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United States v. Sanford Ltd. and James Pogue

July 19, 2012

UNITED STATES,
PLAINTIFF,
v.
SANFORD LTD. AND JAMES POGUE, DEFENDANTS.



The opinion of the court was delivered by: Judge Beryl A. Howell

MEMORANDUM OPINION

Pending before the Court is Defendant Sanford Ltd.'s ("Sanford's") motion in limine to exclude evidence regarding the alleged monetary proceeds obtained by Sanford as a result of the offload of fish cargo from the fishing vessel San Nikunau. See Def.'s Mot. In Limine to Exclude Evid. of Monetary Proceeds ("Def.'s Mot. In Limine") at 1,ECF No. 143. To the extent that Sanford merely argues that all evidence of monetary proceeds earned from the fishing activities aboard the San Nikunau are either irrelevant under FED. R. EVID. 402 or unfairly prejudicial under FED. R. EVID. 403, Sanford's motion is denied for the reasons stated below. Indeed, if the arguments presented by the parties for exclusion of alleged monetary proceeds were the only pertinent issues affecting the admissibility of evidence regarding Sanford's monetary proceeds, this opinion would be simple and short.

Unfortunately, however, neither party has addressed certain critically important legal issues that the Court must weigh in determining what evidence of monetary proceeds is either permitted or required to be presented to the jury. Principally, the Court must consider the interaction between the constitutional issues stemming from the Supreme Court's recent decision in Southern Union Co. v. United States, 132 S. Ct. 2344 (2012), and the appropriate definitions of "gross gain" and "derive[d] . . . from" under the Alternative Fines Act, 18 U.S.C. § 3571(d) as applied to this evidence in the context of the charges pending against the defendants. Thus, to the extent that the government has proffered that it intends to admit evidence that Sanford's gross revenues of $24,045,930.79 over a period of approximately four years constitute a "gross gain" to Sanford "derive[d] . . . from" the charged offenses, the Court is likewise not prepared to admit that particular monetary figure for that purpose under either Rules 402 or 403 for the reasons explained below.

I.BACKGROUND

This is a criminal case charging defendants Sanford and James Pogue with seven felony counts under the Act to Prevent Pollution from Ships ("APPS"), 33 U.S.C §§ 1901 et seq. and related criminal statutes. The superseding indictment charges the defendants with conspiracy, in violation of 18 U.S.C. § 371; knowingly failing to maintain an accurate Oil Record Book ("ORB"), in violation of 33 U.S.C. § 1908(a) and 18 U.S.C. § 2, and 33 C.F.R. § 151.25; falsification of records, in violation of 18 U.S.C. §§ 1519 and 2; obstruction of justice, in violation of 18 U.S.C. §§ 1505 and 2; and unlawful discharge of oil waste, in violation of 33 U.S.C. §§ 1907(a) and 1908(a), 18 U.S.C. § 2, and 33 C.F.R. § 151.10(b). See Superseding Indictment at 7--18, ECF No. 22. These criminal charges stem from the defendants' operation of the fishing vessel San Nikunau in the South Pacific between March 2007 and July 2011. Id. at 2--3.

During that time period, the government charges that the defendants entered into a conspiracy to fail to maintain the ORB as required by law, did fail to maintain the ORB, and knowingly discharged machinery-space bilge waste overboard the vessel without first running such waste through an Oily Water Separator ("OWS"). Id. at 7--18. Between March 2007 and July 2011, the government alleges that Sanford earned $24,862,954.89 in gross revenues from the offloading of fish cargo that was caught aboard the San Nikunau. Id. at 3. The superseding indictment also contains a forfeiture allegation that seeks forfeiture of this amount as monies "equal to property constituting, or derived from, proceeds obtained, directly or indirectly, as a result of the offenses alleged in Counts One, Two, Four, and Seven." Id. at 19.

The instant motion by Sanford to exclude evidence of monetary proceeds is not the first defense motion challenging this evidence, and certain of the arguments raised in the defendant's prior motion are pertinent for consideration here. Specifically, on March 23, 2012, Sanford filed a "Motion to Dismiss or in the Alternative to Strike as Surplusage the Forfeiture Claim." See Def. Sanford Ltd.'s Mot. to Dismiss or in the Alternative to Strike as Surplusage the Forfeiture Claim ("Def.'s Mot. to Strike"), ECF No. 69. As noted, the forfeiture allegation seeks a "judgment in favor of the United States of America for the sum of at least $24,862,954.89." Superseding Indictment at 19. The government's claim for forfeiture appears to be based on the following allegation in the superseding indictment:

Sanford Ltd. gained, during the time period relevant in this indictment, revenues of $24,862,954.89 for the offload of fish cargo from the F/V San Nikunau in American Samoa, even though the vessel was not in compliance with international and United States law and therefore could have been prevented from entering American Samoa and offloading fish cargo . . . all of which constitutes a gain pursuant to the Alternative Fines Act, 18 U.S.C. § 3571, and is forfeitable pursuant to 18 U.S.C. §§ 981(a)(1)(C) & 1956(c)(7)(E).

Id. at 3--4.

In Sanford's March 23 motion, it argued that this allegation was "contrary to logic, conflict[ed] with express Coast Guard policy regarding the basis for banning foreign-flag vessels from United States ports, and is at odds with the practices of the Coast Guard in other APPS investigations and prosecutions over the past 15 years." Def.'s Mot. to Strike at 6. Specifically, Sanford characterized as "illogical" the government's contention that Sanford's commercial fishing revenues were "proceeds" of its recordkeeping violations because if the San Nikunau had been barred from port even once, "the logical result would have been that remedial measures would have been taken promptly to correct the deficiency to ensure the vessel's future operations in American Samoa were not again impeded." Id. It also cited the Coast Guard's CG-543 Policy Letter 10-03, Banning of Foreign Vessels, which states that the Coast Guard will only ban foreign-flagged vessels like the San Nikunau if it has been previously detained three times within the prior twelve months for significant noncompliance with international safety or environmental standards. Id. at 7. Thus, according to Sanford, "the revenues from the fish cargoes of the Nikunau do not constitute the 'proceeds' of the alleged APPS offenses, so there is no . . . logical nexus between the proof of the APPS offenses and the evidence of the fish cargo revenues over the period of the indictment." Id. at 12. Finally, in addition to disputing the nexus between the charged offenses and the revenues from the San Nikunau's commercial fishing activities, Sanford argued that "even if the government were to prevail in its forfeiture claim in this case, any forfeiture award would be for the net revenues from fish cargoes." Id. at 13 (citing 18 U.S.C. § 981(a) (2)). After hearing argument on Sanford's motion at the motions hearing on April 20, 2012, the Court denied the motion and agreed with the government that arguments pertaining to the appropriate amount of forfeiture were premature. Tr. of Mot. Hr'g at 57:6-- 58:22 (Apr. 20, 2012).*fn1

Sanford filed the motion in limine currently pending before the Court on June 20, 2012, in which it sought to "to exclude from admission into evidence at trial evidence, including testimony, regarding the alleged monetary proceeds obtained directly or indirectly as a result of the offload of fish cargo from the fishing vessel San Nikunau." Def.'s Mot. In Limine at 1. Sanford's primary argument in support of its motion is that admission of the amount of proceeds would be either irrelevant under FED. R. EVID. 402 or unfairly prejudicial under FED. R. EVID. 403. See Def.'s Mem. in Support of Def.'s Mot. In Limine ("Def.'s Mem.") at 3--16, ECF No. 143-1. The government, however, argues that evidence of monetary proceeds should be admitted because it is relevant to (1) the defendants' financial motive for committing the charged offenses; and (2) determining the appropriate amount of "gross gain" that was "derive[d] . . . from the offense," which the government intends to seek as a measure of the appropriate criminal fine to be assessed if the defendants are found guilty. See Gov't Mem. in Opp'n to Def. Sanford's Mot. In Limine ("Gov't Opp'n Mem.")at 1--3 & n.1, ECF No. 147; 18 U.S.C. § 3571(d).*fn2

II.DISCUSSION

A.Evidence of Monetary Proceeds Is Generally Admissible

Only relevant evidence is admissible. FED. R. EVID. 402. A trial court may prevent the introduction of relevant evidence, however, "if its probative value is substantially outweighed by a danger of . . . unfair prejudice, confusing the issues, misleading the jury, undue delay, waste of time, or needlessly presenting cumulative evidence." FED. R. EVID. 403. The term "unfair prejudice" in this context means "an undue tendency to suggest decision on an improper basis, commonly, though not necessarily, an emotional one." Id. advisory committee's note. "The trial court has broad discretion to weigh the extent of potential prejudice against the probative force of relevant evidence." Fredrick v. District of Columbia, 254 F.3d 156, 159 (D.C. Cir. 2001).

Sanford argues that any evidence of monetary proceeds from the San Nikunau is either irrelevant or unfairly prejudicial and should therefore be excluded. See Def.'s Mem. at 1. First, the defendant contends that evidence of monetary proceeds is irrelevant under Fed. R. Evid. 402 "because the value of the proceeds of the sales is not an element of any of the offenses charged in the Superseding Indictment." Id. at 3. Second, echoing the same arguments put forth in support of its March 23 "Motion to Dismiss or in the Alternative to Strike as Surplusage the Forfeiture Claim," Sanford argues that such evidence is not probative of the defendants' motives for committing the charged offenses because the Superseding Indictment "does not allege any facts that support the argument that the making of false entries in the Oil Record Book ("ORB") aboard the Nikunau was motivated by or in any way connected to the proceeds from the offloading of fish cargoes." Id. at 9. Hence, Sanford argues, admission of monetary proceeds evidence would "improper[ly] invit[e] . . . the jury to engage in rank speculation regarding 'motive.'" Id. at 10. Furthermore, Sanford argues that any motive argument is "plainly illogical" because the "allegations regarding the making of false entries in the ORB relate to an incidental aspect of the operation of the engine room of the Nikunau." Id.

1. Monetary Proceeds Are Generally Relevant to Motive

Taking the motive argument first, Sanford relies extensively on the Third Circuit's decision in United States v. Abrogar, 459 F.3d 430 (3d Cir. 2006), which involved similar charges against a chief engineer for making false entries in the ORB to conceal illegal discharges of oily bilge water into the ocean. See Def.'s Mem. at 10--11. The similarity between the cases stops there, however. The issue in Abrogar was whether the district court had properly applied a six-level sentencing enhancement, pursuant to § 2Q1.3 of the United States Sentencing Guidelines, for repeated discharges of pollutants into the environment. See Abrogar, 459 F.3d at 431. The district court had imposed the six-level enhancement-even though the defendant had been charged with ORB recordkeeping violations rather than actual illegal discharges-because it found that the illegal discharges were "relevant conduct" for purposes of determining the total offense level under the Guidelines. See id. at 433; see also U.S. SENTENCING GUIDELINES MANUAL § 1B1.1 cmt. 1(H) (2011) (defining "offense" as "the offense of conviction and all relevant conduct"). The Third Circuit disagreed, holding that improper discharges are not "relevant conduct" under the Sentencing Guidelines. Abrogar, 459 F.3d at 435--36.

Sanford points to Abrogar and invites the Court to conflate the term "relevant conduct" under the U.S. Sentencing Guidelines ("USSG") § 1B1.3 with the term "relevant evidence" under FED. R. EVID. 401, but the Court declines that invitation. Even though both terms use the nomenclature of relevance, the definitions and applications of those two terms are completely different. "Relevant evidence" is evidence that "has any tendency to make a fact more or less probable than it would be without the evidence" and "is of consequence in determining the action," FED. R. EVID. 401, while "relevant conduct" is "all acts and omissions committed, aided, abetted, counseled, commanded, induced, procured, or willfully caused by the defendant; and . . . that occurred during the commission of the offense of conviction, in preparation for that offense, or in the course of attempting to avoid detection or responsibility for that offense," U.S.

SENTENCING GUIDELINES MANUAL § 1B1.3. In other words, "relevant conduct" may be "relevant evidence," but the converse is not necessarily true. As Abrogar makes plain, not all relevant evidence is "relevant conduct" under the Guidelines.

The government, on the other hand, proffers that evidence of monetary proceeds is relevant to motive because Sanford paid its employees per metric ton of fish they caught at sea. Gov't Opp. Mem. at 4--5. According to the government, this created an incentive for the crew to "primarily focus[] on fishing operations, keeping the fish properly refrigerated, and trying to maximize their catch," id. at 4, rather than spending time maintaining their ORB or running the OWS. Furthermore, the government argues, because a vessel like the San Nikunau "can be prevented entry into a port of the United States and prevented from engaging in commerce if the vessel is not in compliance with international or United States law," id., the crew had a motive to cover up the alleged violations so that they would not be barred from selling their fish at port and getting paid.

"'[M]otive is always relevant in a criminal case, even if it is not an element of the crime.'" United States v. Hill, 643 F.3d 807, 843 (11th Cir. 2011) (quoting United States v. Sriyuth, 98 F.3d 739, 747 n.12 (3d Cir. 1996)); United States v. Day, 591 F.2d 861, 874--75 (D.C. Cir. 1978) ("Motive is a state of mind . . . showing the probability of appropriate ensuing action [and] it is always relevant." (quoting 1 Wigmore on Evidence ยง 118 at 558, 561 (3d ed. 1940))). Although Sanford is correct that monetary proceeds are not an element of any offense charged, the government has demonstrated that at least some evidence of monetary proceeds will be relevant because it is ...


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