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United States v. Koerber

United States District Court, D. Utah, Central Division

July 25, 2017

CLAUD R. KOERBER, Defendant.

          Robert J. Shelby District Judge.


          PAUL M. WARNER Chief United States Magistrate Judge.

         District Judge Robert Shelby referred this matter to Chief Magistrate Judge Paul M. Warner pursuant to 28 U.S.C. § 636(b)(1)(A).[1] Before the court is Defendant Claud R. Koerber's (“Mr. Koerber”) Motion for Order to Show Cause and to Disqualify Federal Prosecutors and Federal Agents.[2] Having reviewed the parties' briefs and the relevant law, the court renders the following Memorandum Decision and Order.[3]


         This case involves a long and complex procedural history. Relevant to the present motion, on May 26, 2009, Mr. Koerber was indicted in Case No. 2:09-cr-302 (“Koerber I”) before District Judge Clark Waddoups. Following the original indictment, the government obtained two superseding indictments on November 10, 2009, and September 29, 2011. These indictments were litigated over the course of five years and ultimately resulted in Judge Waddoups dismissing the case with prejudice for Speedy Trial Act (“STA”) violations. See United States v. Koerber, No. 2:09-cr-302, 2014 WL 4060618, at *1 (D. Utah. Aug. 14, 2014). The government appealed, and the Tenth Circuit reversed and remanded. See United States v. Koerber, 813 F.3d 1262, 1286-87 (10th Cir. 2016). The Tenth Circuit held that Judge Waddoups failed to properly weigh the STA factors in dismissing the case with prejudice. Id.

         On remand, Judge Waddoups recused and the case was reassigned to District Judge Jill N. Parrish. On a motion to dismiss filed by Mr. Koerber, Judge Parrish dismissed the case without prejudice for STA violations. See United States v. Koerber, No. 2:09-cr-302, 2016 WL 4487742, at *1 (D. Utah. Aug. 25, 2016). As a result, on January 18, 2017, the government obtained the instant eighteen count indictment charging Mr. Koerber with securities fraud, wire fraud, money laundering, and tax evasion (“Koerber II”).[4]

         Mr. Koerber has filed several pretrial motions that rely, in part, on relief Mr. Koerber was granted in Koerber I.[5] For example, in February of 2009, government agents conducted two interviews with Mr. Koerber without Mr. Koerber's counsel present. United States v. Koerber, 966 F.Supp.2d 1207, 1213 (D. Utah 2013). Judge Waddoups held that the interviews violated Rule 4.2 of the Utah Rules of Professional Conduct because at the time of the interviews, the government's posture towards Mr. Koerber “had shifted from investigatory to prosecutorial . . . .” Id. Therefore, Judge Waddoups suppressed the 2009 interviews and “all fruits” derived therefrom (“Suppression Order”). Id. at 1245.

         In response to an IRS subpoena, Mr. Koerber inadvertently produced what he claimed was privileged material to the government, including a July 20, 2005 “To Our Lenders” letter (“2005 Letter”).[6] United States v. Koerber, No. 2:09-cr-302-CW, 2011 WL 2174355, at *1 (D. Utah June 2, 2011). After extensive litigation, Judge Waddoups determined that the 2005 Letter was privileged and the court ordered the government to destroy the government's copies of the letter (“Privilege Order”). Id. at *10.

         Whether the court is bound by the evidentiary rulings in Koerber I presented a threshold question for the court. Therefore, the court ordered the parties to submit supplemental briefing addressing the applicability of rulings made in Koerber I on Koerber II.[7] Relying primarily on the issue preclusion doctrine, Mr. Koerber argued that the parties should be prohibited from re-litigating Judge Waddoups' evidentiary rulings.[8] Judge Shelby held that the outcome of the Suppression Order had no bearing on the court's decision to dismiss Koerber I without prejudice for STA violations.[9] Therefore, Judge Shelby found that the Suppression Order does not have preclusive effect.[10] Furthermore, Judge Shelby held that he was not inclined to accept Judge Waddoups' legal conclusions that a Rule 4.2 violation occurred, that it constituted a due process violation, and that suppression was warranted.[11] Judge Shelby, however, did not address the preclusive effect or the merits of the Privilege Order.


         Mr. Koerber's motion seeks an order to show cause why the United States Attorney's Office for the District of Utah should not be sanctioned and held in contempt for its continued possession of the 2005 Letter.[12] Additionally, Mr. Koerber moves to disqualify Assistant United States Attorney Stewart Walz, FBI Agent Cameron Saxey, IRS Agent Ron Marker, and “other prosecutors and agents previously assigned to the team” for their alleged pattern of misconduct, conflict of interest, and exposure to Mr. Koerber's privileged information.[13]

         For the reasons that follow, Mr. Koerber's motion is denied. The court finds nothing improper or suspect about the government's unintentional retention of the 2005 Letter. Furthermore, Mr. Koerber fails to identify a single ethical violation attributable to the prosecution that would entitle Mr. Koerber to the extraordinary sanction of disqualification. It appears to the court that Mr. Koerber improperly labels the government's rigorous advocacy as a conflict of interest.

         I. Mr. Koerber's Request for an Order to Show Cause

         Mr. Koerber argues that the court should issue an order to show requiring the government to explain why it should not be sanctioned and held in contempt for continuing to possess a copy of the 2005 Letter.[14] After the Privilege Order was issued in Koerber I, the government appointed a filter team to find and destroy any copies of the 2005 Letter.[15] After extensive search of the government's records, the filter team notified the court that it had examined the Bates numbers identified by Mr. Koerber and the court to ensure the privileged information had been destroyed.[16] The filter team further stated: “To the extent some items may have been missed due to inadvertence, the filter team has instructed the trial team, and the relevant agents as to the prohibited evidence, and instructed them to immediately destroy any versions of the evidence they may encounter in the future.”[17]

         In Koerber II, the government reproduced the government's discovery to Mr. Koerber.[18]On May 30, 2017, Mr. Koerber's counsel notified the government that a copy of the 2005 Letter still remained in the government's discovery.[19] In response, the government immediately deleted the copy of the letter and reviewed its discovery to ensure all versions of the 2005 Letter were destroyed.[20] The government maintains it inadvertently retained copies of the 2005 Letter and that the government's case does not rely on the letter.[21] Conversely, Mr. Koerber argues that the government's continued possession of the 2005 Letter was not inadvertent and that the government should be held in contempt and sanctioned for violating the Privilege Order.[22] Mr. Koerber's request is denied for three reasons.

         First, in light of Judge Shelby's ruling on the applicability of the Suppression Order, it is likely the Privilege Order does not provide Mr. Koerber a basis for sanctions. Indeed, any privilege attributable to the 2005 Letter had no bearing on whether the STA was violated in Koerber I. Therefore, like the Suppression order, the Privilege Order likely does not have preclusive effect. See Bobby v. Bies, 556 U.S. 825, 835 (2009) (finding that issue preclusion bars successive litigation where the issue was “essential to” or “necessary to the ultimate outcome of a prior proceeding”); Mabry v. State Bd. of Cmty. Colleges & Occupational Educ., 813 F.2d 311, 316 (10th Cir. 1987).[23]

         Second, the purpose of the Privilege Order was to prevent the government from using the 2005 Letter to seek a conviction. Mr. Koerber has not been denied this remedy. The government states: “The indictment contains no reference to the letter; it will not be used in opening statements; it will not be an exhibit; the trial team will not ask any witness about it; and it will not be used in closing argument.”[24] Therefore, at this point, Mr. Koerber's complaints are merely academic.

         Finally, the court finds nothing nefarious about the government's possession of the 2005 Letter. The government's discovery encompasses over 300, 000 documents. The recently discovered copies of the 2005 Letter were stamped with different Bates numbers than the Bates ranges identified by the Mr. Koerber and the court in Koerber I.[25] Tellingly, Mr. Koerber has had access to the government's discovery for many years and Mr. Koerber did not find the copy of the 2005 Letter until May 30, 2017. Moreover, once the government was notified of its error, the copy was immediately destroyed and the government worked in good faith to ensure that any remaining copies in its possession were destroyed.

         Based on the foregoing, the court finds that Mr. Koerber has failed to demonstrate that the government has engaged in sanctionable conduct. Therefore, Mr. Koerber's request for an order to show cause is denied.

         II. Mr. Koerber's Motion to Disqualify

         Mr. Koerber offers three grounds for disqualifying members of the prosecution team. First, Mr. Koerber argues that the “AUSA Walz, the other AUSAs and federal agents who have participated under his direction” have demonstrated a pattern of misconduct that requires their disqualification.[26] Second, Mr. Koerber argues that unspecified members of the prosecution team have a “personal conflict” of interest that prohibits them from participating in this case.[27]Finally, Mr. Koerber claims that the government's exposure to his privileged information requires that the court neutralize the “taint” of the government's misconduct through disqualification.[28]

         The disqualification of government counsel is a “drastic measure and a court should hesitate to impose it except where necessary.” United States v. Bolden, 353 F.3d 870, 878-79 (10th Cir. 2003) (citation omitted). Indeed, courts have granted disqualification of government counsel in limited circumstances. Id. (collecting cases). For instance, disqualification is warranted when a prosecutor has an actual conflict of interest, see Young v. United States ex rel. Vuitton et Fils S.A., 481 U.S. 787, 807 (1987), or where a prosecutor has the potential to act as a witness at trial, see United States v. Prantil, 764 F.2d 548, 552-53 (9th Cir. 1985). However, a violation of a rule of professional conduct does not automatically require disqualification. Beck v. Bd. of Regents of State of Kan., 568 F.Supp. 1107, 1110 (D. Kansas 1983) (“[T]he court should not act unless the offending attorney's conduct threatens to taint the underlying trial with a serious ethical violation.” (quotations and citations omitted)). Indeed, the Tenth Circuit has held that disqualification is only appropriate if the ethical violation results in “the erosion of public confidence in the integrity of the bar and of the legal system.” United States v. Collins, 920 F.2d 619, 627 (10th Cir. 1990) (quotations and citations omitted) (addressing disqualification in the context of a defendant's Sixth Amendment right to counsel).

         Moreover, the sanction of “disqualification of counsel . . . should be measured by the facts of each particular case as they bear upon the impact of counsel's conduct upon the trial.” Parkinson v. Phonex Corp., 857 F.Supp. 1474, 1476 (D. Utah 1994). To determine if disqualification is required, the court generally weighs “[t]he egregiousness of the violation, the presence or absence of prejudice to the other side, and whether and to what extent there has been a diminution of effectiveness of counsel.” Id. With these standards in mind, the court will address each of Mr. Koerber's grounds for disqualification.

         A. Government's Alleged Misconduct and Disqualification

         Mr. Koerber claims that members of the prosecution should be disqualified for a pattern of repeatedly violating ethics rules, federal law, and the “clear limits” set by the United States constitution.[29] In support, Mr. Koerber relies on the Suppression Order, the litigation surrounding the Privilege Order, and the government's purported refusal to “admit its misconduct.”[30] The court has carefully reviewed Mr. Koerber's allegations and finds that none of the evidence cited by Mr. Koerber warrants disqualification.

         i. The Suppression Order

         Mr. Koerber argues that the ethical violations outlined in the Suppression Order mandate that the court disqualify Mr. Walz and members of the prosecution team working at his direction. Judge Shelby held that the legal conclusions in the Suppression Order do not bind this court.[31]Furthermore, Judge Shelby declined to accept Judge Waddoups' findings that a Rule 4.2 violation occurred, that it constituted a due process violation, and that suppression was warranted.[32] ...

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