakhstan had structured a
deal to require Mobil to pay Mercator a purported fee of
$51 million for its work on the transaction. He told him
that the Kazakhs, however, had directed that Mercator
would only retain $19 million for Mercator`s work on the
transaction and another transaction. He explained that, at
the direction of senior officials of the Republic,
Mercator was to use a portion of the additional funds to
cover expenses it incurred on behalf of the Kazakh
government and the remainder was to be transferred into
one of the Swiss accounts. At the instruction of the
Kazakh government he executed an “agreement” with an
entity called Nichem and then, as and when directed,
Mercator transferred part of its “fee” to Nichem for
further transfer into the central Swiss account.
While he did not tell the [United States] officials the
particulars of every transaction of which he was aware
that involved the Swiss funds (and he was not aware of
every transaction), Mr. Giffen informed them of many types
of transactions including consultant payments, cash
withdrawals for Kazakh delegations, and large jewelry
purchases made by him at the instruction of President
Nazarbaev or his deputies. He also informed them that
Mercator had created a “pass through” account in New York
which was funded by Kazakhstan through “fees” to Mercator,
in order to make purchases and pay expenses at the
direction of the Kazakh government in the United States.
He told them about many of the expenditures made from
the pass-through account.
[No United States officials] ever told Mr. Giffen that
the off-balance sheet accounts or his involvement with
them was improper. Nor did they ever tell him that he
should not be involved with such transactions. To the
contrary, they repeatedly told him to stay close to the
President and continue to report. He thus understood that
the [agency] wanted him to remain in a position to serve
the interests of the United States when called upon to do
so. Mr. Giffen believed that he was authorized to
participate in these transactions. He did not act with
intent to defraud or with corrupt intent.
The government then moved, pursuant to CIPA § 6, to
preclude Giffen from offering a public authority defense at
trial and from introducing at trial classified information
in support of that defense. The government observed that,
according to Giffen`s proffer, he was authorized to help
Kazakh officials create off-balance sheet government
accounts to pay for activities of the Kazakh government. By
contrast, the indictment claimed that Giffen had bribed
Kazakh officials by transferring the money into accounts
owned by the Kazakh officials or their families. Thus, the
government reasoned, even if everything Giffen alleged were
true, he was not authorized to engage in the conduct
alleged in the indictment. The government also argued, among
other contentions, that encouragement by United States
officials to “stay close to the President [of Kazakhstan]
and continue to report” did not constitute authorization to
commit the crimes charged in the indictment. Giffen argued
in response that he could have reasonably understood the
officials to be authorizing his actions.
IV. The District Court Opinion
On October 10, 2005, the district court filed its ruling.
As for the government`s motion to preclude Giffen from
offering a public authority defense, the court denied it.
The court stated that “[b]ased on Giffen`s proffer, this
Court will permit him to present evidence of a public
authority defense,” and that “[a]s an integral part of his
defense, Giffen is entitled to offer evidence regarding his
involvement with [agencies of the United States
government].” However, the district court declined to rule
on the government`s motion to preclude Giffen from offering
classified information in support of his public authority
defense, reasoning that the motion was premature because the
court was not yet in a position to rule on the
admissibility of any particular classified information. The
district court observed that Giffen might be entitled to
additional discovery from the government, and that only at
that time would he be able to make a complete CIPA §
5 proffer of the classified evidence he hoped to offer at
trial.[fn4]
In ruling that Giffen could offer a public authority
defense at trial, the district court rejected the
government`s argument that Giffen failed to assert that he
had disclosed illegal activities to the government. The
court observed that “Giffen`s proffer discloses the
creation, funding and use of the Swiss bank accounts at the
heart of the indictment,” and that according to the proffer
Giffen told the government that the Swiss accounts were in
the names of foreign corporations, controlled by Kazakh
officials, and were maintained secretly through
“nontransparent transactions.” The court emphasized that,
according to the proffer, the funds in the Swiss bank
accounts were used to make “consultant payments, cash
withdrawals for Kazakh delegations and large jewelry
purchases . . . at the instruction of President Nazarbaev
or his deputies.”
The court also rejected the government`s argument that
Giffen failed to allege facts supporting a public authority
defense because he did not claim to have disclosed his
conduct to the government prior to engaging in that conduct
and because the government never explicitly authorized his
actions. The district court stated that “the diversion of
oil revenues to secret Swiss accounts continued for years
with Giffen periodically revealing details to the
[government]” and that “Giffen proffers that the
[government] was aware of his activities and encouraged him
to remain close to Kazakh officials by continuing his
conduct. Since Giffen reported his activities to the
[government] on an ongoing basis, this Court cannot
conclude as a matter of law that he did not inform the
[government] of his unlawful conduct prior to his actions.”
The government filed a notice of appeal on October 25,
2005, invoking the interlocutory jurisdiction of this court
under CIPA § 7.
Discussion
Because the district court did not rule on the disclosure
of classified information, we dismiss this appeal for lack
of appellate jurisdiction under CIPA § 7.
Nevertheless, we offer some observations regarding the
district court`s rulings, which we hope will prove helpful.
I. Jurisdiction
It is common ground that we are without authority to
consider this interlocutory appeal unless it comes within
CIPA § 7(a). That statute provides:
An interlocutory appeal by the United States taken before
or after the defendant has been placed in jeopardy shall
lie to a court of appeals from a decision or order of a
district court in a criminal case authorizing the
disclosure of classified information, imposing sanctions
for nondisclosure of classified information, or refusing a
protective order sought by the United States to prevent
the disclosure of classified information. 18 U.S.C. app.
3, § 7(a).
Giffen argues that the district court`s order does not fall
within the scope of CIPA § 7(a) and that the appeal
is therefore premature. He asserts it remains possible that
the district court will ultimately find that there is no
admissible evidence supporting Giffen`s public authority
defense and that he will therefore not be permitted to
raise the public authority defense at trial, or that any
public authority defense allowed will not call for the
receipt of classified information into evidence. He argues
that an interlocutory appeal will lie only after the
district court has ruled that any particular item of
classified material will be admitted as evidence. The
government argues in support of appealability that the
order “authoriz[ed] the disclosure of classified
information.” Id. The government relies not only on the
ruling that Giffen would be allowed “to present evidence of
a public authority defense,” but more importantly on the
court`s statement that “[a]s an integral part of his
defense, Giffen [would be] entitled to offer evidence
regarding his involvement with [agencies of the United
States government].” The government contends the latter
statement authorized the disclosure of a relationship
between Giffen and certain government agencies, which
itself is classified.
Although we do not adopt all of Giffen`s arguments, we are
persuaded that interlocutory appeal is premature and not
authorized by Section 7(a). While there is some ambiguity
caused by the district court`s statement that Giffen would
be “entitled to offer evidence regarding his involvement
with” government agencies, there are several indications
that the court did not, in fact, intend its order to
authorize the disclosure of classified information, but
rather intended it only as a ruling that the allegations
outlined in Giffen`s proffer were sufficient, as a matter
of law, to support a public authority defense.[fn5]
First, the court stated it would construe Giffen`s proffer
as merely a Rule 12.3 notice of a public authority defense,
explaining that Giffen would have a further opportunity to
submit a CIPA § 5 proffer to determine the
“admissibility of classified information.” Second, the
court expressly declined to rule on the government`s motion
to preclude Giffen from offering classified information in
support of his public authority defense, stressing that the
government`s motion in this regard was premature. The court
stated, “Until the Defendant receives the full universe of
documents, he cannot make a complete and accurate CIPA
§ 5 proffer, and this Court cannot assess the
government`s motion to exclude evidence.” Considering the
court`s words in their full context, we think the most
plausible reading is that the court was upholding the legal
sufficiency of Giffen`s proposed public authority defense
(assuming there was admissible evidence to support it), and
deferring to a later time — after further discovery
and receipt of a complete CIPA § 5 proffer —
the conduct of a CIPA § 6 hearing and rulings on the
disclosure of classified information.
Without question, the district court`s ruling rejected one
asserted basis for the inadmissibility of evidence —
the nonviability of the defendant`s legal theory of
relevance. But, despite words which out of context might
suggest otherwise, it had as yet neither ruled on the
admissibility of any evidence, nor authorized the disclosure
of classified information.[fn6] CIPA § 7 does not
provide for interlocutory appeal in these
circumstances.[fn7]
II. Observations as to the District Court`s Analysis of the
Public Authority Defenses
Because interlocutory appeal is not authorized at this
stage, we have no power to make binding rulings on the
issues the parties have argued. Nonetheless, the district
court might benefit from consideration of our nonbinding
discussion of these issues, when it comes to make its
rulings under CIPA relating to the admission of classified
information. We believe the district court may have
misunderstood the requirements of a public authority
defense, as applied to the facts of this case.
In its October 18 order, the court expressed the view that
Giffen`s proffer, assuming it was supported by admissible
evidence, would justify his offer of a public authority
defense. We are puzzled by this view. The so-called “public
authority” defense, as understood in this circuit, divides
into two closely-related, but slightly different, forms.
One, sometimes described as actual public authority,
depends on the proposition that the defendant`s actions,
although ostensibly in violation of some statute, were in
fact lawful because he was authorized by the government to
do those acts. The second version, usually described by the
name entrapment by estoppel, or simply estoppel, depends on
the proposition that the government is estopped from
prosecuting the defendant where the government procured the
defendant`s commission of the illegal acts by leading him to
reasonably believe he was authorized to commit them. The
district court concluded that the facts alleged in Giffen`s
proffer would support both forms of the defense. We have
misgivings about the district court`s analysis.
a. Actual Public Authority
Under Second Circuit law, an actual public authority
defense exists where a defendant has in fact been
authorized by the government to engage in what would
otherwise be illegal activity. That is, the defendant`s
conduct was, in fact, legitimized by government
action.[fn8] Giffen claims that he repeatedly informed
government officials of his conduct, now alleged to violate
criminal statutes, and was never warned to cease such
activities, but to the contrary was encouraged to maintain
his relationship with Kazakh officials and “continue to
report.” This, he argues, authorized his conduct.
Whether a defendant was given governmental authorization to
do otherwise illegal acts through some dialogue with
government officials necessarily depends, at least in part,
on precisely what was said in the exchange. Upon a close
reading of Giffen`s proffer, in our view it cannot
demonstrate the receipt of government authorization.
Although Giffen asserts that he revealed his conduct to the
government officials, his disclosures, as set forth in the
proffer, did not adequately reveal the illegal conduct
charged in the indictment. Accordingly, the responses of
Giffen`s governmental interlocutors, even assuming they
encouraged him to continue doing what he disclosed, neither
expressed nor implied authorization to commit the criminal
acts with which he is charged.
The crimes alleged, as to which Giffen claims a public
authority defense, are: (a) the defrauding of the Republic
of Kazakhstan by participation with Kazakh officials in a
scheme whereby funds rightfully belonging to the Republic
were disguised as fees to consultants or as loans and
diverted to the personal enrichment of Giffen and those
officials; (b) the bribery of Kazakh officials by paying
millions into bank accounts indirectly owned by those
officials and members of their families, as well as by
giving them luxury items such as jewelry; and (c) engaging
in money laundering conspiracy in order to conceal the
commission of these crimes.
Giffen`s revelations to United States officials as
described in his proffer characterized these transactions
very differently — in a manner that failed to reveal
that the Republic of Kazakhstan was being defrauded of its
funds or that Kazakh officials were bribed. To the
contrary, according to his proffer, when he told United
States officials about payments to secret Swiss bank
accounts, he described the accounts as being used by the
President of Kazakhstan “to assure that a small percentage
of the revenue received from the oil and gas transactions
was not diverted by the Kazakh parliament on what the
President believed to be unnecessary expenditures.” He told
government officials that the funds were used by the
President “to pay for reform programs initiated by the
government, consultants` fees and other expenses as the
President saw fit.” These representations characterize
Giffen`s actions as assisting the Kazakh executive branch,
in preference to the Kazakh Parliament, in using Kazakh
funds for governmental purposes benefiting the Republic of
Kazakhstan. They do not convey that the payments were used
to bribe the Kazakh officials, nor that Kazakhstan was
defrauded of its funds. In short, Giffen`s disclosures to
the United States government, which are the basis for his
claim of authorization, failed to reveal crucial aspects of
the particular crimes with which he is charged in the
indictment.
We express no view of whether the scheme Giffen described
to the United States officials, which involved Giffen
assisting the executive branch of the Kazakh government in
hiding funds from the legislative branch so as to use the
funds for government purposes benefiting the Republic,
constitutes a crime under the laws of Kazakhstan or the
United States. But even if this is so, it would be
irrelevant for purposes of this case, as Giffen is not
charged with that crime. In order to obtain a judgment of
conviction on these counts, the government will have to
prove beyond a reasonable doubt that Giffen defrauded the
Republic of Kazakhstan of its money and corruptly bribed
Kazakh officials. Even if Giffen was authorized to commit a
crime that is not charged in the indictment, this does not
give him a defense to the crimes that are charged in the
indictment. Thus, even if duly authorized United States
officials had responded to Giffen, “You are hereby
authorized to continue doing what you have described,” this
would not have constituted authorization to commit the
crimes charged in the indictment.[fn9]
The district court took the position that because Giffen,
according to the proffer, told United States officials that
the Swiss accounts were “off-balance sheet” and in
corporate names, and that “Mercator had created a `pass
through` account in New York which was funded by Kazakhstan
through `fees` to Mercator, in order to make purchases and
pay expenses at the direction of the Kazakh government in
the United States,” the United States officials would have
understood that what was being described was bribery and
fraud. In our view, it does not follow. If an actor`s
inference of authorization is based on his having told the
government agent of his plans to engage in the criminal acts
and received implicit approval, the actor must have
revealed with reasonable clarity the criminal nature of his
intended conduct. Giffen`s revelations to his government
contacts did not reveal with reasonable clarity that he
intended to commit the crimes for which he has been
indicted. According to the proffer, Giffen gave a different
explanation to United States officials why the payments
were made in covert fashion — to help President
Nazarbaev protect the Republic`s funds from being wasted by
the Kazakh Parliament in “unnecessary expenditures.”
Considering the complete exchange, the response of the
government officials did not authorize the criminal
transactions charged.[fn10]
Because Giffen`s disclosures to governmental officers of
his conduct did not reveal an intention to commit the
crimes charged in the indictment, their response urging him
“to stay close to the President [of Kazakhstan] and
continue to report,” did not constitute authorization to
commit the crimes charged.[fn11]
b. Entrapment by Estoppel
The defense of entrapment by estoppel can be established
without the defendant having received actual authorization.
It depends on the proposition that the government is barred
from prosecuting a person for his criminal conduct when the
government, by its own actions, induced him to do those
acts and led him to rely reasonably on his belief that his
actions would be lawful by reason of the government`s
seeming authorization. In the narcotics context, we have
explained, “If a drug enforcement agent solicits a
defendant to engage in otherwise criminal conduct as a
confidential informant, or effectively communicates an
assurance that the defendant is acting under [government]
authorization, and the defendant, relying thereon, commits
forbidden acts in the mistaken but reasonable, good faith
belief that he has in fact been authorized to do so as an
aid to law enforcement, then estoppel bars conviction.”
United States v. Abcasis, 45 F.3d 39, 43 (2d Cir. 1995);
see Cox v. State of Louisiana, 379 U.S. 559, 571
(1965).[fn12]
In our view, based on the allegations in the proffer,
Giffen is not entitled to assert the defense of entrapment
by estoppel. As discussed above with respect to the defense
of actual public authority, Giffen did not disclose the
conduct alleged in the indictment. The government`s
response, therefore, instructing Giffen, without
restrictions, to “stay close to the President and continue
to report,” even assuming it could be construed as
encouragement to continue doing what he had revealed, was
not a solicitation or encouragement of the commission of
the charged crimes. Moreover, because Giffen failed to
apprise the government officials that he was engaged in
bribery and fraud, we do not see how Giffen could have
reasonably understood the officials` response as
authorization to engage in bribery and fraud. See Abcasis,
45 F.3d at 43-44 (“The defendant`s conduct must remain
within the general scope of the solicitation or assurance
of authorization; this defense will not support a claim of
an open-ended license to commit crimes in the expectation
of receiving subsequent authorization.”); see also United
States v. Patient Transfer Serv., Inc., 413 F.3d 734,
742-43 (8th Cir. 2005); United States v. West Indies
Transp., Inc., 127 F.3d 299, 313 (3d Cir. 1997); United
States v. Trevi?„o-Martinez, 86 F.3d 65, 70 (5th Cir. 1996).
Under these circumstances, the considerations of fairness
that underlie estoppel do not support barring the
government from prosecuting Giffen for the charged crimes,
because, according to Giffen`s proffer, government
officials neither induced him to commit these crimes nor
led him to an objectively reasonable belief that he had
received authorization. See United States v. Neville, 82
F.3d 750, 762 (7th Cir. 1996) (“Even if [defendant] somehow
truly believed that she was indeed a `government agent,`
this is unavailing, for reasonableness in this context is
objective.”).[fn13]
c. Negation of Intent
In addition, the district court mentioned a related
doctrine, sometimes described as negation of intent. This
is not an affirmative defense, but rather an attempt to
rebut the government`s proof of the intent element of a
crime by showing that the defendant had a goodfaith belief
that he was acting with government authorization. Such a
legal theory, as distinct from actual public authority and
entrapment by estoppel, has been expressly recognized only
in the Eleventh Circuit, and has never been considered by
this court.[fn14] See United States v. Ruiz, 59 F.3d 1151,
1154 (11th Cir. 1995); Anderson, 872 F.2d at 1517-18 & n.
14; United States v. Juan, 776 F.2d 256, 258 (11th Cir.
1985); see also United States v. Baptista-Rodriguez, 17
F.3d 1354, 1368 n. 18 (11th Cir. 1994).
The district court seemed to assume that, with respect to
any crime, a defendant may raise a defense “that he
honestly, albeit mistakenly, believed he was committing the
charged crimes in cooperation with the government.” We have
great difficulty with this proposition, which would swallow
the actual public authority and entrapment-by-estoppel
defenses. “Such an unwarranted extension of the good faith
defense would grant any criminal carte blanche to violate
the law should he subjectively decide that he serves the
government`s interests thereby. Law-breakers would become
their own judges and juries.” United States v. Wilson, 721
F.2d 967, 975 (4th Cir. 1983). We will assume for purposes
of argument — without expressing any view on the
matter — that, at least in some circumstances, a
defendant may offer evidence that he lacked the intent
essential to the offense charged because of his good-faith
belief that he was acting on behalf of the government.[fn15]
The relevance, and hence admissibility, of such a belief
would depend, however, on the nature of the intent element
of the charged crime, and whether a defendant`s belief that
his actions were authorized by the government would negate
that intent. The district court did not consider what
intent the government will need to prove with respect to
each of the crimes charged in the indictment, and did not
discuss whether or how the allegations in Giffen`s proffer
might negate that intent. Because there has been neither a
ruling nor even a discussion by the district court of these
considerations, we do not discuss the question.
* * *
For the reasons discussed above, we doubt that Giffen has
alleged facts satisfying the elements of actual public
authority or entrapment by estoppel. Once again, we
emphasize that as we do not have jurisdiction to hear this
interlocutory appeal, these observations are dicta and do
not bind the district court. Nonetheless, the district
court may find it useful to consider these observations when
it returns, in the context of its rulings on Giffen`s CIPA
§ 5 proffer, to the question whether Giffen can
mount a public authority defense.[fn16]
Conclusion
The interlocutory appeal is dismissed for lack of
jurisdiction.
[fn1] The indictment has been superseded twice, but the
changes are not relevant to this appeal.
[fn2] The discovery process has not yet been completed. The
district court has ordered the government to assemble
additional documents for its review.
[fn3] Federal Rule of Criminal Procedure 12.3(a)(1) provides
that “[i]f a defendant intends to assert a defense of
actual or believed exercise of public authority on behalf
of a law enforcement agency or federal intelligence agency
at the time of the alleged offense, the defendant must so
notify an attorney for the government in writing and must
file a copy of the notice with the clerk” of the court.
Rule 12.3(a)(2) requires that the notice include “(A) the
law enforcement agency or federal intelligence agency
involved; (B) the agency member on whose behalf the
defendant claims to have acted; and (C) the time during
which the defendant claims to have acted with public
authority.”
[fn4] While Giffen`s submission had, pursuant to the court`s
scheduling order, combined both a CIPA § 5 proffer
and a Fed.R.Crim.P. 12.3 notice, the court stated that it
would treat the document solely as a Rule 12.3 notice and
would give Giffen another opportunity, after discovery was
complete, to submit a CIPA § 5 proffer.
[fn5] We express no view on whether Section 7(a) allows
interlocutory appeal when the district court authorizes the
disclosure of a general class of classified information or
only when the court authorizes disclosure of specified
items of classified information.
[fn6] We express no view on what might be an implication in
the district court opinion that knowledge in the public
domain cannot be “classified information” for CIPA
purposes.
[fn7] The government argues that, even in the absence of
jurisdiction under § 7, we should issue a writ of
mandamus directing the district court to grant the
government`s motion. To justify a writ of mandamus, the
government must show the inadequacy of other available
remedies. See United States v. Amante, 418 F.3d 220, 222
(2d Cir. 2005). The government claims that, unless we rule
now in its favor, it will have no available remedies, and
will be forced to choose between disclosing classified
information and being sanctioned by the district court
pursuant to CIPA § 6(e). This is not correct. The
district court has not yet authorized the disclosure of
classified information. If it does, the government may take
interlocutory appeal from the district court`s order
pursuant to § 7. The government will not be compelled
to choose between disclosing classified information or
facing sanction, without this court having jurisdiction to
hear an interlocutory appeal. Mandamus is not appropriate.
[fn8] Some courts have described the public authority
defense in terms of the reasonableness of the defendant`s
understanding and of his reliance. See, e.g., United States
v. Fulcher, 250 F.3d 244, 254 (4th Cir. 2001); United
States v. Achter, 52 F.3d 753, 755 (8th Cir. 1995); United
States v. Burrows, 36 F.3d 875, 882 (9th Cir. 1994); United
States v. Holmquist, 36 F.3d 154, 161 n. 7 (1st Cir. 1994).
Under Second Circuit law, the defense has two forms. The
actual public authority defense depends on the fact of
governmental authorization, which renders otherwise illegal
conduct lawful. See United States v. Schwartz, 924 F.2d
410, 423 (2d Cir. 1991); United States v. Duggan, 743 F.2d
59, 83-84 (2d Cir. 1984); see also United States v.
Anderson, 872 F.2d 1508, 1516 (11th Cir. 1989). The
reasonableness of the defendant`s belief that he was
authorized and of his reliance are pertinent to the
estoppel-based form of the defense, which can protect the
defendant regardless of whether the government in fact
authorized his conduct.
[fn9] In United States v. Schwartz, 924 F.2d 410, 422 (2d
Cir. 1991), defendants were charged, inter alia, with
attempting to illegally ship arms to Poland, and argued in
their defense that they had been authorized to do so by
officials at the Department of Defense Intelligence Agency.
However, it was uncontested that a defendant had told the
officials that the arms in question would not be sent to
Poland and that one of the officials had warned a defendant
that selling the arms to Poland would be illegal. Id. at
422. This court held that “Appellants cannot now claim they
were authorized to commit the charged crimes of attempting
to sell weapons to Poland at the same time they admit
telling the purported authorizing agents the arms were not
going to Poland.” Id. Giffen argues that Schwartz is
distinguishable from his case, because Giffen never told
government officials that he was not engaging in bribery or
fraud. The distinction is without substance. Because
neither Giffen nor the defendants in Schwartz revealed
their criminal acts, in neither case could governmental
authorization to do the acts revealed constitute
authorization to do the illegal acts that were not
revealed.
[fn10] It is true that Giffen`s statements to United States
officials included an aspect that might well have raised
suspicions. He told them that funds in the Swiss accounts
were used to pay for purchases of jewelry, on the
instructions of President Nazarbaev or his deputies. It is
true that the revelation of jewelry purchases might well
have raised the suspicion that at least some of the money
was being devoted to the personal enrichment of Kazakh
officials, rather than to governmental causes. Nonetheless,
in order to establish authorization of criminal conduct
through the approval by government officials of the acts he
described, Giffen must have reasonably clearly revealed the
criminal aspect of those acts — not merely raised a
suspicion about it.
[fn11] We recognize that regulating Giffen`s access to
classified information has presented the district court
with a significant challenge. Our conclusions regarding the
availability of a public authority defense are based on the
record before us, particularly the charges in the
indictment and Giffen`s proffer. It is possible that as the
case develops, the government`s theory with respect to any
particular count may change, so that either Giffen`s proffer
or the documents the district court reviews more directly
relate to the charges than is evident at present. The
district court obviously would be free to revisit any
decision it renders, consistent with the principles of a
public authority defense discussed in this opinion.
[fn12] In setting forth the elements of the estoppel
defense, the government states that it may be raised only
when the government official has actual authority to
authorize the conduct. Although we recognize that courts
have occasionally made such statements, see, e.g., United
States v. Spires, 79 F.3d 464, 466-67 (5th Cir. 1996);
United States v. Brebner, 951 F.2d 1017, 1024 (9th Cir.
1991), we wonder whether such a limitation makes sense in
light of the fact that the motivating principle underlying
the doctrine is “the unfairness of prosecuting one who has
been led by the conduct of government agents to believe his
acts were authorized.” Abcasis, 45 F.3d at 44. The
inappropriateness of government prosecution of conduct that
the government has solicited, and the unfairness to the
defendant are no less when the government official who
communicates with him appears to have authority, but in
fact lacks authority to authorize criminal conduct.
Furthermore, adding to the unfairness of such a requirement,
in some circumstances it would be extraordinarily difficult
for an individual, even one trained in law, to determine
whether a government official who purports to authorize
criminal conduct is in fact empowered by law to grant such
authorization. To the extent the requirement of actual
authority is invoked to guard against inappropriate
invocation of the doctrine where the defendant could not
have reasonably believed he had received authorization to
commit criminal acts, sufficient assurance seems to be
prescribed by the requirements that the authorizing
government officials must have had “apparent authority” to
authorize, and the defendant must have reasonably relied on
the asserted authorization. See George, 386 F.3d at 399
(“[T]o invoke the entrapment by estoppel defense, the
defendant must show that he relied on the official`s
statement and that his reliance was reasonable in that a
person sincerely desirous of obeying the law would have
accepted the information as true.”) (internal quotation
marks omitted). For these reasons, we understand the
defense of entrapment by estoppel in this circuit to
encompass circumstances where the defendant reasonably
relies on the inducements of government agents who have
apparent authority to authorize the otherwise criminal acts
— even if they do not in fact possess such
authority. See United States v. Howell, 37 F.3d 1197, 1204
(7th Cir. 1997) (explaining that defense of entrapment by
estoppel applies to government actors operating with
“actual or apparent authority”).
[fn13] The fact that the officials did not volunteer an
observation that the conduct was illegal does not
reasonably support Giffen`s concluding that his conduct was
being authorized. See United States v. Pardue, 385 F.3d
101, 108-09 (1st Cir. 2004) (“In order to establish a prima
facie case for entrapment by estoppel, a defendant must put
forth an affirmative representation by a government
official that his conduct was or would be legal.”); West
Indies Transp., Inc., 127 F.3d at 313 (holding that
entrapment by estoppel applies where, inter alia, a
government official “told the defendant that certain
criminal conduct was legal”); Spires, 79 F.3d at 466 (“The
defense of entrapment by estoppel is applicable when a
government official or agent actively assures a defendant
that certain conduct is legal and the defendant reasonably
relies on that advice and continues or initiates the
conduct.”).
[fn14] The government suggests that this court rejected the
negation of intent defense in United States v. Duggan, 743
F.2d 59, 83-84 (2d Cir. 1984). However, there is no
indication that the defendants in Duggan raised, or that
the Duggan court ever considered, the possibility of a
negation-of-intent defense as distinct from other types of
public authority defenses. Moreover, as we explained in
Abcasis, 45 F.3d at 45, the Duggan court rejected the
defendants` contention because in that case the claimed
reliance “was unreasonable as a matter of law.”
[fn15] This would depend on the precise elements of a given
crime, and thus, if the district court ultimately finds
that classified evidence in support of such a theory is
admissible, it is critical that the district court identify
which crimes charged in the indictment contain mens rea
elements that the classified information tends to disprove.
[fn16] It would be helpful, to clarify the issues that will
arise on interlocutory appeal under CIPA § 7 of any
ruling authorizing the receipt of classified information
into evidence, if the court would specify in its ruling the
particular form of public authority (or other) defense, and
the particular evidence pertinent to it.