UNITED STATES OF AMERICA, PETITIONER V. JOHN R. WILLIAMS, JR. No. 90-1972 In The Supreme Court Of The United States October Term, 1990 The Solicitor General, On Behalf Of The United States, Petitions For A Writ Of Certiorari To Review The Judgment Of The United States Court Of Appeals For The Tenth Circuit In This Case. Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Tenth Circuit TABLE OF CONTENTS Question Presented Opinions below Jurisdiction Constitutional provision involved Statement Reasons for granting the petition Conclusion OPINIONS BELOW The opinion of the court of appeals (App., infra, 1a-15a) is reported at 899 F.2d 898. The orders of the district court (App., infra, 16a-18a, 19a-26a) are unreported. JURISDICTION The judgment of the court of appeals was entered on March 20, 1990. Petitions for rehearing were denied on April 22, 1991. App., infra, 27a. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). CONSTITUTIONAL PROVISION INVOLVED The Fifth Amendment provides in pertinent part: No person shall be held to answer for a * * * crime, unless on a presentment or indictment of a Grand Jury * * *. STATEMENT QUESTION PRESENTED Whether an indictment may be dismissed because the government failed to present exculpatory evidence to the grand jury. 1. Between September 1984 and November 1985, respondent obtained loans and renewals of loans from several banks in Tulsa, Oklahoma. In applying for those loans, respondent provided the banks with two types of financial statements. One statement, called a "Market Value Balance Sheet," included a list of respondent's "current assets." In financial statements, current assets are generally understood to be cash or assets that can be converted to cash within one year. Respondent's list of current assets contained a group of "notes receivable"; included in the list were notes totalling between $5 million and $6 million reflecting loans that respondent had made to three venture capital companies. Although respondent's balance sheet did not disclose the fact, each of the venture companies was relatively new and had a negative net worth at the time the statements were submitted to the banks; the value of those notes was therefore questionable. App., infra, 2a. The second financial document used by respondent was a "Statement of Projected Income and Expense." It listed as a source of income for respondent the interest that was payable on the venture capital notes described above. Because of the precarious financial condition of the venture companies, no interest could be paid on the notes apart from the funds generated from respondent's own loans to the companies. Respondent's financial statements, however, failed to indicate that the interest income did not derive from an independent outside source, but came from the funds that he himself had invested in the venture companies. App., infra, 2a-3a. 2. On May 4, 1988, a grand jury sitting in the United States District Court for the Northern District of Oklahoma returned a seven-count indictment against respondent. The indictment charged respondent with knowingly making false statements to federally insured banks for the purpose of influencing the banks to extend loans, in violation of 18 U.S.C. 1014. The allegedly false oral and written statements related to respondent's overvaluation of the notes receivable in his current assets, and the overvaluation of his interest income in his projected income statement. App., infra, 3a. After receiving portions of the grand jury transcript in discovery, respondent moved to dismiss the indictment on the ground that the government had failed to present "substantial exculpatory evidence" to the grand jury as required by United States v. Page, 808 F.2d 723, 728 (10th Cir.), cert. denied, 482 U.S. 918 (1987). Respondent claimed that his ledgers, tax returns, and other financial records were in the government's possession, but had been withheld from the grand jury. Respondent's theory was that those documents were exculpatory because they revealed that he and his accountants had consistently treated the notes receivable and interest income in the same manner as they had been treated in the presentations to the banks. Respondent also asserted that the government had in its possession and should have presented to the grand jury a five-volume transcript of his deposition, given in a bankruptcy proceeding, in which he explained his methods of accounting and financial reporting in a fashion that he claimed exonerated him. App., infra, 3a-4a. The district court initially denied respondent's motion, concluding that "there has been no substantial exclusion of exculpatory evidence from the purview of the Grand Jury." App., infra, 17a. Although stating that certain "potentially" exculpatory evidence had not been presented to the grand jury, the court found that that information did not rise to the threshold set by Page, because a prosecutor is not obligated "to 'ferret out and present every bit of potentially exculpatory evidence.'" Ibid., citing Page, 808 F.2d at 728. On reconsideration, however, the court reversed itself and dismissed the indictment. The court stated that two categories of evidence in the government's possession constituted "substantial exculpatory evidence" that had been withheld from the grand jury: (1) the bankruptcy deposition, in which respondent explained his financial accounting methods, and (2) various financial statements, tax records, accounting ledgers, and other documents prepared by respondent and his accountants. App., infra, 23a. As the court saw it, that evidence was germane to respondent's "intent to make materially false statements upon which the banks would rely," and was "substantially exculpatory." Id. at 24a. The court then applied this Court's decision in Bank of Nova Scotia v. United States, 487 U.S. 250, 256 (1988), under which an indictment may be dismissed for prosecutorial misconduct only if "'the violation substantially influenced the grand jury's decision to indict,' or if there is 'grave doubt' that the decision to indict was free from the substantial influence of such violations." Examining the facts under the Bank of Nova Scotia test, the district court concluded that the withheld information "raises reasonable doubt about (respondent's) intent to defraud," such that the grand jury's decision to indict was "gravely suspect." App., infra, 26a. Accordingly, the court dismissed the indictment without prejudice. Ibid. 3. The court of appeals affirmed. Citing its decision in Page, the court declared that "a prosecutor has the duty to present substantial exculpatory evidence to the grand jury." App., infra, 5a. The court treated the district court's determination that the government had withheld exculpatory evidence as a finding of fact, and it concluded that the district court's ruling was not clearly erroneous. Id. at 4a-5a, 7a-11a. As to the bankruptcy deposition, the court of appeals found that although respondent's explanations of his accounting methods "may seem irrelevant and self-serving under the government's theory of the case, the grand jury must receive any information that is relevant to any reasonable theory it may adopt." App., infra, 8a. In this case, the court stated, the grand jury could reasonably have accepted, a different view of respondent's definition of "current assets" than that offered by the government; if it had, respondent's explanations of his accounting methods "would have been relevant" in tending to establish that he lacked an intent to defraud the banks. Id. at 8a-9a. As to respondent's financial records, the court noted that respondent had consistently reported his income and expenses in the same way that he had presented them to the banks. The court also observed that the grand jury could have concluded that respondent's financial statements put the banks on notice that respondent used an unconventional method to account for his current assets. App., infra, 9a-10a. In light of those factors, the court concluded that the withheld evidence was "consistent with the possible theory that (respondent) simply did not intend to mislead the banks." Id. at 11a. It therefore upheld the district court's characterization of the withheld information as exculpatory. /1/ Ibid. The court also upheld the district court's determination that the absence of this evidence rendered the indictment vulnerable to dismissal under the Bank of Nova Scotia standard. The court explained that "the purpose of the grand jury is to render an unbiased, independent, and informed decision based on all relevant evidence"; the "government's theory of the case is not critical." App., infra, 14a. Reasoning that "(t)he finding of intent to commit a criminal act is a determination the grand jury must make in deciding whether probable cause exists," the court sustained the district court's ruling that "the failure to present evidence relevant to the critical issue of intent rendered the indictment suspect," ibid., and justified the dismissal of the indictment without prejudice, id. at 14a-15a. REASONS FOR GRANTING THE PETITION The court of appeals held that an indictment may be dismissed when the government has in its possession, but fails to present to a grand jury, evidence that is deemed "exculpatory" because it is consistent with a possible theory of defense. That holding squarely conflicts with decisions of other courts of appeals, which have held that a prosecutor has no duty to present exculpatory evidence to the grand jury. It also conflicts with basic principles governing the function of a grand jury and threatens to cause practical problems for courts and prosecutors. In hindsight, defendants can easily identify some arguably exculpatory evidence that the prosecutor did not present to the grand jury. If the decision below is allowed to stand, courts will be required to adjudicate those highly factual issues before trial, and prosecutors will have to expand their grand jury presentations to avert possible avenues of challenge. The decision below therefore constitutes a substantial source of potential delay and disruption in the criminal process. Because the question whether a prosecutor has any duty to present exculpatory evidence to a grand jury is a recurring issue on which the circuits are divided, and because the correct resolution of that question is of importance to the criminal justice system, this Court's review is warranted. 1. The Tenth Circuit's holding that a prosecutor has a duty to disclose exculpatory evidence to a grand jury conflicts with the holdings of at least five other circuits. The First, Sixth, Eighth, Ninth, and Eleventh Circuits have all ruled that a prosecutor has no obligation to present exculpatory evidence to a grand jury. See United States v. Rivera-Santiago, 872 F.2d 1073, 1087 (1st Cir.) (prosecutor is neither required "to disclose exculpatory evidence" to a grand jury, nor "to impeach the credibility of his own witnesses"), cert. denied, 492 U.S. 910 (1989); United States v. LaTorre, 922 F.2d 1, 7 (1st Cir. 1990) (same); United States v. Adamo, 742 F.2d 927, 937 (6th Cir. 1984) ("A federal prosecutor is not obligated to present exculpatory evidence to the grand jury."); United States v. Vincent, 901 F.2d 97, 99 (8th Cir. 1990) ("The government is 'normally not under a duty to disclose exculpatory evidence to the grand jury.'"); United States v. Larrazolo, 869 F.2d 1354, 1359 (9th Cir. 1989) ("Ninth Circuit precedent does not impose an affirmative duty on the prosecutor to present exculpatory evidence * * *. 'The prosecutor has no duty to present to the grand jury all matters bearing on the credibility of witnesses or any exculpatory evidence.'"); United States v. McClintock, 748 F.2d 1278, 1285 n.3 (9th Cir. 1984) ("We reject any argument that the indictment should be dismissed for failure of the prosecutor to present exculpatory material to the grand jury. The prosecutor has no such legal obligation."), cert. denied, 474 U.S. 822 (1985); United States v. Hawkins, 765 F.2d 1482, 1488 (11th Cir. 1985) ("The government is not obligated to present exculpatory evidence to a grand jury."), cert. denied, 474 U.S. 1103 (1986). /2/ In United States v. Page, the Tenth Circuit explicitly broke with that line of authority to join those circuits it perceived as imposing the duty on a prosecutor to disclose exculpatory evidence to the grand jury. Page began by stating that "(t)here are two views concerning the duty of a prosecutor to present exculpatory evidence to a grand jury." 808 F.2d at 727. While noting that several decisions have rejected such a duty, it read decisions from the Second /3/ and Seventh /4/ Circuits as "suggest(ing) that, although a prosecutor need not present all conceivably exculpatory evidence to the grand jury, it must present evidence that clearly negates guilt." Ibid. The court then adopted the latter rule, holding that "when substantial exculpatory evidence is discovered in the course of an investigation, it must be revealed to the grand jury." Id. at 728. The court justified its rule by stating that it promotes "judicial economy," because "(i)f a fully informed grand jury cannot find probable cause to indict, there is little chance the prosecution could have proved guilt beyond a reasonable doubt to a fully informed petit jury." Ibid. Although the court in Page qualified its holding by stating that a prosecutor need not "ferret out and present every bit of potentially exculpatory evidence," 808 F.2d at 728, the decision in this case demonstrates the reach of the Page principle and the extent of its departure from the rule in other circuits. Here, in applying Page, the Tenth Circuit concluded that "the grand jury must receive any information that is relevant to any reasonable theory it may adopt." App., infra, 8a. In light of that principle, the court concluded that certain financial records and a deposition transcript of respondent should have been submitted to the grand jury because they were "consistent with (a) possible theory" of defense regarding respondent's lack of fraudulent intent. Id. at 11a. That rule puts the daunting burden on a prosecutor to anticipate a defendant's possible trial defenses, discover whether any information in the prosecutor's possession is "consistent" with those defenses, and then consume whatever of the grand jury's time is necessary to present such "exculpatory" evidence. /5/ The burden is particularly acute in complex cases involving extensive documentary evidence. Any number of documents may contain some evidence or be subject to some interpretation that is consistent with a defendant's possible theory of defense, but it is often far from obvious how the documentary evidence supports that theory. The problem is exacerbated when, as is often the case, the evidence in dispute bears on the gray area of intent. In contrast to the decision below, no other court of appeals has imposed such a burdensome requirement on the prosecutor's relationship to the grand jury. /6/ 2. The Tenth Circuit's requirement that a prosecutor must disclose known exculpatory evidence to the grand jury is unfounded. It is well established that an indictment may not be challenged on the ground that the evidence before the grand jury was inadequate or incompetent, Costello v. United States, 350 U.S. 359 (1956); was obtained in violation of the Fourth Amendment, United States v. Calandra, 414 U.S. 338 (9174); or was obtained in violation of the privilege against compulsory self-incrimination, Lawn v. United States, 355 U.S. 339 (1958). For several reasons, the principles that underlie grand jury. They are particularly incompatible with those holdings cannot be squared with a rule that courts may dismiss indictments based on the prosecutor's failure to present exculpatory evidence to the grand jury. They are particularly incompatible with the Tenth Circuit's requirement that "the grand jury must receive any information that is relevant to any reasonable theory it may adopt." App., infra, 8a. First, the grand jury's function is to determine whether probable cause exists; a grand jury proceeding is "not an adversary hearing in which the guilt or innocence of the accused is adjudicated." Calandra, 414 U.S. at 343; Branzburg v. Hayes, 408 U.S. 665, 686-687 (1972). The grand jury proceeds ex parte, has essentially investigative functions, and does not render final judgments. Potential targets do not have a right to appear before the grand jury, to cross-examine witnesses, or to present evidence in support of their theory of the case. And unlike the verdict of a petit jury, which must be the product of a unanimous finding of guilt beyond a reasonable doubt, an indictment may be returned if a bare majority of the grand jurors find probable cause. See Fed. R. Crim. P. 6(a) and (f). Because of the nature of the grand jury's functions, the grand jury cannot and need not explore all possible trial defenses, or even all substantial ones, before determining whether to indict. The time for adjudicating the defendant's defenses is at trial, in accordance with the constitutionally required safeguards that attend the trial process. Second, it would greatly obstruct the grand jury's proceedings to permit judical oversight of whether a prosecutor withheld exculpatory evidence. Not only would the litigation of such motions compromise grand jury secrecy in many cases, it also would require courts to hold "preliminary trials on the merits," Calandra, 414 U.S. at 350. "Any holding that would saddle a grand jury with minitrials and preliminary showings would assuredly impede its investigation and frustrate the public's interest in the fair and expeditious administration of the criminal laws." United States v. Dionisio, 410 U.S. 1, 17 (1973); see also United States v. R. Enterprises, Inc., 111 S.Ct. 722, 726-727 (1991). Third, requiring courts to conduct pretrial proceedings to determine whether prosecutors had withheld exculpatory evidence from the grand jury would impose significant and unjustified costs on the criminal justice system. At the grand jury stage, it is often difficult for a prosecutor to predict whether a court will later view a particular item of evidence as "substantially exculpatory." Defenses have not been presented or fleshed out, and there is no formal adversary process to facilitate their development. Prosecutors would therefore be compelled, upon pain of dismissal of the indictment, to anticipate what evidence might be deemed, as the Tenth Circuit put it, "consistent with (a) possible theory" of defense that may surface later in the proceedings. App., infra, 11a. The inevitable result would be to prolong and complicate grand jury proceedings. And dismissing an indictment, so that the prosecutor would have to re-present the case by including evidence the court considered exculpatory, would impose additional costs and delays and inevitably provoke further dispute about the adequacy of the prosecutor's representation. /7/ The court of appeals ignored those costs in reasoning that its rule would "promote() judicial economy"; the court surmised that if a fully informed grand jury could not find probable cause, then the petit jury would be unlikely to convict under the higher standard of proof that applies at trial. App., infra, 5a, quoting Page, 808 F.2d at 728. But that argument relies on a perception of judicial economy that is largely illusory. The prosecution has ample incentive not to seek an indictment when the chances of a conviction based on a full record are remote; "(f)or the most part, a prosecutor would be unlikely to request an indictment where a conviction could not be obtained." Calandra, 414 U.S. at 351. Because of the difficulty of assessing the exculpatory value of particular evidence at the grand jury stage, the process of judicial review of the presentations made to grand juries will be burdensome and will likely result in frequent errors. Even if the courts could correctly identify those few cases in which the withheld exculpatory evidence is so powerful that it would likely motivate a grand jury not to indict, it is certain that the courts would spend far more time reviewing meritless claims raised by creative defendants seeking to put the prosecutor on trial for conduct before the grand jury. Any benefits that would flow from that regime would come at far too high a cost. /8/ 3. The court of appeals' decision has significant practical ramifications. If allowed to stand, the decision would have a substantial and troubling impact on criminal prosecutions in the Tenth Circuit. The decision below provides fertile grounds for defendants to create delay and distraction at the pretrial stage. It also forces prosecutors needlessly to prolong their grand jury presentations; it imposes on courts the burden of sorting out whether particular items of evidence are sufficiently exculpatory; and it invites preliminary judicial proceedings that inevitably will compromise the integrity and secrecy of the grand jury process. The rule will particularly impede white-collar criminal investigations, which frequently generate thousands of documents that could support a myriad of possible theories of defense. Those defenses emerge and crystallize long after the investigative phase of a case. A duty to present "exculpatory" evidence relevant to a "possible" theory of defense in that situation confronts the prosecutor with the dilemma of presenting all conceivable evidence that may support some hypothetical defense, or risking protracted pretrial litigation that will scrutinize the grand jury record and that could result in dismissal of the indictment. This case well illustrates the mischief that is inherent in the court of appeals' rule. The indictment in this case charged fraud in respondent's use of false financial statements to obtain loans from banks. Respondent, of course, was not compelled to divulge his defense to the allegations prior to the issuance of the indictment. Yet the court of appeals concluded that particular financial documents and information not given to the grand jury could be read as giving rise to a reasonable doubt that respondent had fraudulent intent. It may well be that this evidence was "consistent with (a) possible defense"; after all, the range of evidence that can support defenses going to intent is quite wide. Cf. Cheek v. United States, 111 S. Ct. 604, 611 (1991). But the question whether particular evidence of intent is exculpatory or not should be reserved for the finder of fact at trial; it is not an issue that should be decided by a court as a matter of law, and certainly not on the necessarily incomplete record that typically accompanies a pretrial proceeding. Under the court of appeals' ruling in this case, prosecutors must guess what defenses might be raised and must find all evidence in their files that is consistent with those defenses. Otherwise, a district court may later decide that the prosecutor failed to ensure that the grand jury "receive(d) any information that is relevant to any reasonable theory it may adopt." App., infra, 8a. Because of the widespread and harmful consequences that such a rule would impose on the administration of criminal justice and because of the division in the circuits on the validity of such a rule, this Court's review is warranted. CONCLUSION The petition for a writ of certiorari should be granted. Respectfully submitted. KENNETH W. STARR Solicitor General ROBERT S. MUELLER, III Assistant Attorney General WILLIAM C. BRYSON Deputy Solicitor General MICHAEL R. DREEBEN Assistant to the Solicitor General JUNE 1991 /1/ In addition to arguing that the withheld information was not exculpatory, the government contended that its witnesses had in fact put before the grand jury the substance of the information discussed by the court. The court of appeals declined to decide that issue, however, stating that "the government did not designate the grand jury transcript as a part of the record before us." App., infra, 11a. On rehearing, the government explained that the grand jury transcripts had in fact been designated as part of the record, and that it was only because of an error by the district court clerk that the transcripts had not been transmitted to the Tenth Circuit. The government urged the panel to reconsider its holding in light of the transcripts. Gov't C.A. Pet. for Rehearing at 4. The panel, however, denied rehearing. App., infra, 27a-28a. For purposes of this petition, we assume that the grand jury did not actually receive the information that the court of appeals found to be exculpatory in this case. /2/ The Third Circuit has not reached a settled conclusion on the existence or extent of any duty to present exculpatory evidence. See United States v. Ismaili, 828 F.2d 153, 165 n.13 (3d Cir. 1987) (leaving the issue open), cert. denied, 485 U.S. 935 (1988); cf. Hochman v. Rafferty, 831 F.2d 1199, 1204 (3d Cir. 1987) (no due process violation to omit credibility evidence because it was not "clearly exculpatory"), cert. denied, 485 U.S. 1022 (1988). /3/ United States v. Ciambrone, 601 F.2d 616, 622-623 (1979). In Ciambrone, the court stated that "where a prosecutor is aware of any substantial evidence negating guilt he should, in the interest of justice, make it known to the grand jury, at least where it might reasonably be expected to lead the jury not to indict." Id. at 623. Subsequent Second Circuit cases have echoed that view. See United States v. Casamento, 887 F.2d 1141, 1183 (1989) ("(A) prosecutor should present exculpatory evidence where such evidence is 'substantial' and 'where it might reasonably be expected to lead the jury not to indict.'"), cert. denied, 493 U.S. 1081 (1990). No Second Circuit decision, however, has reversed a conviction or dismissed an indictment based on the principle discussed in Ciambrone. /4/ United States v. Flomenhoft, 714 F.2d 708, 712 (1983), cert. denied, 465 U.S. 1068 (1984). In Flomenhoft, the court rejected a claim that the government had failed to present exculpatory evidence to the grand jury, but cited with apparent approval a district court's statement that "while prosecutors need not present to the grand jury all circumstances which might be considered exculpatory, they must present evidence which clearly negates the target's guilt." Id. at 712, quoting United States v. Dorfman, 532 F. Supp. 1118, 1133 (N.D. Ill. 1981). No Seventh Circuit decision has reversed a conviction or dismissed an indictment based on the principle discussed in Flomenhoft. /5/ Since the decision in this case, the Tenth Circuit has ruled that Page does not require that a prosecutor reveal the criminal history of a particular witness to the grand jury because that is "not evidence which would have negated (the) defendant's guilt." United States v. Reid, 911 F.2d 1456, 1460 (1990), cert. denied, 111 S. Ct. 990 (1991). Nothing in Reid, however, signals a retreat from the rule announced here and in Page that authorizes courts to review the record of the presentation before the grand jury to determine whether exculpatory evidence of some kind has been withheld from the grand jury. /6/ Commentators have recognized that the "federal courts (are) sharply divided" with respect to whether "the prosecutor's failure to present known exculpatory evidence will constitute sufficient grounds to dismiss an indictment." 2 W. LaFave & J. Israel, Criminal Procedure Section 15.4, at 92 & n.78.1 (Supp. 1990) (citing cases illustrating the circuit split). See also P. Diamond, Federal Grand Jury Practice and Procedure Section 9.04, at 346 (1990) (noting that "the circuits disagree on th(e) subject" of whether there is a duty to present exculpatory evidence). /7/ The grand jury is constituted as a body of independent citizens because of its "dual function of determining whether there is probable cause to believe that a crime has been committed and of protecting citizens against unfounded criminal prosecutions." Branzburg v. Hayes, 408 U.S. 665, 686 (1972); see Butterworth v. Smith, 110 S. Ct. 1376, 1380 (1990). But if courts routinely entertained attacks on omissions of possible defense evidence, it would quickly lead to a level of judicial scrutiny that would undermine the grand jury's independence, for, as one court has noted, "a court that dismisses a validly returned indictment is more guilty of interfering with the independence of the grand jury than a prosecutor who presents a slanted case to the grand jury." United States v. Udziela, 671 F.2d 995, 1001 n.3 (7th Cir. 1982) (quoting Note, Grand Jury: A Prosecutor Need Not Present Exculpatory Evidence, 38 Wash. & Lee L. Rev. 110, 117 (1981)), cert. denied, 457 U.S. 1135 (1982). /8/ This is not to say that prosecutors should not make fair and even-handed presentations to grand juries. The failure to do so is contrary to Department of Justice policy, which provides that when a prosecutor conducting a grand jury inquiry is personally aware of substantial evidence which directly negates the guilt of a subject of the investigation, the prosecutor must present or otherwise disclose such evidence to the grand jury before seeking an indictment against such a person. United States Attorneys' Manual Paragraph 9-11.233, at 15 (1988). That a practice represents sound prosecution policy, however, does not mean that it is compelled by the Constitution, cf. Mu'min v. Virginia, No. 90-5193 (May 30, 1991), slip op. 9, or that its violation is a proper basis for dismissal of an indictment. APPENDIX