Will recusal fix AG Jeff Sessions’ Russian problem?


(c) Brenda Grantland, 2017
published 3/5/2017 on brendagrantland.com
reprinting permitted with attribution

A brouhaha has arisen over brand new Attorney General Jeff Sessions’ testimony under oath during his Senate confirmation hearing.

When Senator Al Franken asked him whether there was

any evidence that anyone affiliated with the Trump campaign communicated with the Russian government in the course of this campaign?

Sessions replied:

I’m not aware of any of those activities. I have been called a surrogate a time or two in that campaign and I did not have communications with the Russians, and I’m unable to comment on it.

Sessions later admitted that he spoke to the Russian ambassador, Sergey Kislyak, twice during the Trump campaign.

According to Fox News, one of the meetings occurred in Session’s Senate office. The Justice Department — over which Sessions is now boss — said Sessions was conducting that meeting in his capacity as a member of the Senate Armed Services Committee.

His second meeting with Kislyak occurred after a Heritage Foundation speech, when Sessions met with Kislyak and a group of other ambassadors.

Sessions has sort of suggested he may recuse himself from any investigation of the connection between the Trump campaign and the Russians. Many think that is not enough. Some are calling for Sessions to resign as Attorney General. Others call for appointment of a special prosecutor to investigate the matter.

Is recusal enough to cure Sessions’ problem?

Recusal from any investigation of alleged contacts between the Trump campaign and Russian officals during the campaign might help address Sessions’ conflict of interest in investigating Russian influence on the Trump election — a serious conflict if Sessions was involved in the dialog between Russia and the Trump campaign.

Clearly letting Sessions be the big boss overseeing that investigation would be akin to letting Attorney General Loretta Lynch investigate the alleged interference of the Hillary Clinton campaign (for which Bill was a surrogate) with the FBI investigation of Hillary. During the FBI investigation of Hillary Clinton, when Bill sprinted to Lynch’s airplane on the tarmack and had a private conversation with her and was caught by the press, Loretta Lynch recused herself from Hillary’s FBI investigation, delegating her authority as Attorney General to the FBI chief, a delegation some said was not enough to cure the problem.

Taking his cue from Lynch’s reaction, this week Sessions offered to recuse himself from that investigation, sort of, saying “I would recuse myself on anything that I think I should recuse myself on. That’s all I can tell you.”

No doubt Sessions may try to follow Loretta Lynch’s lead in delegating his prosecutorial oversight as Attorney General to the FBI chief. To most of us, that didn’t cure the conflict with Lynch and it won’t with Sessions because the FBI chief is an underling of the Attorney General. Having the Attorney General delegate his/her power to a subordinate doesn’t cure anything. Subordinates are subject to the control of their bosses, whether overt or subliminal. Who would dare defy their boss on such a matter, especially a controversy which impugns his boss’s integrity?

Recusal won’t solve Sessions’ problem for another reason as well — it doesn’t address the question of whether he lied under oath, as House Minority Leader Nancy Pelosi charged. Because Sessions made that statement in his sworn testimony to Congress, if he lied under oath, he may have committed perjury, a felony, carrying a sentence of up to 5 years in prison.

Is Sessions’ statement perjury?

Under federal law, perjury occurs when anyone:

“having taken an oath before a competent tribunal, officer, or person, in any case in which a law of the United States authorizes an oath to be administered, that he will testify, declare, depose, or certify truly, or that any written testimony, declaration, deposition, or certificate by him subscribed, is true, willfully and contrary to such oath states or subscribes any material matter which he does not believe to be true…”

18 U.S. Code § 1621(1). The Ninth Circuit’s jury instruction breaks that criminal offense down into these elements — whether:

  • the person was under oath?
  • the testimony was false?
  • the false testimony was material to the matter under inquiry in the proceeding?
  • the person acted wilfully and with knowledge that the testimony was false?

Clearly the statement was made under oath. It occurred during Sessions’ Senate confirmation hearings for the office of Attorney General.

Was the testimony false?

According to the 1815 Congress of Vienna,

“ambassadors are diplomats of the highest rank, formally representing the head of state, with plenipotentiary powers (i.e. full authority to represent the government).”

Can there even be a shadow of doubt that the Russian ambassador is a Russian official?

Did Sessions know the statement was false?

Having served in the U.S. Senate for 20 years, he had to have known that the man he met with, Sergey Kislyak, was a Russian ambassador and that an ambassador is the highest ranking diplomat in the U.S. representing a foreign government.

The issue boils down to one question:

Was Sessions’ statement material to the matter under inquiry?

So what was the matter under inquiry?

Sessions was applying for a job as Attorney General, the top prosecutor in the country. Senator Franken was asking whether anyone affiliated with the Trump campaign had any contact with Russian officials during the campaign — because there were ongoing allegations from the Hillary Clinton campaign that Russia “hacked the election,” causing the election of Trump instead of her. That accusation is still being hurled by Hillary surrogates as her excuse for losing the election, and the controversy likely won’t die down until there is an official investigation that lays it to rest. And an investigation that the public trusts as being thorough and unbiased.

Senator Franken thought that issue was important enough to ask Sessions the general question, to which Sessions went further and replied that he himself “did not have communications with the Russians.”

Had Sessions not unequivocally denied it, but admitted that he had several meetings with the Russian Ambassador during the Trump campaign, Frankin would no doubt have asked follow-up questions about whether Sessions’ meetings included any mention of the Trump campaign, for which Sessions was currently serving as a surrogate.*

By denying any such communications, Sessions cut off that line of inquiry.

Former White House Ethics Lawyer Richard Painter pointed out that, now that the cat is out of the bag about the meetings, we need to know a lot more — “we don’t know for example what was being discussed with the Russian ambassador.”  According to Fox News,

“Franken said he was troubled that Sessions’ response to his question was ‘at best, misleading.’ He said he planned to press Sessions on his contact with Russia.”

Richard Painter, who served in the George W. Bush White House, also questioned “why a member of the Senate Armed Services Committee was having unilateral discussions with the Russians,” and called for Sessions to resign.

Clearly there is bipartisan concern about this alleged perjury.

Was Sessions’ statement just a white lie, a slip of the tongue, a nothingburger?

Numerous right wing blogs are calling this a “nothingburger.”** Just a few months ago Hillary supporters were calling Hillary’s FBI investigation a nothingburger, perhaps not using the same quaint term.

But is it trivial, much ado about nothing? The DOJ’s explanation that he was acting in his role as a member of the Senate Armed Services Committee doesn’t overlook the fact that his actual words unequivocally stated, all in the same sentence, that he had been called a surrogate of the Trump campaign and that he did not communicate with the Russians in the course of the campaign.

When I hear Sessions’ words in his characteristic Southern drawl — “I did not have communications with the Russians” — I can’t help hearing another Southerner drawl “I did not have sexual relations with that woman.”

There are some important parallels here. Meeting with the Russian ambassador is not a crime. Neither is having sexual relations with a consenting adult, even if you are president and the woman is your intern and you do it in the oval office.

The important question is, did he commit perjury when he lied under oath?

That question cannot be answered without knowing the content of the discussions Sessions had with the Russian Ambassador, because the question still remains whether Sessions’ false statement was material. Further testimony is required.

Recusing himself from heading the investigation into the Trump-Russian connection and his own conduct won’t cut it.

Even a member of his own party, Senator Lindsay Graham (R- S.C.) called for a special prosecutor — sort of — saying:

“If there’s something there that the FBI believes is criminal in nature, then for sure you need a special prosecutor.”

Of course if Sessions’ FBI is charged with deciding whether the Russian-Trump connection or what Sessions did is something “criminal in nature” — that will be the end of the investigation. No FBI chief would dare oppose the Attorney General, as FBI Chief Comey has already shown. At least Comey had the integrity to come forward voluntarily and correct a mistaken statement he had made in his Congressional testimony, an act he caught hell for from Hillary.

This brings us to the bigger questions:

1. Should perjury be a crime?

I think everyone will agree it should be. Otherwise, trials and Senate hearings would have no way of enforcing factual integrity.

2. Should there be two different standards: one for public officials and one for the public?

Let’s face it. Much of the government corruption that the American people are yammering on and on about today is about the double standard. Well connected government officials, powerful political candidates and party officials, and powerful political party donors like the banksters who caused the banking collapse and recession and yet got bailed out with taxpayer money — got different treatment from the rest of us. “Justice for just us” does not sit well with Americans who lost their jobs or life savings due to the banking collapse.

The public outcry about Sessions’ lie to Congress and the conflict of interest that it possibly uncovered should not be squelched, or drowned out by  a new red scare focused on the Russians or claims that the Democrats did the same thing, but should instead be focused on cleaning up the corruption in both parties.

Allegedly lying to Congress right out of the box during his confirmation hearing means Sessions may well lack the legal ethics chops to serve as Attorney General. The Attorney General is the nation’s top prosecutor. This position requires a high degree of legal ethics and ability to apply the law fairly and without bias. Standard 3-2.1 of the ABA Standards for the Prosecution Function say that a public prosecutor “is a lawyer subject to the standards of professional conduct and discipline.” Lying to the court, or Congress impugns ones honesty. It is an act of moral turpitude that can lead to disbarment, even for the country’s top prosecutor.

Incidentally, Bill Clinton’s lie about sex with an intern did not turn out to be a nothingburger. That lie led in 1998 to perjury charges and impeachment by the House of Representatives, ending in Bill Clinton’s acquittal in the Senate after a 21 day trial. Clinton was also held in civil contempt for lying about the Lewinsky affair in testimony in the Paula Jones case and was fined $90,000 by that judge. Clinton’s license to practice law was suspended in Arkansas for five years, and has never been reinstated, and he was also disbarred from appearing in front of the US Supreme Court.

This is not a nothingburger but a really big deal.

One or more independent prosecutors should be appointed to thoroughly investigate and report to the American people on whether there was any illegal meddling or manipulation in the entire 2016 presidential election — primaries and all — by the Russians, the DNC/Hillary campaign, or any other forces.

Making it a bipartisan inquiry could help ensure that the selection of the independent prosecutors is not biased in favor of the political party in control of both houses and the Presidency. It will also put to rest the claim that the Clintons did it first, therefore it is okay.


* Sessions was well connected to the Trump campaign all along. A July 2016 article in the Washington Post said “in the party of Trump, Sessions is at the center of the action. He was an early backer of the real estate mogul’s candidacy, when most Republican officials were denouncing Trump’s comments about Mexicans and his promise to build a wall on the southern border.”

** In case you are curious, the term “nothingburger” was apparently coined in 1984 by Ann Gorsuch, Ronald Reagan’s appointee as EPA Director. She took the position with the avowed purpose of dismantling the EPA, and succeeded in cutting its budget by 22%, relaxing EPA regulations, reducing the prosecutions of polluters, downsizing its employees, and hiring new staff from the industries that the EPA regulated. Eventually, after prolonged public outrage, she resigned her EPA post under pressure of a Congressional investigation of her alleged mishandling of the $1.6 billion toxic waste Superfund. Ronald Reagan promised Gorsuch another job in his administration. When he appointed her to a three year term as chair of an advisory committee on oceans and atmosphere (where she could have learned from experts on the panel about the effects of pollution on global warming and ocean level rise), she called that position a “nothingburger,” prompting both houses of Congress to pass resolutions asking Regan to withdraw her appointment. She then declined the job.

Neil Gorsuch — Ann Gorsuch’s son — is Trump’s nominee to the Supreme Court.

What we really need in a federal forfeiture reform bill – part 3A: an overhaul of the criminal forfeiture third party process

(c) 2015 Brenda Grantland
from Truth and Justice Blog, 4/11/2015

While we are going through the effort to try to reform civil asset forfeiture laws we need to take a look at criminal forfeiture as well. Third parties in criminal forfeiture cases are often treated worse than civil forfeiture litigants.  They certainly are not afforded the same level of due process protection.

I have previously reported on various abuses of criminal forfeiture process, especially as it affects third parties who are not charged with any crime.  See my November 30, 2014 blog, Criminal forfeiture laws need to be reformed too, and my December 6, 2014 blog, The way they are enforcing criminal forfeiture laws against third parties is just plain criminal.

Let’s face it, criminal procedure is designed to provide criminal defendants with their constitutional rights while aiding prosecutors and courts in efficiently prosecuting cases and forfeiting assets.  It was not designed to protect the rights of people who are not parties.  Victims of the crime and third parties who own interests in the property being forfeited frequently see their interests tied up for years in a process in which they do not get to participate, and in which their Due Process rights are ignored because they are not parties.


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The truth about multi-jurisdictional drug task forces

(c) 2015 Brenda Grantland
from Truth and Justice Blog, 2/2/2015, updated 10/15/2016

Attorney General Eric Holder’s Policy Order limiting a tiny aspect of the asset forfeiture program — federal adoption — is a hot topic in the news lately.   In reality the policy change will not make a dent in federal adoptions because of the multi-jurisdictional task force exemption. A multi-jurisdictional task force is made up mostly of local and state cops, with a federal agent or two to give it that federal connection.  See the DEA website page DEA Programs: State & Local Task Forces. Be sure to click on the interactive map on that page to see the multi-jurisdictional task forces operating  in your state.

The Holder policy order was partially a clever ploy to appease those clamoring for forfeiture reform. It was also a Trojan horse because it encourages state and local police agencies to form multi-jurisdictional task forces with the federal government if they want to preserve their previously abundant Equitable Sharing revenue streams.

Task forces are governed by contract between participating police agencies.  State and local police agencies are created and regulated by statutes and/or ordinances, and answer directly to the local or state government which created them, and the agency’s chain of command answers to the top official of the agency, with internal checks and balances to ensure that they enforce the law they were hired to enforce. The state or local legislature controls their purse strings and that is a big motivator to get them to obey the applicable state or local law.

The fact that the federal government could override that statutorily established chain of command, substituting federal law for the law of the state, county or city that hired them is questionable in itself.  That state and local officers’ chain of command could be supplanted by a board of directors created by private contract between law enforcement agencies is a topic of grave concern that warrants discussion.


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Attorney General Holder’s Asset Forfeiture Policy Limiting Federal Adoption Will Not Stop the Abuses


Download “Atty. Gen. Holder order limiting federal adoption”

AGassetforfetureorder.pdf – Downloaded 5123 times – 353.91 KB

Download “Atty. Gen. Holder press release re: order limiting federal adoption”

DOJpress-release-Holder-policy-Fed-Adoption.pdf – Downloaded 7882 times – 103.42 KB

(c) 2015 Brenda Grantland
from Truth and Justice Blog, 1/17/2015

There was widespread rejoicing yesterday when U.S. Attorney General Eric Holder ordered a new policy governing the Asset Forfeiture Program’s “Federal Adoption” program (often known under the broader term, Equitable Sharing).

Immediately after the order was issued, newspapers, non-profit websites, and people on Facebook were celebrating the demise of civil forfeiture as we know it.  Breathless articles were published on the internet and widely reposted, reporting the news based on facts gleaned from other newspaper articles – instead of the policy order itself. [Note: You may download Holder’s policy order and the DOJ press release about it from the Download Attachment links at the top of this page.]

As the story spread, exaggerations grew.  By yesterday afternoon, the hysteria on Facebook was spreading faster than I could post comments debunking the misunderstandings.  Forfeiture victims were asking if they can get their stuff back now.

The problem began with reporters who misunderstood the legal terms used in the order. For example, the web article Amazing! Holder Ends An Asset Seizure Program, which has since been replaced, 1/ said Holder announced the U.S. “was ending the Federal Government’s ‘Equitable Sharing’ program, otherwise known as civil forfeiture.”  Some people took that to mean civil forfeiture had been abolished by Holder’s order – it hadn’t. Equitable Sharing is not the same thing as civil forfeiture.  And Holder’s order was not really about the Equitable Sharing program, but the subdivision of that program known as Federal Adoption.


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Meaningful punishment…? Puh-lease!

(c) 2014 Brenda Grantland
reprinted from Truth and Justice Blog 11/17/2014

A fellow defense attorney sent me a Huffington Post article from November 8, 2014, For the First Time Ever, a Prosecutor Will Go to Jail for Wrongfully Convicting an Innocent Man, by University of Cincinnati law professor Mark Godsey, a former prosecutor and editor of the Wrongful Convictions Blog.  It begins:

Today in Texas, former prosecutor and judge Ken Anderson pled guilty to intentionally failing to disclose evidence in a case that sent an innocent man, Michael Morton, to prison for the murder of his wife. When trying the case as a prosecutor, Anderson possessed evidence that may have cleared Morton, including statements from the crime’s only eyewitness that Morton wasn’t the culprit. Anderson sat on this evidence, and then watched Morton get convicted. While Morton remained in prison for the next 25 years, Anderson’s career flourished, and he eventually became a judge.

In today’s deal, Anderson pled to criminal contempt, and will have to give up his law license, perform 500 hours of community service, and spend 10 days in jail. Anderson had already resigned in September from his position on the Texas bench….

I agree with Godsey’s statements that most prosecutors and police are ethical and try to comply with their responsibilities under the Constitution – if “most” means at least half.  But there is no way to know for sure. I have seen an inordinate number of dishonest, corrupt cops and prosecutors who withhold evidence, fabricate evidence, and lie in court, and bury their wrongdoing until a zealous adversary or reporter uncovers it.  It would be impossible to determine how common unethical prosecutors and police are because so few get exposed for their wrongdoing.

I also agree with Godsey’s statement that, when police and prosecutors get caught committing flagrant violations of ethics, law and their constitutional responsibilities, they almost always escape punishment of any kind for it.  Read his Huff Po article for some very troubling examples of corrupt prosecutors and cops being coddled and even rewarded.


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Are bogus “fraud” and SUA civil forfeiture cases the latest federal forfeiture racket?

(c) 2014 Brenda Grantland
Truth and Justice Blog, 5/5/2014

In the past few years I’ve seen a lot of bank account seizures based on the allegations that the money was “traceable proceeds” of fraud – or proceeds of Specified Unlawful Activity (“SUA”) 1/– without any criminal charges  being filed against the property owner.

In many such cases we have successfully resolved the forfeiture case – and my clients have gotten back most if not all of the money – without any criminal charges ever being filed. How did we do it? It required diligent investigation, aggressive pursuit of discovery, research, and a great deal of effort, but often in the end I found the government just didn’t have a case.

With fraud and white collar crime being such a big problem in the U.S. today, why would the government seize a bank account for forfeiture based on a fraud or SUA proceeds theory and not prosecute the property owner with the underlying crime?


Twentieth Century COINTELPRO revisited

(c) 2014 Brenda Grantland
Truth and Justice Blog, 1/7/2014

I was already planning a blog about COINTELPRO in the near future when astounding news broke today:  The activists who broke into an FBI Office in Media, Pennsylvania on March 8, 1971 and stole the COINTELPRO papers publicly revealed their identities today!

In case you weren’t around in the early 1970s, COINTELPRO (short for COunter INTELligence PROgram) was a secret program of government surveillance, infiltration and sabotage against political activists, officially begun in 1956 and designed by FBI Director J. Edgar Hoover.  Hoover used FBI resources to spy on, infiltrate, undermine and disrupt advocacy groups he considered subversives and those critical of his regime.  Targets included activists who opposed the War in Vietnam, or who supported the Civil Rights movement, the Indian Rights Movement, and a myriad of other peaceful associations advocating societal or legislative change – activities protected by the First Amendment.

Among many other targets of COINTELPRO in the 1960s-1970s were: Rev. Martin Luther King Jr., the NAACP, Southern Christian Leadership Conference, Student Nonviolent Coordinating Committee, Senator Frank Church, Senator Howard Baker, the American Indian Movement, the Black Panthers, anti-Vietnam war groups including the Students for Democratic Society and Weathermen, among many others.

As stated by Wikipedia “FBI Director J. Edgar Hoover issued directives governing COINTELPRO, ordering FBI agents to ‘expose, disrupt, misdirect, discredit, or otherwise neutralize’ the activities of these movements and their leaders.”  Many of their tactics allegedly included libelous, tortious and even criminal activities against the targets.


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How our criminal justice system got so out of whack

(c) 2013 Brenda Grantland
reprinted from Truth and Justice Blog, 11/22/2013
When I graduated law school and began my legal practice I had starry eyed notions about the adversary system and believed that it really worked the way it was supposed to.

On the one side there was a relatively conscientious and ethical prosecutor and the other side a relatively conscientious and ethical defense attorney, with a judge who would be relatively fair and unbiased and would follow the law most of the time.

Theoretically these systems would all mesh together into a system of checks and balances that should ensure that citizens are treated fairly and ethically by the criminal justice system, and that the results are equitable under the true facts and established law.

But it doesn’t work that way in real life.

After three decades practicing law, mostly in the criminal justice and asset forfeiture system, with the federal government as my opponent, I can see the system is way out of whack. It’s even worse under state law, where fundraising through lucrative asset forfeiture cases is used to supplement budget shortfalls.

Asset forfeiture has corrupted the criminal justice system and disrupted the system of checks and balances that previously kept law enforcement corruption and unjust prosecutions more or less under control.


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Home team bias in local press coverage of the Thomas Petters cases

by Brenda Grantland 1-2-2011, updated 1-26-2011

(c) 2011, Brenda Grantland, Esq.

Copyright notice:  This article may be linked to, emailed, printed, and disseminated to others so long as it is done free of charge, without changes to the text, and with this copyright notice included.  However, this article may not be republished for sale, either by itself or as part of a compilation of other material, without written permission from the author.

The opinions stated in this blog are the opinions of the author, and do not necessarily reflect the views of any other associate of, or client represented by, the Law Office of Brenda Grantland.


The Thomas Petters fraud scheme litigation has been a big story in the Minnesota press for the past two years, providing almost daily fodder for the local news media. The Petters Receivership and related bankruptcy cases are big money-makers for Minneapolis-St. Paul area law firms, a boon to the local economy during the recession, especially after Petters empire imploded, losing many local jobs. Quite understandably, the Petters Receivers and Trustees and prosecutors were treated as heroes by the local media. Petters’ victims (most of whom were from out of state) did not fare so well – in the courts or in the local media. The local press rarely covered the travails of the victims and creditors who sought (and were denied) relief from the receivership litigation stay, or who tried to assert their statutory rights as crime victims in the criminal litigation and were rebuffed at every turn.

For the past year and a half years I have represented Ritchie Capital Management (“Ritchie”), a Petters victim, in the receivership and criminal restitution litigation. I was generally disappointed with the coverage (or lack thereof) of victims’ issues by the Minnesota press, but its recent coverage of Ritchie’s restitution litigation really showed the local media’s true colors.

On December 1, 2010 Ritchie filed a certiorari petition to the United States Supreme Court, Ritchie Special Credit Investments, Ltd., et al., Petitioners v. Thomas Petters, et al., # 10-738, seeking review of the Petters’ criminal judge’s orders denying restitution to victims, and the Eighth Circuit’s dismissal, without written opinions or any statement of reasons, of Ritchie’s mandamus petitions. The certiorari petition was the culmination of months of litigation under the Crime Victims Rights Act of 2004 and the Mandatory Victim Restitution Act of 1996, two statutes which gave victims actual enforceable rights in the criminal process that they never had before. In Petters’ criminal case when the criminal judge denied victims their CVRA and MVRA rights, Ritchie filed four petitions for mandamus [1/] in the federal Court of Appeals for the Eighth Circuit.  Without even requiring the government to respond on the merits to Ritchie’s claims of CVRA and MVRA violations, the Eighth Circuit dismissed every one of Ritchie’s mandamus petitions, without a written opinion or any statement of reasons. That in itself is a violation of the CVRA, which specificially requires a written opinion detailing the reasons if the court of appeals denies the victim’s petition.  The press did not cover Ritchie’s CVRA and MVRA litigation in the district court or Eighth Circuit.

Ritchie’s filing of the certiorari petition spontaneously began generating press coverage. Ritchie decided to put out a press release explaining what our certiorari petition was all about, with a link to the petition itself. The press release was picked up and distributed on the PR Newswire. A few days later I got a call from John Welbes, a reporter at St. Paul, Minnesota’s  Pioneer Press. Though disappointed in the past by the local media coverage, I took the call and answered his questions.  I was on the phone with Welbes  for quite some time, explaining at length the issues raised in our petition.  I explained that the Mandatory Victim Restitution Act requires a criminal court judge, when sentencing a criminal defendant convicted of fraud, to enter restitution judgments against the defendants in favor of all “direct and proximate” victims in the full amount of their losses. The narrow exception [2/] the criminal judge cited, the “complexity exception,” allows criminal judges to avoid determining restitution if the court finds, from facts in the record, that the burden on the sentencing process of determining restitution outweighs the harm to victims of denying restitution. I pointed out that the reason the judge stated in denying restitution — that victims had other remedies they could pursue — was not a reason listed in the MVRA’s  “complexity exception”.  In fact, the judge’s reliance on the availability of other remedies conflicted with a provision of the MVRA’s procedural statute, which prohibits the court from considering the victim’s entitlement to compensation from other sources in determining the amount of restitution. Currently the courts are split on whether the availability of other remedies may be considered in weighing the factors of the complexity exception.

When the article, “Ritchie Capital Goes To High Court“, appeared in the St. Paul, Minnesota, Pioneer Press on 12/16/2010, it made no mention of the Mandatory Victim Restitution Act. Instead of explaining that Ritchie’s petition involved litigation under a criminal statute, the article made it appear that this was just some argument Ritchie had made up in a bankruptcy case.  The article even went so far as to quote a “bankruptcy expert” who pooh-poohed Ritchie’s certiorari petition:
Ritchie’s “chances are slim,” said David Leibowitz, a Chicago attorney and bankruptcy expert who hasn’t worked on the Petters case. He said there isn’t a “big split” in rulings from various courts of appeals around the country on restitution cases and that Ritchie could appear to be asking for an unequal distribution of assets, favoring itself over other creditors.”I don’t think this (Supreme Court case) is going to get them anywhere,” he said.
Dismayed by the reporter’s mangled description of our case and his expert’s criticism of our argument, I emailed David Leibowitz to see what his qualifications were regarding the MVRA:
Mr. Leibowitz –

I saw your quote in a news article, and I was wondering what your experience is in criminal restitution matters?  Have you represented victims in criminal cases when they file claims under the Mandatory Victims Restitution Act?

Brenda Grantland

He promptly responded with this email:
Thanks for your inquiry. I have little to no experience with criminal restitution. If you want, I’ll try to find someone for you who does. Where do you live?

Kind regards,
David Leibowitz

I then wrote him back to ask why he thought he had sufficient expertise on criminal restitution under the MVRA to criticize our certiorari petition (which did not involve bankruptcy law at all) and why he made the unkind (and untrue) suggestion that Ritchie was trying to get an unequal share of the assets.  (Read entire message here.)

Leibowitz immediately wrote me back:
I am a bankruptcy expert and my opinion is rendered in that context.
Best wishes

David LeibowitzLakelaw
Waukegan – Chicago – Kenosha
Sent from my iPhone
There was no bankruptcy context.  Our certiorari petition and all the litigation that led up to it all happened in criminal court, under crime victims’ rights statutes in the criminal code (title 18 U.S.Code).  Leibowitz was stating an opinion on something he admittedly knew nothing about.  And he never explained the basis for his gratuitous slur that Ritchie appeared to be trying to gain an advantage over other creditors.

I cc’d John Welbes but he never responded to my email. Apparently he sees nothing wrong with attacking those who criticize the “home team” by calling in “experts” with no expertise on the subject matter on which they render opinions.  I recommend that all readers of his articles take everything Welbes says with a grain of salt, especially when he quotes “experts.”

#  #  #

Not to be outdone by the Pioneer Press, Twin Cities Business Magazine reporter Jake Anderson wrote a similarly skewed and mangled piece of journalism — “Petters Investor Petitions Supreme Court” — without speaking to anyone representing Ritchie, and apparently without bothering to read our certiorari petition.  The Twin Cities Business article begins with a subtitle in bold proclaiming:

Ritchie Capital Management says that it and other victims of Tom Petters’ Ponzi scheme have been denied restitution by the courts.   A local expert said that there are “sufficient mechanisms” in place for creditors to recover valid claims.”

Ritchie “says it and other victims… were denied restitution?”

It’s not a matter of interpretation.  Judge Kyle issued orders denying restitution on June 3, June 4 and July 2.  You can download them above, along with a copy of the transcript in which Judge Kyle orally denied our motion to vacate his orders denying restitution.

The Twin Cities article completely botches the issues in Ritchie’s certiorari petition:

Ritchie claims that the Mandatory Victim Restitution Act of 1996 dictates that it should be awarded restitution for its losses by suing Petters’ companies directly, …

Completely wrong.  The MVRA dictates that the sentencing judge award restitution to fraud victims without requiring victims to sue the defendant.

… but the courts ruled that victims must recover funds through other means—namely, by filing claims in the Petters bankruptcy case and receiving assets when they are doled out by Doug Kelley, the receiver in the case.

That is not correct either.  The criminal judge declined to award MVRA restitution against Petters and his codefendants, citing the complexity exception, but relying on a reason not included in the complexity exception — the fact that victims might qualify for some compensation from the pending bankruptcy cases of Petters’ companies.  The article fails to explain that there are several pools of assets that were seized from the defendants.  The bankruptcy cases only involve some of Petters’ companies.  None of the individual defendants declared personal bankruptcy (nor could they be forced into bankruptcy by victims or creditors, because the receivership litigation stay prohibited all lawsuits against the defendants).  All of the personal assets of the co-defendants, totalling $10 – $50 million, are in the hands of the receiver Douglas Kelley. This money would have been be distributed pro rata to the victims as part of the sentencing process in the criminal cases (see Doc. 393 p. 3), but the judge denied restitution to the victims.

Mertz is also wrong in his suggestion that Receiver Doug Kelley will be doling out funds to victims. There is no statutory mechanism in 18 U.S.C. § 1345 which allows the Receiver to dole out anything to victims. If the orders denying restitution are upheld, those funds held by the receiver will be forfeited to the federal government. Judge Kyle said victims were free to ask the federal government to give them some of the assets through the DOJ remission program, but that is a completely discretionary remedy, decided by the Chief of the Asset Forfeiture and Money Laundering Division of the DOJ, without a hearing, without a judge, and with victims having no right to appeal to any court if the Asset Forfeiture Chief turns them down.  The Chief of AFMLS has already indicated that they intend to distribute the “net proceeds” to “qualified victims” — obviously meaning what’s left after law enforcement agencies are paid. Regulations governing the remission process do not have the same standards for “qualified victims” as the MVRA standards defining “victims” as those “directly and proximately” harmed by the crimes for which each defendant is convicted.

Once again, the local press brought in “a local expert” to contradict Ritchie’s arguments. Like the Pioneer Press’s expert, Mertz also appears to be a bankruptcy lawyer, since he says there are sufficient mechanisms in place for “creditors” — a term used in bankruptcy cases, but not in criminal restitution cases.  Although there is some overlap, creditors of the various corporate bankruptcy cases are not the same group of folks as the “direct and proximate” victims of Petters’ and his codefendants’ crimes — who are entitled to criminal restitution under the MVRA. The rights of bankruptcy creditors and crime victims are very different, and they are enforced in different courts.  Ritchie will hopefully receive some compensation some day from the bankruptcy cases as creditors of some of the Petters’ companies, but that’s not the same thing as criminal restitution judgments. [3/]  Defendants convicted of fraud are personally liable under the MVRA for the full amount of their victims’ losses “directly and proximately” caused by the fraud, and MVRA restitution judgments are enforceable for 20 years, against assets the defendants obtain in the future.

Mertz … said that, in his opinion, there are “sufficient mechanisms” put in place for creditors of the various Petters entities to recover valid claims from the bankruptcy case and the receivership. “It’s whether claims are valid” that will be difficult to determine, and Kelley has previously objected to some of Ritchie’s claims, he added.

True, there are the regular bankruptcy mechanisms that victims of Petters’ fraud can pursue in a bankruptcy cases if they are creditors of one of the bankrupt companies.  But Mertz is wrong in suggesting there is a mechanism by which victims can file claims with Receiver Doug Kelley and get compensation from the $10 – $50 million in personal assets of the defendants held by Kelley’s receivership.  The receivership case was brought under a criminal statute — 18 U.S.C. § 1345 — which only empowers the Receiver, Doug Kelley to “hold assets in place” (see Order, PCI bankruptcy Doc. 153 p. 22) until they are distributed by order of the criminal judge in restitution and/or forfeiture.  Section 1345 does not allow the Receiver to decide claims or distribute the assets to fraud victims.  When Mertz says Kelley has objected to some of Ritchie’s claims, he is probably referring to the Polaroid bankruptcy case, where Kelley objected to Ritchie’s claim as a secured creditor of Polaroid, as opposed to an unsecured creditor — because Ritchie’s liens were perfected less than 90 days before Polaroid declared bankruptcy.  This avoidance action brought in the Polaroid bankruptcy case has nothing to do with Ritchie’s right to restitution under the MVRA.  There is no dispute that Ritchie’s restitution claims are valid. The government recognized Ritchie as a victim of the fraud and correctly stated Ritchie’s losses in its Final Proposed Restitution Order, Exhibit 1. PricewaterhouseCoopers’ report (p. 11) came up with the same figure for Ritchie’s net losses as the government’s figure  (see Doc. 456-1 p. 10) — $165,294,491.

And who is this “local expert”?  The article says Steve Mertz is “a partner in Faegre & Benson’s finance and restructuring practice” … “whose firm represents some creditors and defendants in clawback suits related to the Petters case.” Mertz and his firm, Faegre & Benson, played prominent roles in the Polaroid bankruptcy case, first as counsel to the Committee of Unsecured Creditors, when Polaroid was in chapter 11 bankruptcy.  After it was converted to chapter 7 bankruptcy and John Stoebner was appointed trustee for Polaroid, Stoebner had Faegre & Benson appointed special counsel to the Trustee.  Steve Mertz served in that capacity when the Trustee helped negotiate the coordination agreement, which funnelled the assets held by the Petters receivership to the federal government while carving out the bankruptcy estates of the Petters companies to be separately administered by the bankruptcy courts. Ritchie objected to the coordination agreement.

Steve Mertz ranked near the top of the List of High Billers in the Polaroid Bankruptcy case for 2009, billing the Polaroid bankruptcy estate $605 per hour for his services to the committee for unsecured creditors. His 2010 rates went up to $625 per hour.  Faegre & Benson has been paid a total of $ 288,012.81 so far from the Polaroid bankruptcy estate.  (No creditors have been paid anything yet.)

Faegre & Benson also represents Frank Vennes, who was implicated as a co-conspirator in the Petters fraud scheme (see Rice affidavit p. 10, 14-16), but was never indicted.  His assets and the assets of his companies — including Metro Gem and Metro Gold — were restrained in the same § 1345 civil injunction and receivership action as Petters’ assets (only with a different Receiver, Gary Hansen).  Like Petters (see p. 18), Vennes and Metro Gem were given a litigation stay (see p. 13) preventing victims and creditors from suing them.  Frank Vennes’ investment funds netted profits from the Petters scheme, according to the government’s Final Proposed Restitution Order (see p. 6), and they are now the target of a clawback suit brought by Doug Kelley (in his role as PCI-PGW bankruptcy trustee) seeking $2,348,317,000 ($2.3 billion).  Under a settlement plan proposed by Vennes and his Receiver, Gary Hansen, and supported by the federal government (go figure!), Vennes proposed to distribute ALL of the restrained assets held by the Metro Gem Receiver to Metro Gem’s own investors — some of whom netted profits from Metro Gem — with nary a penny to Petters’ direct victims whose money was funnelled to Metro Gem.  PCI bankruptcy trustee Doug Kelley objected to the Vennes’ plan, saying the Vennes defendants are the second or third largest winner from the Petters scheme, having raked in “$204 million [in] false profits and commissions,” and that some of the Metro Gem assets should be clawed back to the PCI/PGW bankruptcy estates. See objection p. 3. [Update: On January 26, Judge Montgomery approved the proposed settlement, but withheld 20% of the assets pending resolution of the clawback claims.]

The article says Faegre & Benson represents “some creditors and defendants in clawback suits” in the related bankruptcy cases, but doesn’t say who they are.  We found a few.  In addition to Frank Vennes/Metro Gem (both clawback defendants in the PCI/PGW bankruptcy) Steve Mertz/Faegre & Benson also represent General Electric Capital, in a PCI clawback suit seeking $293,464,000.  The complaint in the GE Capital clawback suit alleges on page 14 that “[t]estimony of GE Capital employees, Jack F. Morrone and Paul Feehan, from the criminal trial of Petters shows that GE Capital had actual knowledge regarding the fraudulent scheme and wrongdoing, prior to the transfer of more than $48,000,000 to GE Capital, including knowledge of forged and fraudulent purchase orders and checks by PCI and Petters Capital, Inc.”

Steve Mertz/Faegre & Benson also represent Sun Minnesota Foreign Holdings, LLC, Sun Minnesota Domestic Holdings, LLC, Sun Credit, LLC and Whitebox Advisors LLC in a $ 4,047,000 clawback suit brought by the Committee for Unsecured Creditors in the Sun Country Airlines bankruptcy case.  The clawback complaint alleges “the Defendants were a large investor group who exerted substantial influence over Petters and his companies in order to extract value from the Debtor and MN Holdings in an exit from the Defendants’ investments in the Debtor.”  (See clawback complaint p. 5).

As entities that netted profits from Petters’ fraud scheme, the Vennes defendants, GE Capital and the Sun Minnesota/ Whitebox entities are natural adversaries of Petters’ direct victims who sought MVRA restitution and filed bankruptcy claims to recoup some of their net losses.

So it is easy to see the reason for his bias, but what exactly is Steve Mertz’s expertise that qualifies him as an expert in crime victims rights and restitution?  “He practices in the areas of bankruptcy, business reorganization and commercial finance,” according to the Faegre & Benson’s website. Apparently, he is no more an expert on criminal restitution or crime victims rights than Leibowitz was.



1/  Mandamus is an ancient but rarely used “writ” to command a public official to do his duties as the law commands.  When Congress enacted the CVRA, it made the new rights enforceable by victims by including a provision allowing crime victims to obtain appellate review of decisions denying victims their rights under the statute by filing petitions for writ of mandamus.  We had to file four separate petitions for mandamus because CVRA requires them to be filed within 14 days after the order is entered denying the right protected by the CVRA (in our case, the right to “full and timely restitution”), and Judge Kyle issued four separate orders.  See Mandamus #1, #2, #3, #4.

2/  There are two exceptions to the MVRA, allowing the judge to decline to award mandatory restitution: (1) when the number of identifiable victims is too numerous and (2) under the “complexity exception” balancing test which Judge Kyle cited.  Courts have imposed MVRA restitution in cases involving 10,000 victims, so the handful of direct victims here would not qualify under the first exception.

3/  The MVRA prohibits a sentencing judge from taking into consideration a victim’s entitlement to compensation from “any other source” in setting the amount of restitution.  But after a restitution judgment is entered, the defendant is entitled to credits against a restitution judgment for any amounts recovered by the victims for the same losses from civil litigation, which would include bankruptcy payments to victims.