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United States v. Concord Management & Consulting LLC

United States District Court, District of Columbia

August 13, 2018

UNITED STATES OF AMERICA
v.
CONCORD MANAGEMENT & CONSULTING LLC, Defendant.

          MEMORANDUM OPINION [*]

          DABNEY L. FRIEDRICH UNITED STATES DISTRICT JUDGE

         Concord Management and Consulting LLC moves to dismiss the indictment on the ground that Special Counsel Robert Mueller was appointed unlawfully by Acting Attorney General Rod Rosenstein. Dkt. 36. The Court will deny Concord's motion. The Special Counsel's appointment complies with the Constitution's Appointments Clause because (1) the Special Counsel is an “inferior Officer”; and (2) Congress “by Law vest[ed]” the Acting Attorney General with the power to make the appointment. U.S. Const. art. II, § 2, cl. 2.

         First, the Special Counsel is an inferior officer because he is directed and supervised by the Acting Attorney General. Although the Special Counsel regulations may not permit the Acting Attorney General to countermand certain decisions made by the Special Counsel, the Special Counsel remains subject to the Acting Attorney General's plenary supervision: the Acting Attorney General has the discretionary power to rescind or revise the regulations; moreover, the Acting Attorney General effectively has the power to remove the Special Counsel at will, either via the regulations or by rescinding or revising the regulations. Second, Congress vested the Acting Attorney General with the power to appoint the Special Counsel. Even though no statute explicitly authorizes the Acting Attorney General to make the appointment, Supreme Court and D.C. Circuit precedent make clear that the Acting Attorney General has the necessary statutory authority.

         Concord's secondary arguments also fail. The appointment does not violate core separation-of-powers principles. Nor has the Special Counsel exceeded his authority under the appointment order by investigating and prosecuting Concord. Accordingly, and for the reasons stated below, the Court will deny Concord's motion to dismiss the indictment.

         I. BACKGROUND

         A. The Office of the Special Counsel

         During the Watergate era, special prosecutors were appointed through executive-branch regulations. In 1978, Congress enacted the Ethics in Government Act, which allowed for the appointment of a special prosecutor later renamed the “independent counsel.” See Pub. L. No. 95-521, § 601(a) (1978); see also Ethics in Government Act Amendments of 1982, Pub. L. No. 97-409, § 2 (1983). Under the Act, if the Attorney General determined that certain investigations or prosecutions were warranted, the Attorney General applied to a special three-judge court, which then selected and appointed an independent counsel. Pub. L. No. 95-521, § 601(a). In the face of a constitutional challenge, the independent counsel provisions of the Ethics in Government Act were upheld in Morrison v. Olson, 487 U.S. 654 (1988). The provisions expired in 1999, and Congress declined to renew them. Then-Attorney General Janet Reno testified before the Senate, “The Independent Counsel Act is structurally flawed and . . . those flaws cannot be corrected within our constitutional framework. . . . [T]he independent counsel is vested with the full gamut of prosecutorial powers, but with little of its accountability. He has not been confirmed by the Senate . . . . Accountability is no small matter. It goes to the very heart of our constitutional scheme.” The Future of the Independent Counsel Act: Hearing Before the S. Comm. on Governmental Affairs, 106th Cong. (March 17, 1999) (statement of Janet Reno, Att'y Gen. of the United States).

         As the independent counsel provisions of the Ethics in Government Act expired in 1999, the Attorney General promulgated the Office of the Special Counsel regulations to “replace” the Act. See Office of Special Counsel, 64 Fed. Reg. 37, 038, 37, 038 (July 9, 1999) (published at 28 C.F.R. §§ 600.1-600.10). Under the regulations, the Attorney General “appoint[s] a Special Counsel when he or she determines that criminal investigation of a person or matter is warranted and-

(a) That investigation or prosecution of that person or matter by a United States Attorney's Office or litigating Division of the Department of Justice would present a conflict of interest for the Department or other extraordinary circumstances; and
(b) That under the circumstances, it would be in the public interest to appoint an outside Special Counsel to assume responsibility for the matter.”

Id. The regulations govern the Special Counsel's jurisdiction, powers, and duties. They “seek to strike a balance between independence and accountability in certain sensitive investigations.” Id. According to the regulations' preamble, the Special Counsel is “free to structure the investigation as he or she wishes and to exercise independent prosecutorial discretion to decide whether charges should be brought, within the context of the established procedures of the Department.” Id. “Nevertheless, it is intended that ultimate responsibility for the matter and how it is handled continue[s] to rest with the Attorney General (or the Acting Attorney General if the Attorney General is personally recused in the matter).” Id.

         B. Appointment of Special Counsel Robert Mueller

         On April 26, 2017, Rod Rosenstein was sworn in as the Deputy Attorney General. Dep't of Justice, Meet the Deputy Attorney General (last visited August 13, 2018), https://www.justice .gov/dag/staff-profile/meet-deputy-attorney-general. As a result, he became the Acting Attorney General for matters from which the Attorney General was recused, see 28 U.S.C. § 508; 28 C.F.R. § 0.15(a), which included “existing or future investigations of any matters related in any way to the campaigns for President of the United States, ” Dep't of Justice, Office of Public Affairs, Attorney General Sessions Statement on Recusal (Mar. 2, 2017), Dkt. 36-5. On May 17, 2017, Rosenstein appointed a Special Counsel. His appointment order states: “By virtue of the authority vested in me as Acting Attorney General, including 28 U.S.C. §§ 509, 510, and 515, . . . Robert S. Mueller III is appointed to serve as Special Counsel for the U.S. Department of Justice.” Dep't of Justice, Office of the Deputy Attorney General, Order No. 3915-2017, Appointment of Special Counsel to Investigate Russian Interference with the 2016 Presidential Election and Related Matters (“Appointment Order”) (May 17, 2017), Dkt. 36-1. Per the appointment order, the Special Counsel is “authorized to conduct the investigation confirmed by then-FBI Director James B. Comey in testimony before the House Permanent Select Committee on Intelligence on March 20, 2017, including:

(i) any links and/or coordination between the Russian government and individuals associated with the campaign of President Donald Trump; and
(ii) any matters that arose or may arise directly from the investigation; and
(iii) any other matters within the scope of 28 C.F.R. § 600.4(a).”

Id. ¶ (b).[1] And “[i]f the Special Counsel believes it is necessary and appropriate, the Special Counsel is authorized to prosecute federal crimes arising from the investigation of these matters.” Id. ¶ (c). Finally, the appointment order stated that 28 C.F.R. §§ 600.4 through 600.10 “are applicable to the Special Counsel.” Id. ¶ (d).

         C. United States v. Internet Research Agency, et al.

         Nine months later, on February 16, 2018, the grand jury returned an eight-count indictment against thirteen individuals and three corporate entities: Internet Research Agency LLC, Concord Management and Consulting LLC, and Concord Catering. Indictment ¶¶ 10-24, Dkt. 1. Under 18 U.S.C. § 371, the indictment charges that the defendants conspired to defraud the United States by impeding the lawful functions of the Federal Election Commission, the Department of Justice, and the Department of State. Id. ¶ 9. Also, under 18 U.S.C. §§ 1343 and 1344, the indictment charges that the Internet Research Agency and two individual defendants conspired to commit wire and bank fraud. Id. ¶ 87. And under 18 U.S.C. § 1028A, the indictment charges that the Internet Research Agency and four individual defendants committed aggravated identity theft. Id. ¶ 97.

         On the day the grand jury returned the indictment, the magistrate issued summonses for the defendants to appear on March 20. The Special Counsel was unable to effectuate service, so the magistrate continued the initial appearance and arraignment until May 9. See Minute Order of Mar. 19, 2018. In the interim, defense counsel entered an appearance on April 11 for Concord Management and Consulting LLC. Dkt. 2; Dkt. 3. On May 4, the Special Counsel moved to continue the initial appearance and arraignment scheduled for May 9 until the Court resolved whether Concord had been properly served. Dkt. 7 at 1, 3-5. The Special Counsel also requested that the Court set a schedule for the parties to brief service-related issues by June 15. Dkt. 7 at 1, 5; Dkt. 7-5. Concord, however, responded that it intended to voluntarily appear through counsel consistent with Rule 43(b) of the Federal Rules of Criminal Procedure and it intended to plead not guilty. Dkt. 8 at 2. The Court therefore denied the Special Counsel's motion. Minute Order of May 5, 2018. At the ensuing initial appearance and arraignment on May 9, defense counsel stated that Concord was not properly served under Rule 4, but nonetheless, Concord authorized defense counsel to enter a voluntary appearance, subject Concord to the Court's jurisdiction, and plead not guilty, which defense counsel did. Dkt. 9 at 4-5, 9.

         One week later, at a status conference on May 16, the Court directed the parties to confer regarding a protective order and a briefing schedule for pretrial motions. Dkt. 18 at 5, 7-8. Because the parties did not reach agreement on a protective order, discovery was delayed. At a hearing on June 15, the Court ordered the parties to propose a joint interim protective order that same day, Dkt. 41 at 29, which the Court then issued, Dkt. 30. After further briefing, see Dkt. 37; Dkt. 39; Dkt. 40, the Court issued a more comprehensive protective order and later approved a firewall counsel to facilitate discovery, see Dkt. 42-1; Minute Entry of Aug. 6, 2018.

         Contemporaneously, on June 25, Concord filed a motion to dismiss the indictment “based on the Special Counsel's unlawful appointment and lack of authority.” Dkt. 36 at 1. Concord's motion argues that (1) the appointment of the Special Counsel violates the Appointments Clause of the Constitution; (2) the regulations governing the Special Counsel violate core separation-of-powers principles; and (3) even if the regulations are valid and binding, the order appointing the Special Counsel is inconsistent with the regulations and does not authorize the prosecution of Concord. Id.

         D. Related Cases

         Three recent opinions address similar issues. In May and June 2018, respectively, Judge Berman-Jackson and Judge Ellis resolved motions to dismiss filed by defendant Paul Manafort. Manafort argued that the Special Counsel's appointment is invalid because it conflicts with the Special Counsel regulations and, even if the appointment is valid, the Special Counsel exceeded his authority by prosecuting the particular charges against Manafort. See United States v. Manafort, No. 17-cr-0201, 2018 WL 2223656, at *1 (D.D.C. May 15, 2018); United States v. Manafort, No. 18-cr-0083, 2018 WL 3126380, at *1 (E.D. Va. June 26, 2018). Judge Berman-Jackson and Judge Ellis denied the motions. Manafort, 2018 WL 2223656, at *18; Manafort, 2018 WL 3126380, at *8, *14. Judge Ellis also noted that Manafort did not argue that the appointment of the Special Counsel violates the Appointments Clause and the parties did not dispute the issue, but he observed that “such an objection would likely fail.” Manafort, 2018 WL 3126380, at *3 n.5, *12.

         On July 31, Chief Judge Howell resolved a motion to quash filed by a witness ordered to appear before the grand jury. The witness argued that the appointment of the Special Counsel violates the Appointments Clause, and the witness “adopt[ed] and incorporate[d] by reference th[e] same arguments” advanced by Concord. Redacted Mem. Op., In re Grand Jury Investigation, No. 18-gj-0034, 2018 WL 3688461, at *10 (D.D.C. July 31, 2018) (alterations in original) (quoting Witness's Second Motion to Quash). Chief Judge Howell concluded that “the Special Counsel's power falls well within the boundaries the Constitution permits, ” and she denied the motion to quash. Id. at *2, *42. Chief Judge Howell also granted the Special Counsel's motion to unseal the redacted opinion. See Mem. & Order at 1, 7, In re Grand Jury Investigation, No. 18-gj-0034 (D.D.C. Aug. 2, 2018) (Dkt. 26); see also Order, In re Grand Jury Investigation, No. 18-gj-0034 (D.D.C. Aug. 8, 2018) (Dkt. 32) (unsealing the docket and certain filings).

         On August 3, this Court held a hearing on Concord's motion to dismiss, which the Court now resolves.

         II. LEGAL STANDARDS

         Under Rule 12(b)(1) of the Federal Rules of Criminal Procedure, a party “may raise by pretrial motion any defense, objection, or request that the court can determine without a trial on the merits.” Fed. R. Crim. P. 12(b)(1). Relevant here, a defendant may raise a “defect in the indictment” by challenging the constitutionality of the Special Counsel's appointment and his authority to bring an indictment. Fed. R. Crim. P. 12(b)(3); see also United States v. Park, 297 F.Supp.3d 170, 174 (D.D.C. 2018). “When considering a motion to dismiss an indictment, a court assumes the truth of [the indictment's] factual allegations.” United States v. Ballestas, 795 F.3d 138, 149 (D.C. Cir. 2015).

         III. THE APPOINTMENTS CLAUSE

         The Appointments Clause states:

[The President] shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.

U.S. Const. art. II, § 2, cl. 2. The clause “is more than a matter of etiquette or protocol; it is among the significant structural safeguards of the constitutional scheme.” Edmond v. United States, 520 U.S. 651, 659 (1997) (internal quotation marks omitted). The clause prescribes the manner of appointment for “Officers of the United States.” In contrast to “mere employees, ” officers are persons who “exercis[e] significant authority pursuant to the laws of the United States.” Id. (quoting Buckley v. Valeo, 424 U.S. 1, 126 (1976) (per curiam)).[2]

         By default under the Appointments Clause, officers are nominated by the President and confirmed by the Senate. The President's nomination power “prevents congressional encroachment upon the Executive and Judicial Branches, ” and confirmation by the Senate “serves . . . to curb Executive abuses of the appointment power.” Edmond, 520 U.S. at 659. “By requiring the joint participation of the President and the Senate, the Appointments Clause was designed to ensure public accountability for both the making of a bad appointment and the rejection of a good one.” Id. at 660. But for “inferior Officers, ” unlike principal officers, Congress may deviate from the default: it “may by Law vest” their appointments in the President alone, courts, or “Heads of Departments.” U.S. Const. art. II, § 2, cl. 2. The purpose of this provision is “administrative convenience, ” but “that convenience was deemed to outweigh the benefits of the more cumbersome procedure only with respect to the appointment of ‘inferior Officers.'” Edmond, 520 U.S. at 660. “These limitations on the appointment power ‘ensure that those who wield it are accountable to political force and the will of the people.'” Ass'n of Am. Railroads v. Dep't of Transp., 821 F.3d 19, 36 (D.C. Cir. 2016) (alterations omitted) (quoting Freytag v. CIR, 501 U.S. 868, 884 (1991)).

         Concord argues that the appointment of the Special Counsel violates the Appointments Clause in two ways. First, the Special Counsel is not an inferior officer. See Concord Mem. at 39-52, Dkt. 36. Second, even if the Special Counsel is an inferior officer, Congress has not “by Law vested” his appointment in the Acting Attorney General. See Id. at 20-39.

         A. The Special Counsel as an “inferior Officer”

         Consistent with the Appointments Clause, the Acting Attorney General may not appoint a Special Counsel outside of the nomination-and-confirmation process unless the Special Counsel is an “inferior Officer.” U.S. Const. art. II, § 2, cl. 2. “Generally speaking, the term ‘inferior officer' connotes a relationship with some higher ranking officer or officers below the President.” Edmond, 520 U.S. at 662. That is, “[w]hether one is an ‘inferior' officer depends on whether he has a superior.” Free Enter. Fund v. PCAOB, 561 U.S. 477, 510 (2010) (quoting Edmond, 520 U.S. at 662). “It is not enough that other officers may be identified who formally maintain a higher rank, or possess responsibilities of a greater magnitude.” Edmond, 520 U.S. at 662-63; see also Id. at 662 (observing that the exercise of significant authority “marks, not the line between principal and inferior officer for Appointments Clause purposes, but rather, as we said in Buckley, the line between officer and nonofficer”). Rather, “‘inferior officers are officers whose work is directed and supervised at some level' by other officers appointed by the President with the Senate's consent.” PCAOB, 561 U.S. at 510 (quoting Edmond, 520 U.S. at 663).

         For evaluating direction and supervision, Edmond “emphasized three factors”: whether an officer is (1) “subject to the substantial supervision and oversight of” another executive officer who is a principal officer or is “subordinate” to a principal officer, (2) subject to “revers[al]” by “another executive branch entity” so that the officer has “no power to render a final decision on behalf of the United States unless permitted to do so by other Executive Officers, ” and (3) “removable . . . without cause.” Intercollegiate Broad. Sys. v. Copyright Royalty Bd., 684 F.3d 1332, 1338 (D.C. Cir. 2012) (citing Edmond, 520 U.S. at 664-65). Of these factors, the third-the removal power-is likely “the most important to a Court's determination of principal-inferior status.” In re Grand Jury Investigation, 2018 WL 3688461, at *12; see PCAOB, 561 U.S. at 501 (noting that the power to appoint and control executive officers is “perhaps the key means” for protecting the constitutional prerogatives of the executive branch, and stating that “[t]he power to remove officers at will and without cause is a powerful tool for control of an inferior”); Edmond, 520 U.S. at 661-62.

         Statutes and regulations provide the framework for evaluating the direction and supervision of the Special Counsel. See Estes v. Dep't of the Treasury, 219 F.Supp.3d 17, 38 (D.D.C. 2016) (“Appointments Clause challenges are properly structural.”). The Special Counsel regulations matter because they have the “force of law” so long as “extant.” Nixon v. United States, 418 U.S. 683, 695 (1974). Thus they bind the Department of Justice and the Acting Attorney General. Id. (“So long as this regulation remains in force the Executive Branch is bound by it . . . .”); Accardi v. Shaughnessy, 347 U.S. 260, 266-68 (1954) (holding that when the Attorney General delegated discretionary powers via regulations, he denied himself the authority to exercise the delegated powers as long as the regulations remained operative, even though the original authority was his and he could reassert it by amending the regulations); Erie Blvd. Hydropower v. FERC, 878 F.3d 258, 269 (D.C. Cir. 2017) (“It is axiomatic that an agency is bound by its own regulations.” (alteration omitted)). The Special Counsel's principal argument is that, despite the constraints imposed by the regulations, the Acting Attorney General retains control of the Special Counsel. Therefore, the Court does not begin its analysis by “looking solely to statutes.” In re Grand Jury Investigation, 2018 WL 3688461, at *13. Instead, the Court first examines the Acting Attorney General's ability to direct and supervise the Special Counsel under the presently binding statutes and ...


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