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United States v. Bank

United States District Court, E.D. Virginia, Norfolk Division

May 8, 2019

DARYL G. BANK, Defendant.


          Mark S. Davis Chief United States District Judge.

         This matter is before the Court on Defendant Daryl G. Bank's ("Defendant" or "Bank") Motion to Dismiss for Double Jeopardy Violation. Def.'s Mot., ECF No. 139. Defendant moves to dismiss the pending indictment against him in light of the United States Supreme Court's decision in Kokesh v. SEC, 137 S.Ct. 1635 (2017). Id. For the reasons explained below, Defendant's motion to dismiss is DENIED.


         In the second superseding indictment issued by a Grand Jury of this Court on May 25, 2018, Bank was charged with the following counts:

• Conspiracy to commit mail and wire fraud, in violation of 18 U.S.C. § 1349 (Count 1);
• Mail fraud, in violation of 18 U.S.C. §§ 2, 1341 (Counts 2-6);
• Wire fraud, in violation of 18 U.S.C. §§ 2, 1343 (Counts 7-12);
• Conspiracy to sell unregistered securities and to commit securities fraud, in violation of 18 U.S.C. § 371 (Count 13);
• Unlawful sale of unregistered securities, in violation of 15 U.S.C. §§ 77e, 77x and 18 U.S.C. § 2 (Counts 14-18);
• Securities fraud, in violation of 15 U.S.C. §§ 77q, 77x and 18 U.S.C. § 2 (Counts 19-22);
• Conspiracy to launder monetary instruments, in violation of 18 U.S.C. § 1956(h) (Count 23);
• Engaging in unlawful monetary transaction, in violation of 18 U.S.C. §§ 2, 1957 (Counts 24-28).

         Second Superseding Indictment, ECF No. 105. These charges arise from allegations that Bank and others executed a scheme to defraud investors. Id. at 30.

         A separate prior civil enforcement action was initiated on April 6, 2015 by the United States Securities and Exchange Commission ("SEC") in the United States District Court for the District of Arizona against Bank and others for several investment activities, some of which form the basis of the securities offenses in the second superseding indictment now before this Court. Gov't Resp. 2, ECF No. 147 (citing SEC v. Janus Spectrum LLC, No. CV-15-609 (D. Ariz.)). On February 8, 2018, the District of Arizona entered a final judgment against Bank in the civil enforcement action, holding Bank civilly liable for a disgorgement of $4, 494, 900, pre-judgment interest in the amount of $802, 553, and a civil penalty of $4, 494, 900 pursuant to 15 U.S.C. §§ 77t(d), 78u(d)(3). SEC v. Janus Spectrum LLC, No. CV-15-609, 2018 U.S. Dist. LEXIS 21709, at *2, *8 (D. Ariz. Feb. 8, 2018); Gov't Ex. 2 at 5, ECF No. 147-2.

         Defendant filed the instant motion on November 27, 2018. Def.'s Mot., ECF No. 139. Defendant claims that the 2017 Supreme Court decision in Kokesh, which declared SEC disgorgement a penalty, bars pursuit of the instant criminal action under the Double Jeopardy Clause of the Fifth Amendment because Defendant has already been punished for some of the activity with which he is charged. Def.'s Br. 2, ECF No. 14 0. The Government replied on December 11, 2018, arguing (1) that Defendant unfairly delayed filing the instant motion, (2) that he waived his right to pursue a Double Jeopardy claim, (3) that he cannot claim Double Jeopardy because he only received a civil punishment, and (4) that, even if Double Jeopardy applied, it would only apply to the pending criminal charges associated with the specific investment activities involved in the civil action. Gov't Resp., ECF No. 147. Defendant filed a reply on December 20, 2018, contesting most of the Government's assertions, but conceding that Double Jeopardy would only bar some of the charges in the indictment because only a portion of the criminal allegations are related to the investment activities punished by the civil action.[1] Def.'s Reply, ECF No. 155. Accordingly, Defendant is pursuing a partial dismissal of the pending criminal charges based on the conduct that was punished by the Janus Spectrum case. Having been fully briefed, this matter is now ripe for disposition.


         The Double Jeopardy Clause of the Fifth Amendment of the United States Constitution states that "No person shall ... be subject for the same offence to be twice put in jeopardy of life or limb . . . ." U.S. Const, amend. V. This guarantee protects criminal defendants from both multiple punishments and successive prosecutions for the same offense. United States v. Dixon, 509 U.S. 688, 696 (1993); United States v. Ragins, 840 F.2d 1184, 1187 (4th Cir. 1988).

         In explaining the parameters of a restriction on multiple punishments, as is relevant in this case, the Supreme Court has "long recognized that the Double Jeopardy Clause does not prohibit the imposition of any additional sanction that could, 'in common parlance,' be described as punishment." Hudson v. United States, 522 U.S. 93, 98-99 (1997) (quoting United States ex rel. Marcus v. Hess, 317 U.S. 537, 549 (1943)). Rather, "[t]he Clause protects only against the imposition of multiple criminal punishments for the same offense." Id. at 99. To determine whether a punishment is civil or criminal, the Supreme Court has held that “[a] court must first ask whether the legislature, “in establishing the penalizing mechanism, indicated either expressly or impliedly a preference for one label or the other.'" Id. (quoting United States v. Ward, 448 U.S. 242, 248 (1980)). In doing so, courts are required to "begin with reference to [the statute's] text and legislative history." Seling v. Young, 531 U.S. 250, 262 (2001). If Congress "has indicated an intention to establish a civil penalty, '" a court must then consider the following seven factors, with respect to "the statute on its face," to determine if the civil penalty is transformed into a criminal penalty for the purposes of Double Jeopardy:

(1)"whether the sanction involves an affirmative disability or restraint"; (2) "whether it has historically been regarded as a punishment"'; (3) "whether it comes into play only on a finding of scienter"; (4) "whether its operation will promote the traditional aims of punishment -- retribution and deterrence"; (5) "whether the behavior to which it applies is already a crime"; (6) "whether an alternative purpose to which it may rationally be connected is assignable for it"; and (7) "whether it appears excessive in relation to the alternative purpose assigned."

Hudson, 522 U.S. at 99-100 (first quoting Ward, 448 U.S. at 248- 49, then quoting Kennedy v. Mendoza-Martinez, 372 U.S. 144, 168- 69 (1963)); accord United States v. Dyer, 908 F.3d 995, 1002 (6th Cir. 2018), cert, denied, 587 U.S. (Apr. 22, 2019) (No. 18- 8436); Brewer v. Kimel, 256 F.3d 222, 226 (4th Cir. 2001); United States v. Trogden, 476 F.Supp.2d 564, 569-72 (E.D. Va. 2007). “' [O]nly the clearest proof' will suffice to override legislative intent and transform ... a civil remedy into a criminal penalty." Hudson, 522 U.S. at 100.

         III. ANALYSIS

         A. Timely Filing

         In response to Defendant's motion, the Government first argues that Defendant unfairly delayed filing the motion. While the Court recognizes that Defendant could have filed this motion much earlier, he was not required to file it within the pretrial motions deadline, let alone prior to trial. United States v. Jarvis, 7 F.3d 404, 409 (4th Cir. 1993) (stating that a Double Jeopardy claim "may, but need not, '' be raised prior to trial); see Fed. R. Crim. P. 12(b)(3). Additionally, Defendant's delay in filing is not necessarily indicative of the strength of his claim. It is equally likely that he focused his efforts on first filing motions that were time restricted, before devoting time to the present motion. Therefore, the Court declines to consider the timing of the motion in weighing its merits.

         B. Waiver

         The Government next argues that, in the Janus Spectrum consent judgment, Defendant waived his right to pursue a Double Jeopardy-claim. Defendants are permitted to waive their constitutional right to assert a Double Jeopardy claim. See Menna v. New York, 423 U.S. 61, 62 n.2 (1975); see also United States v. Van Waeyenberghe, 481 F.3d 951, 957 (7th Cir. 2007) . However, the Supreme Court has explained that * [a] waiver is ordinarily an intentional relinquishment or abandonment of a known right or privilege," and has cautioned against presuming that a waiver of fundamental constitutional rights was knowing and voluntary. Johnson v. Zerbst, 304 U.S. 458, 464 (1938) . "In examining a purported waiver of the double jeopardy right, we must draw all reasonable presumptions against the loss of such a right." United States v. Morgan, 51 F.3d 1105, 1110-11 (2d Cir. 1995).

         1. Intentional and Knowing

         Here, the consent judgment between Defendant and the SEC in the Janus Spectrum case contains the waiver provision at issue. Such provision states: "Defendant waives any claim of Double Jeopardy based on the settlement of this proceeding, including the imposition of any remedy or civil penalty herein." Gov't Ex. 1 at 3, ECF No. 147-1. Although Defendant argues that his waiver could not have been meaningfully knowing and intentional prior to the change of law in Kokesh, which was decided six months after his waiver, there is no indication that Defendant's waiver was not knowing and voluntary based on the law at the time of the waiver, and he does not request to withdraw his waiver based on the new law. See Def.'s Reply 1) 6. Rather, Defendant argues that Kokesh altered the Double Jeopardy analysis by declaring disgorgement to be punitive (a key factor in the Double Jeopardy analysis), thus creating a viable Double Jeopardy claim that did not exist at the time of his waiver and that may have caused him not to waive his right had it existed. Id. While the language of his waiver is broad and covers "any claim," Gov't Ex. 1 at 3 (emphasis added), there is some merit to the argument that Defendant did not waive a Double Jeopardy claim because, before Kokesh, such a claim was not viable under existing case law finding disgorgement remedial rather than punitive, and thus, rejecting similar Double Jeopardy claims. See, e.g., SEC v. Bilzerian, 29 F.3d 689, 696 (D.C. Cir. 1994) ("Accordingly, we conclude that the disgorgement order is remedial in nature and does not constitute punishment within the meaning of double jeopardy."). Having considered the case law and the specific waiver language at issue here, and "drawing all reasonable presumptions against the loss of such a right," Morgan, 51 F.3d at 1110-11, the Court finds that the evidence currently before the Court is insufficient to show Defendant intentionally relinquished a known right. Zerbst, 304 U.S. at 464. Therefore, the Court looks to the language of the waiver.

         2. Scope of Language

         The Government argues that the scope of the language of Defendant's waiver in the consent judgment is sufficient for the Court to deny the instant Double Jeopardy motion. The language of Defendant's waiver provision is broader than that of the one deemed insufficient in Hudson, which did not expressly mention Double Jeopardy. Hudson, 522 U.S. at 97 n.2. However, although the language at issue broadly waives the right to make a Double Jeopardy claim, it does so without specific reference to criminal proceedings. In this respect, it is, therefore, almost identical to the language of the pre-Kokesh waiver that the United States Court of Appeals for the Seventh Circuit deemed an insufficient basis alone for denying a later Double Jeopardy claim. Van Waeyenberghe, 481 F.3d at 957. Therefore, having considered the case law and specific waiver language at issue here, the Court finds that the language of Defendant's waiver ...

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