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Media Alerts - United States v. Sussman--Third Circuit
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March 7, 2013
  United States v. Sussman--Third Circuit
Area of Law: Obstruction of Justice 18 USC § 1503(a); Theft of Government Property 18 USC § 641.

Issues Presented:
(1) Did the FTC's request to the Bank of America to freeze a safety deposit box which was the subject of a court order, qualify as a "judicial proceeding" under 18 USC § 1503(a)?
(2) Did the court order directing all financial institutions holding Sussman's assets to transfer them to the FTC give the FTC an ownership interest in the Bank of New York safe deposit box under 18 USC § 641?

Brief Summary: Appellant, Barry Sussman was the defendant in a civil action resulting in a $10,204,445 judgment against him. As a result of this judgment, a freeze was placed on his assets. The FTC directed all financial institutions holding Sussman's assets to transfer them to the FTC within five (5) business days of the court order. The FTC contacted the Bank of New York ("BNY") to request that it continue a freeze put on a safety deposit box in Sussman's name containing gold coins. The FTC intended for this freeze to be in effect until the civil appeals process was complete and they could liquidate the coins and distribute them to affected consumers. During the civil appeals process, Sussman went to BNY and removed the coins from the box without permission of the court. Instead, he went out of his way to assure that the court would not find out.

The bank ultimately notified the FTC that Sussman took the coins and he was criminally charged for theft of government property and obstruction of justice. The District Court found him guilty of these offenses and Sussman filed a timely appeal arguing: (1) that the coins were not the property of the U.S. at the time he took them; (2) that the freeze agreement between BNY and the FTC was a voluntary agreement and not pursuant to a court order; and (3) that an incomplete trial transcript and improperly admitted evidence of prior bad acts entitled him to a new trial. The Court of Appeals discredited all of these arguments, holding that the freeze agreement between FTC and the BNY was the direct result of a court order and thus qualified as a "judicial proceeding" under 18 USC § 1503(a) and that the FTC had an ownership interest in the coins at the time Sussman removed them pursuant to 18 USC § 641. Sussman's conviction was affirmed.

Extended Summary: The root of this action is a civil case brought by the Federal Trade Commission ("FTC") against Barry Sussman ( "Sussman") on May 12, 2013 for abusive debt collection practices. (FTC v. Check Investors). The District Court of New Jersey ordered an injunction freezing all of Sussman's assets to preserve them to pay any judgment remedies. The civil action resulted in a judgment against Sussman for $10,204,445 in damages and a permanent injunction against participating in debt collection activities. That order directed any financial institutions holding Sussman's assets to transfer them to the FTC or its agent within five (5) business days. Before the five (5) days had expired, the FTC wrote to the Bank of New York ("BNY") and requested that it extend the freeze on a safe deposit box of Sussman's containing gold coins ( "BNY box") and hold the box pending exhaustion of the civil appeals process. This letter will be referred to as the "Freeze Letter."

On September 6, 2007 this court affirmed the District Court's holding in the civil case. On February 6, 2008, Sussman's petition for rehearing was denied. An e-mail on this same day from Sussman to his lawyers revealed that the Bergen County Sheriffs office had seized the contents of another of Sussman's safe deposit boxes to satisfy an outstanding judgment against him by a Texas creditor. Since this box was also protected by the FTC freeze order, Sussman expressed that he felt that the FTC had not protected his assets and that he felt that he was in "a race to the bank" to get to the BNY box before the Texas creditor.

After being advised by his lawyers not to, on February 7, 2008 Sussman attempted to access the BNY box. The bank initially would not grant him access but Sussman assured them that "his lawyers had worked it out." The assistant branch manager allowed Sussman access to the box. Sussman took all of the gold coins out of the box and left the bank with them. In a subsequent e-mail to his attorneys, Sussman requested that they not tell the government that he had taken the coins and that he and the attorneys could "enjoy their windfall." Shortly thereafter the bank realized its mistake and informed the FTC of what had happened.

On April 14, 2008, the Postal Inspection Service issued a warrant for the coins. On May 12, 2008, after discovering the coins were missing, Sussman was charged with (1) theft of government property under 18 USC § 641 and (2) obstruction of justice under 18 USC § 1503(a). On October 2, 2008, Sussman's lawyers told the government that Sussman had control of the coins. On November 10, 2008 certiorari was denied for the civil case. This marked the end of the civil appeals process, meaning that the District Court's final injunction and order against Sussman was left standing. On November 3, 2008 the U.S. Attorney requested Sussman return the coins to the government immediately. On December 2, 2008, the coins were returned. Sussman retained the coins for about seven months after he was criminally charged for taking them.

On October 5, 2009, after a jury trial that found Sussman guilty on both counts, he was sentenced to 41 months for each count to be served concurrently, three years of supervised release and fines. On October 15, 2009, Sussman appealed to this court alleging insufficient evidence, and demanding a new trial based on a lost portion of the trial court transcript, redacted documents from the civil case being improperly admitted in the criminal proceedings, and an improper jury instruction on count two. The case is now properly before the Court of Appeals for the Third Circuit.

Sussman challenges his conviction on sufficiency of the evidence grounds. The Court stated that such challenges are reviewed with particular deference to the jury verdict and that the burden on Sussman is very heavy. Sussman's first claim on appeal is that the evidence is not sufficient to show that he violated 18 USC § 641 by stealing government property. 18 USC § 641 requires that a defendant knowingly convert to his use, "money or a thing of value" to the U.S. Sussman attempts to argue that at the time he took them, the coins were not "money or a thing of value" to the U.S. under the statute.

The Court noted that in the District Court, Sussman moved for a Judgment of Acquittal and in doing so, conceded that the FTC had already taken custody of the coins, and that they owned the coins at the time he removed them from the box. Technically, the Court could hold that this concession effectively waives Sussman's argument that the coins were not "money or a thing of value" to the U.S. Although this waiver technically binds Sussman on appeal, the Court also reviewed the issue on a plain error basis. A plain error analysis requires that the defendant's substantial rights were affected and the error "seriously affects fairness, integrity or public reputation" of the judicial proceeding.

In arguing that the coins were not "money or a thing of value" to the U.S., Sussman construes the Freeze Letter as a voluntary agreement wholly separate from the final order of the court. He argues that by writing to the bank and requesting them to hold the assets, rather than transferring the assets into a separate account under their name, the FTC abandoned any ownership interest they had in the coins.

The final order for judgment issued on July 18, 2005, specified that any financial institution holding defendant's assets were required to turn them over to the FTC within five business days. The order specifically mentioned the BNY box and the gold coins. The Court held that it was plain under this order that the government had an ownership interest in the coins or at least a right to possession or control.
Much of the Court's analysis rested on U.S. v. Milton (1993) which held that money from a judgment, which is held by a government agency pursuant to being distributed to affected consumers, is within the "supervision or control" of the government. The Court of Appeals has consistently applied a supervision and control test to determine ownership. Milton is analogous to the facts at hand because BNY served as the repository for the coins pending distribution to consumers. Since it had a court-ordered monetary judgment in its name, the FTC did not need to put the coins in a separate account under its name. The Court held that by asking BNY to hold the box and by freezing its contents, the FTC retained supervision and control by exercising its dominion over the coins.

The Court rejected Sussman's argument that the FTC abandoned its interest in the coins by leaving them in the BNY box because it "could not conceive" that the government intended to give up its interest in the coins by asking the bank to act as a custodian. The intent of this action was, in fact, to safeguard their interest in the coins. The Court held that by requesting that the bank freeze the contents of the box and hold it, the FTC designated BNY as its "agent" under the court order directing any financial institutions holding Sussman's assets to transfer them to "the FTC or its agent."

Sussman's second argument is that he did not obstruct justice under 18 USC § 1503(a) because the Freeze Letter was not a judicial proceeding. The elements of an obstruction of justice charge require: (1) the existence of a judicial proceeding (2) knowledge or notice of the proceeding (3) acting corruptly with the intent to influence, obstruct or impede the proceeding and (4) action that has a natural and probable effect of interfering with the administration of justice. Defendant maintains that elements one and two of this charge are not satisfied
.
Sussman maintains that the Freeze Letter was a voluntary agreement between the FTC and BNY which was wholly separate from the final order in the judicial proceeding. The Court held that the Freeze Letter was clearly intended to carry out that final order. It reasoned that without the court order, the FTC would not have had the authority to enter into an agreement with BNY to freeze Sussman's assets. The Court distinguished U.S. v. Davis (1999) where it was determined that investigations independent of judicial authority cannot be considered judicial proceedings. The case at hand dealt with a direct court order, not an independent FTC investigation. The Court held that collection of judgments qualifies as a "judicial proceeding" under § 1503 because the statute is designed to prevent any corrupt conduct which attempts to obstruct or interfere with the administration of justice.

The Court next addressed Sussman's claim that he should be granted a new trial due to portions of the trial transcript which were apparently lost. 28 USC § 753(b) requires that all criminal cases be recorded verbatim. In this case, testimony of the BNY vice president and re-direct testimony of an FTC attorney involved in the civil case against Sussman appear to be missing from the record. In order to prevail here, Sussman needed to show specific prejudice resulting from the incomplete transcript and a "colorable need" for the transcript.

Federal Rule of Appellate Procedure 10(c) provides that where a transcript is unavailable the appellant may prepare a statement of the proceedings using the "best available means" which can include appellant's own recollection. This statement is then provided to the Appellee who can object. The District Court then settles and approves the statement. This procedure was followed in this case, and the District Court accepted Sussman's statement as accurate with no changes made by Appellees. The court held that since the missing transcripts had already been summarized and submitted through court supervised reconstruction, that Sussman could not show specific prejudice or a "colorable need" for the transcript. The reconstructed record successfully enabled the court to effectively review the relevant issues.

Sussman next argued that redacted documents from the civil trial should not have been introduced into evidence in the criminal trial because they were evidence of prior bad acts which are inadmissible under Federal Rule of Evidence 404(b) and because the probative value of the documents was substantially outweighed by unfair prejudice which is prohibited under Federal Rule of Evidence 403. The court rejected this argument because the documents were introduced to prove intent, which is an exception to FRE 404(b). It put specific emphasis on the "substantially outweighed" requirement of FRE 403.

The documents admitted included a temporary restraining order, a preliminary injunction and the final order from the civil trial of Sussman. The documents were heavily redacted. The Court reviewed the admission of the evidence under the abuse of discretion standard, which it noted is construed especially broadly in regards to FRE 403. Sussman maintained that the prosecution could have achieved its purpose by introducing a stipulation to the existence of the documents rather than admitting the documents themselves. The court held that a mere showing of an alternative means of proof that the prosecution chose not to use, does not satisfy the abuse of discretion standard.

It reasoned that because there were intent requirements to both offenses, the admitted documents assisted the jury in considering Sussman's intent because they set forth the situation regarding control of the coins and made clear that he hoped to benefit by obtaining possession of them. Since intent evidence is an exception to FRE 404(b) the Court held that the District Court did not abuse its discretion by not admitting the documents.

The Court next addressed Sussman's argument that improper jury instructions were given which entitled him to a new trial. It held that the instruction regarding the obstruction of justice charge was proper because the jury was instructed that the government must prove that Sussman acted "knowingly and dishonestly" with specific intent. It held that the "natural and probable effect" requirement need not be listed as a fourth element of the offense because it was simply a "nexus" requirement and was adequately coved by the instruction on how to determine state of mind which stated that they may consider the "natural and probable" consequences of actions defendant knowingly took, without finding that defendant intended such consequences.

Sussman also objected to the theory of defense instruction given to the jury because it was a shortened version of the one he requested. A defendant is entitled to a theory of defense instruction if he satisfies certain criteria. Here, the District Court properly gave the instruction, just not in the exact words that Sussman proposed. The court held that nothing requires the court to give the instruction exactly as it is submitted and no party has the right to a jury instruction exactly in the manner and words that it prefers. It reasoned that the District Court abbreviated the language but still encapsulated Sussman's argument that he took the coins in order to safeguard them from creditors other than the FTC.

The court noted that there was a slight wording discrepancy in the written jury instruction and the oral instruction reflected in the transcript. It held however, that jury instructions must be viewed in their entirety and taken as a whole. The Court reasoned that here, the instructions accurately conveyed that the key issue was Sussman's intent when he removed the coins from the BNY box. The slight wording error was not a sufficient reason to overturn the jury's verdict. For all of the foregoing reasons, the Court of Appeals for the Third Circuit affirmed Sussman's conviction.

The full text of the opinion can be found at www.ca2.uscourts.gov/opinionarc094023p.

Panel: Circuit Judges Greenaway, Greenberg and Cowen

Author: Judge Greenberg

Argument Date: December 13, 2013

Date of Issued Opinion: March 6, 2013

Docket Number: 09-4023

Case Alert Author: Shannon Harkins

Counsel: Mark E. Coyne, John F. Romano, U.S. Attorney, Counsel for Appellee. Peter Goldberger, David A. Ruhnke, Ruhnke and Barrett, Counsel for Appellant.

Circuit: Third

Case Alert Supervisor: Susan DeJarnatt

    Posted By: Susan DeJarnatt @ 03/07/2013 01:51 PM     3rd Circuit  

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