United States District Court, E.D. Virginia, Norfolk Division
OPINION AND ORDER
S. Davis Chief United States District Judge.
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.
FACTUAL AND PROCEDURAL BACKGROUND
second superseding indictment issued by a Grand Jury of this
Court on May 25, 2018, Bank was charged with the following
• 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
• Unlawful sale of unregistered securities, in violation
of 15 U.S.C. §§ 77e, 77x and 18 U.S.C. § 2
• 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).
Superseding Indictment, ECF No. 105. These charges arise from
allegations that Bank and others executed a scheme to defraud
investors. Id. at 30.
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.
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. 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.
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).
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
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.
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.
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).
Intentional and Knowing
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.
Scope of Language
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