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Article: October 2018: White Collar Litigation Update

October 01, 2018
Business Litigation Reports

Information Advantage – Challenges by Foreign Nationals and Companies to Navigate U.S. Criminal Prosecutions While Subject to the Fugitive Disentitlement Doctrine. Non-U.S. individuals and companies face an initial critical question when summoned to face criminal charges in U.S. courts: should they immediately surrender to the U.S. government’s authority, or fight to gain more information, protect assets from seizure, and/ or potentially challenge extradition? With little access to relevant information at the outset, and often with a limited understanding of applicable U.S. laws, the individual or company involved should attempt to gain as much information as possible about the strength of the government’s case before proceeding.

A typical defendant has at its disposal several methods to gather information, including various forms of discovery, a written bail demand that may trigger disclosures, or the ability to conduct its own internal investigation. These processes are severely hampered by the “fugitive disentitlement doctrine,” however, which limits the recourse available to defendants who remain beyond the reach of the U.S. courts.

The nearly 150-year old fugitive disentitlement doctrine was initially created by an appellate court to “dismiss an appeal or writ in a criminal matter when the party seeking relief becomes a fugitive.” Degen v. United States, 517 U.S. 820, 823 (1996) (citing Ortega- Rodriguez v. United States, 507 U.S. 234, 239 (1993)); and Smith v. United States, 94 U.S. 97, 24 (1876)). The doctrine developed to respond to two concerns – first, that a decision by a U.S. appellate court would be unenforceable against the fugitive because of due process concerns; and second, that a “fugitive” from justice should not be able to avail himself or herself of the benefits of the same system he or she is seeking to avoid. Over time, the doctrine has expanded beyond criminal cases to civil cases including, in particular, those involving foreign defendants.

Once a court concludes that a party is a fugitive, the doctrine permits a court to deny that party’s request to make any use of the judicial system. The doctrine promotes the federal courts’ power “to protect their proceedings and judgments in the course of discharging their traditional responsibilities” and promote the “dignity of the judiciary.” Degen, 517 U.S. at 823.

Contrary to the popular understanding of a “fugitive” as a defendant who, after being charged with a crime, hides or flees the jurisdiction to avoid imprisonment, the doctrine also applies to non-U.S. citizens who are considered “fugitives” because of their failure to surrender to U.S. authorities upon learning of the charges against them. See, e.g., United States v. Nabepanha, 200 F.R.D. 480, 482 (S.D. Fla. 2001) (noting the “critical element” is “knowledge of a pending charge” and that a defendant’s knowledge “can be inferred from his failure to surrender to authorities once he learns of the charges while outside of the jurisdiction”). Failing to surrender does not mean, of course, that a non-U.S. national can count on safely remaining beyond the United States’ jurisdiction. The U.S. Department of Justice (“DOJ”) may commence extradition proceedings against a foreign national if that individual’s home country is a party to an extradition treaty with the United States. It can also pursue an INTERPOL Red Notice requesting that participating countries arrest the named individual for possible extradition to the United States, which effectively prevents the foreign national from traveling.

Once triggered, the fugitive disentitlement doctrine limits a foreign defendant’s defensive and information-gathering options in three important ways. First, the doctrine can defeat a foreign defendant’s motion to dismiss the indictment, a typical first parry for a foreign national facing charges. Courts have routinely refused to entertain motions to dismiss brought by foreign nationals based on the fugitive disentitlement doctrine alone. See, e.g., United States v. Kashamu, 656 F. Supp. 2d 863, 868 (N.D. Ill. 2009) (denying motion to dismiss under fugitive disentitlement doctrine); United States v. Stanzione, 391 F. Supp. 1201, 1202 (S.D.N.Y. 1975) (same).

Second, the doctrine can prevent the foreign national defendant from obtaining discovery into the charges, another common and important strategy pursued by defendants. U.S. courts consistently deny such requests when the foreign national is considered a fugitive. Nabepanha, 200 F.R.D. at 482-84 (denying a discovery request by defendant who moved to Israel prior to his indictment and who refused to return to the United States for trial); see also S.E.C. v. Roman, 1996 WL 34146, *2 (S.D.N.Y. Jan. 30, 1996) (holding that plaintiffs were barred from obtaining discovery while they were fugitives because “one who has removed himself from the jurisdiction of the courts has no claim upon them which would require the delivery of the files of the United States government to his hiding place”). In a recent and high-profile example, the U.S. District Court for the District of Columbia restricted access into the government investigative file by absent foreign entities in the Special Counsel’s investigation into alleged Russian involvement in the 2016 U.S. election. See United States v. Concord Mgmt. & Consulting LLC, Case No. 1:18-cr-00032-DLF, Dkt. No. 42 at 3-4 (D.D.C. June 29, 2018) (ordering that “all sensitive discovery materials must be stored in a U.S. office of [defendant’s counsel’s firm] and shall not be disclosed, transported, or transmitted outside of the United States”).

Third, the doctrine also has been extended to bar foreign nationals who are alleged fugitives from contesting the seizure of their assets. The Civil Asset Forfeiture Reform Act of 2000 (“CAFRA”) codified the fugitive disentitlement statute, allowing courts to prohibit fugitives from contesting forfeiture claims. 28 U.S.C. § 2466.

Given these procedural impediments to those deemed fugitives, it is important to understand the applicable law relevant to the doctrine. The U.S. Courts of Appeals are currently split over the issue of the requisite intent “to avoid criminal prosecution” that triggers application of the doctrine. The D.C. Circuit has adopted the most favorable position to foreign nationals, holding that the government must prove “that avoiding prosecution is the reason [an alleged fugitive] has failed to enter the United States.” United States v. 6,976,934.65, Plus Interest Deposited into Royal Bank of Scot. Int’l, Account No. 2029-56141070, Held in Name of Soulbury Ltd. (“Soulbury”), 554 F.3d 123, 132 (D.C. Cir. 2009). The Second Circuit has rejected the D.C. Circuit’s approach, concluding that “[t]o the extent that the D.C. Circuit’s opinion in [Soulbury] was intended to mean that when a claimant declines to enter or reenter the United States the government is required to prove that avoidance of criminal prosecution is his sole purpose, we respectfully disagree.” United States v. Technodyne LLC, 753 F.3d 368, 384-85 (2d Cir. 2014) (emphasis added). The Second Circuit ruled that the correct standard is instead “specific intent” to avoid prosecution, a lower threshold. Id. “[S]pecific intent need not be the actor’s sole, or even primary, purpose.” Id. Rather, in the Second Circuit, individuals can be deemed fugitives under § 2466 so long as “any of their motivations for declining to reenter the United States was avoidance of criminal prosecution.” Id. at 386.

The Fifth and Ninth Circuits have adopted yet a third standard by requiring that intent to avoid prosecution be proven by a totality of the circumstances. See United States v. 2005 Pilatus Aircraft, Bearing Tail No. N679PE, 838 F.3d 662, 664 (5th Cir. 2016) (approving fugitive disentitlement of a defendant who suddenly avoided any travel following his criminal indictment, after previously taking more than 100 trips to the United States); United States v. $671,160.00 in U.S. Currency, 730 F.3d 1051, 1056-57 (9th Cir. 2013) (claimant’s changed travel plans coupled with statements that he remained in Canada due to the criminal matter demonstrated that totality of the circumstances showed he deliberately remained away from the United States to avoid criminal prosecution).

Given the impediments posed by the fugitive disentitlement doctrine, a foreign national may determine it best to travel to the United States to challenge criminal proceedings, but that strategy comes with serious risks of its own. Upon arrival, he or she faces arrest and may be detained pending trial or required to post a significant bond. The foreign national could also be forced to remain in the United States for a significant time prior to trial. These competing considerations complicate the defense strategy for foreign individuals facing U.S.-based criminal prosecutions and require careful analysis.