On Appeal from the United States District Court for the District of New Jersey
(D.C. Criminal No. 93-cr-00300-1)
Before: COWEN and SAROKIN, Circuit Judges, and POLLAK, District Judge *fn*
John Voigt appeals from a judgment of conviction and sentence entered by the District Court for the District of New Jersey. The conviction arises from Voigt's role as the mastermind of a pernicious "advance fee" scheme whereby Voigt, operating under the auspices of the Euro-American Money Fund Trust, would obtain substantial fees in advance from, respectively, unsuspecting loan applicants and potential investors for various loans and investments that never materialized. Over a three-year period the Trust took in a total of 18.5 million dollars.
Of Voigt's eight assignments of error, two significant constitutional questions are presented for our review. The first is whether the government's use of acquitted co-defendant Mercedes Travis, who Voigt alleges was counsel to the Trust and to him personally, as a confidential informant against him constitutes "outrageous government conduct" in violation of the Fifth Amendment's Due Process Clause. The second is whether the district court violated Voigt's Sixth Amendment right to counsel of choice when, citing potential conflicts, it disqualified a third attorney Voigt sought to add to his defense team without holding a formal evidentiary hearing. We also confront several questions of first impression in this Circuit pertaining to the money laundering statute, 18 U.S.C. Section(s) 1956(a)(1), and its forfeiture counterpart. Id. Section(s) 982. We must decide whether those statutes require formal "tracing" where laundered funds have been commingled in a bank account with untainted funds. We also must determine what is the proper burden of persuasion for forfeiture proceedings under 18 U.S.C. Section(s) 982, a question we have addressed previously in two other contexts. See United States v. Pelullo, 14 F.3d 881 (3d Cir. 1994) (RICO; reasonable doubt); see also United States v. Sandini, 816 F.2d 869 (3d Cir. 1987) (CCE; preponderance). Finally, Voigt contests the legal sufficiency of his convictions for tax evasion under 26 U.S.C. Section(s) 7201, and challenges the orders of the district court requiring him to make restitution in the amount of $7,040,000 and refusing to grant his motions for severance.
For the reasons we set forth below, we will affirm Voigt's conspiracy, money laundering and tax evasion convictions, along with the order of restitution, in all respects. We will vacate the judgment insofar as it incorporates an erroneous order of forfeiture and remand for further proceedings consistent with this opinion.
John Voigt was the mastermind of a scheme to defraud loan applicants and potential investors by inducing them to pay substantial "advance fees" for nonexistent loans and investments. To implement this scheme, Voigt created two fraudulent entities: Euro-American Money Fund Trust, and Meta Trading and Financial International [hereinafter collectively referred to as "the Trust"]. Voigt fabricated a fictitious genealogy for the Trust, claiming that it was a long-established European financial institution affiliated with the Catholic Church and the Knights of Malta and that it had access to billions of dollars. Voigt also falsely claimed that the Trust's headquarters was located in Paris, France, and that he was the U.S. Director. To facilitate the scheme Voigt used various aliases and required loan applicants to fill out bizarre confidentiality agreements that purported to bar customers from disclosing information about the Trust in this life and the afterlife.
The scheme operated from early 1990 until mid-1993. Brokers for the Trust recounted the false genealogy Voigt had concocted to unsuspecting victims. At first, the Trust marketed only "loans." These multi-million dollar loans were supposedly self-liquidating, which meant that, in return for a fee that ranged into the hundreds of thousands of dollars, customers would receive a loan that they did not have to repay. As soon as the fees were received they were distributed among the coconspirators. Eventually, the Trust began to market "Master Collateral Commitments" ("MCCs"), bogus financial instruments that were touted as special promissory notes issued by banks and available only through the Trust. They were marketed to unsuspecting investors for 3.5-4.5 million dollars with the representation that they eventually would yield hundreds of millions of dollars. All told, Voigt's three-year gain from marketing self-liquidating loans and MCCs was approximately seven and one-half million dollars.
On December 13, 1993, Voigt and four alleged coconspirators -- Skip Alevy, Mercedes Travis, Ralph Anderskow, and Donald Anchors -- were charged in a twenty-eight-count superseding indictment. The indictment charged Voigt personally with one count of conspiracy to commit wire fraud, fifteen counts of wire fraud, four counts of money laundering, two counts of tax evasion, and criminal forfeiture allegations arising out of the money laundering counts. After a three-month trial, a jury convicted Voigt of all counts except one count of wire fraud. *fn2 After a non-jury proceeding at which the district court ordered forfeiture of certain automobiles and pieces of jewelry, the court sentenced Voigt to a term of imprisonment of 188 months and ordered him to make $7,040,000 in restitution. This appeal followed. *fn3
Voigt challenges the judgment against him on eight grounds. He argues that: (1) the government's use of his alleged attorney, Mercedes Travis, as an informant violated his Fifth Amendment due process rights and his Sixth Amendment right to effective assistance of counsel; (2) the district court erred in disqualifying one of his attorneys due to a potential conflict of interest without first making sufficient findings of fact, in violation of his Sixth Amendment right to counsel of choice; (3) there was insufficient evidence to support his conviction on money-laundering counts twenty-five and twenty-six; (4) the forfeiture order should be vacated because the district court failed to require the government to prove beyond a reasonable doubt that the forfeited items were "traceable to" laundered money; (5) his convictions on the tax evasion counts should be vacated because the government failed to prove an affirmative act of evasion as required by statute; (6) the district court erred in imposing an order of restitution without making findings of fact regarding his ability to pay; (7) the district court should have granted his motion for a severance because his co-defendants asserted defenses antagonistic to his own; and (8) the district court erred in increasing his Guidelines offense level by two points for obstruction of justice.
The district court had original jurisdiction over this criminal action pursuant to 18 U.S.C. Section(s) 3231. We exercise appellate jurisdiction to review a final judgment of conviction under 28 U.S.C. 1291.
III. OUTRAGEOUS GOVERNMENT CONDUCT
Voigt argues that the government infringed his Fifth Amendment right to due process by recruiting his attorney as a government informant "in deliberate and flagrant disregard for the attorney-client relationship." Voigt's Br. at 10. The premise of this claim is that codefendant Mercedes Travis, with whom the government had extensive investigative contacts, was his personal attorney during the time of the investigation. The precise nature of Travis' relationship with Voigt and with the government, however, is in dispute.
The relevant facts are as follows. Mercedes Travis began working for the Trust in August, 1990. Voigt contends that she was engaged as an attorney at that time, and points to an engagement letter that supports his claim. The government, however, maintains that it justly and reasonably believed that Travis was not and had never been an attorney for the Trust. In any event, by Travis' own account, she became concerned about the legitimacy of the Trust and feared that she herself was being defrauded. As a result, she left her post in Europe and approached the FBI with her concerns. In June and July, 1991, she met with Special Agent Alvin Powell and voluntarily provided him with a package of relevant documents. Those documents indicated that the Trust was engaged in a fraud.Over the course of a three-day interview at a New Jersey motel in mid-July of 1991, Travis detailed the fraud for Powell. Noting that Travis was an attorney, and having seen a letter on Trust letterhead purporting to appoint Travis as attorney for the Trust, Powell asked Travis whether she had acted in a legal capacity for the Trust. Travis indicated on several occasions that she had not acted as a legal representative for the Trust but, rather, that she had been primarily responsible for initiating and maintaining contacts with banks. Travis also insisted that the letter purporting to appoint her as an attorney for the Trust was false.
Travis indicated that she went to work for the Trust in 1990, first in the U.S. and later in Europe, believing it to be a bona fide financial institution. Over time, however, she discovered that, notwithstanding Voigt's contention that the Trust possessed $75 billion in assets, the Trust was simply a shell corporation with few assets. Travis then related that the Trust was engaged in an advance-fee scheme for loans in which fees were paid but no loan was ever funded. Based on Travis' allegations, and on Powell's belief that she had not represented the Trust or its members in a legal capacity, Powell enlisted the assistance of Travis. Powell devised a pretext whereby Travis would reingratiate herself with the Trust by falsely informing Voigt that she had negotiated an MCC. Powell hoped that this would lead Voigt to divulge further information about the Trust's activities. Powell eventually had Travis officially designated as a "cooperating witness" on the FBI's records.
Having enlisted Travis as an informant, Powell asked her to sign a document allowing the consensual recording of her conversations with Trust members, including Voigt. In that document, however, Powell carefully noted that the purpose of the recordings was to corroborate her statements, based on the understanding that she had not acted, and would not act, as an attorney for the Trust or any of its members. In September of 1991, Travis made three supervised calls from the FBI office in New Jersey, although apparently none involved Voigt or his coconspirators.
In October of 1991, Travis informed Powell that she had been invited to Europe by someone associated with the Trust. Powell asked her to maintain contact with him, and she called once during her trip to inform Powell that she had met with Voigt, but that they had discussed only personal matters. When Travis returned from Europe, Powell met her in an Atlantic City hotel, where she provided him with several cassette recordings of conversations, documents obtained during the trip, and information acquired by talking with Voigt. Travis was still convinced that the Trust was engaged in a fraud. According to Powell's version of the meeting, Travis indicated that she had not performed legal work for the Trust or Voigt during her trip to Europe.
In February of 1992, Travis informed Powell that she had prepared a tax opinion for Voigt. She claimed it was a "one-shot deal," and that it concerned Voigt and not the Trust, but she did not share the substance of the opinion with Powell. Powell had no prior knowledge that Travis would be providing legal advice to Voigt. In March of 1992, Travis advised Powell that she had persuaded Voigt to let her become the Trust's attorney, but that her role would be to facilitate communications between the Trust and other entities. Powell became concerned about this latest development because of potential attorney-client privilege problems and because Travis herself might become an active participant in what she had insisted was a fraud. He therefore instructed Travis to meet with Assistant United States Attorney ("AUSA") Paul Zoubek, who was supervising the investigation. Travis replied that she would inform Powell if her status changed from facilitating loans and investments to providing legal advice. Travis next called Powell on March 10 to inform him that she indeed had been appointed as attorney for the Trust. Powell again warned her about acting in a legal capacity and warned her not to engage in any illegal activity. He also gave her a firm date for their meeting with AUSA Zoubek. In another telephone call two days later, Powell again instructed Travis not to act as an attorney, and she reassured Powell that the information she was providing raised no issue of privilege.
On March 25, 1992, Travis and Powell met with AUSA Zoubek at the U.S. Attorney's Office in Newark. After listening to Travis recount her version of the events, AUSA Zoubek pointed out the stark inconsistency between her original allegation that the Trust was a fraud and her recent decision to rejoin the Trust as its attorney. Travis indicated that she wanted to determine for herself whether in fact the Trust was legitimate and would inform the government of her findings within two weeks. AUSA Zoubek nevertheless told her that she would be on her own, and that any time spent in Europe working for the Trust would not be as a government informant due to potential privilege problems. According to Zoubek, as verified by Powell's notes of the meeting, the only way that information otherwise privileged could be provided to the government would be if the crime-fraud exception were deemed to be applicable. Travis indicated that she understood. At the same time, however, Powell instructed Travis to report to him as to whether the Trust had sufficient funds to cover its existing loan commitments.
From the time of their last meeting on March 25, 1992, until May 1, 1992, Powell did not hear from Travis, but received information indicating that she was participating in the same type of fraudulent conduct that originally had motivated her to come forward to the FBI. On May 1, 1992, Travis made two separate calls to Powell from Europe. Her first call, which Powell maintained was unsolicited, was from a pay phone because, according to Travis, she was afraid her calls were being monitored. Travis again told Powell that the Trust had no funds to lend, and that she would make her "official" call later that day. In her second call, Travis indicated that she was representing Voigt in connection with two grand jury subpoenas for records of the Trust that Powell had served on Voigt. At trial, however, Travis testified that at that point she was representing only the Trust, and that attorney James Binns was representing the Trust and its directors for purposes of the criminal investigation. Powell advised Travis that she and Voigt should appear at the FBI office to discuss the matter. It was not until sometime after this May 1 call from Travis that Powell had Travis officially taken off the books as a confidential informant.
Travis did not contact the government again until September of 1992, when Travis called AUSA Robert Ernst (who had taken over the investigation) to discuss grand jury subpoenas that had been served on the Trust in August. Travis informed Ernst that she was representing the Trust in connection with the subpoenas. Before any further discussion occurred, Ernst informed Travis that she was a target of the investigation and, given her earlier contacts with the government, that she had a conflict of interest and should withdraw as counsel for the Trust. AUSA Ernst documented this admonition in a letter sent to Travis eight days later.
On November 6, 1992, Travis again made an unsolicited call to Powell, warning him that an unsuspecting potential customer was about to transfer $21 million to the Trust and asking him to stop the transaction. In response to a question by Powell, Travis indicated that she was not represented by counsel. After reiterating that Travis was a target, Powell asked Travis whether she would appear voluntarily before a federal grand jury. Travis agreed to testify. After Travis had arrived in Newark, but prior to her grand jury testimony, she met with Powell and AUSA Ernst. Ernst repeated that Travis was a target, and informed her of her rights. Ernst warned Travis not to disclose any confidences between her and any person affiliated with the Trust because of potential attorney-client privilege issues, and stated that he would not ask any questions that would risk eliciting potentially privileged information. In fact, when Travis indicated that she had brought Trust documents with her to turn over to the government, Ernst refused to examine them. Notwithstanding Travis' insistence that the documents were not privileged because the Trust did not actually exist, Ernst turned them over to an AUSA who was not part of the investigation into the Trust to make an independent privilege determination.
Before the grand jury, Travis again was informed of her rights and that she was a target of the investigation. She was again admonished not to disclose privileged information, and when it appeared that she was about to do so, Ernst instructed her not to answer. On January 12, 1993, Ernst wrote to Travis informing her once more that she was a target of the grand jury's investigation and invited her to provide additional testimony or evidence in her own behalf, which she did on January 15, 1993.
Contending that the government's reliance on Travis to build a case against him constitutes "outrageous government conduct" in violation of the Fifth Amendment's Due Process Clause, Voigt moved pretrial to dismiss the indictment. The district court declined to hold an independent evidentiary hearing because it determined that Voigt had failed to make a prima facie showing of outrageousness and the trial would address the issues raised by his motion. The district court ultimately denied Voigt's renewed posttrial motion to dismiss the indictment:
[A]s far as outrageous conduct by the Government, I certainly can't find that here. I have had the benefit of seeing Agent Powell testify, I have seen Mercedes Travis testify and the cross examination of both of them, and I can't find that that was the case.
To the extent there is any conflict between the testimony of Powell and Travis, I credit the testimony of Powell . . . because Powell convinced me that the Government was acting reasonably based upon what Travis had told them when they went forward, even though she was an attorney, that she was not acting as an attorney. I can't find any outrageous conduct whatsoever here and, of course, we know later, Travis was not a Government agent, [and] was really acting on her own at the time. I can't see any outrageous conduct whatsoever and I have had the benefit of the full trial hearing on this. App. at 1122-23.
Our standard of review is mixed. When the district court decides a constitutional claim based on a developed factual record, we exercise plenary review of the district court's legal conclusion. United States v. Driscoll, 852 F.2d 84, 85 (3d Cir. 1988). We defer to the factual findings supporting that conclusion unless they are clearly erroneous. United States v. Bonanno, 852 F.2d 434, 437 (9th Cir.), cert. denied, 488 U.S. 1016, 109 S. Ct. 812 (1989). *fn4
In 1952 the Supreme Court recognized that outrageous misconduct by law enforcement officers in detecting and obtaining incriminating evidence could rise to the level of a due process violation. Rochin v. California, 342 U.S. 165, 72 S. Ct. 205 (1952) (vacating conviction and dismissing indictment where police had pumped stomach of suspected drug pusher to obtain incriminating evidence). Since Rochin was decided the Court has discussed the viability of an outrageous government conduct claim only in the context of government instigation of and overinvolvement in the very criminal activity it seeks to punish. See United States v. Russell, 411 U.S. 423, 93 S. Ct. 1637 (1973); see also Hampton v. United States, 425 U.S. 484, 96 S. Ct. 1646 (1976) (five Justices reaffirm viability of due process claim for government overinvolvement in crime). In United States v. Payner, 447 U.S. 727, 100 S. Ct. 2439 (1980), however, the Court discussed, in dictum, whether an illegal search of a third party's briefcase might constitute outrageous government conduct. Id. at 737 n.9, 100 S. Ct. at 2447 n.9. Thus, we have no reason to doubt that the Court continues to recognize a due process claim premised upon outrageous law enforcement investigative techniques.
The showing required to establish a due process violation, though often recited, is by no means pellucid. Writing for the Court in Rochin, Justice Frankfurter said that "the proceedings by which this conviction was obtained do more than offend some fastidious squeamishness or sentimentalism about combatting crime too energetically. This is conduct that shocks the conscience." Rochin, 342 U.S. at 172, 72 S. Ct. at 209. In Russell, the Court elaborated on the standard it had enunciated in Rochin:
While we may some day be presented with a situation in which the conduct of law enforcement agents is so outrageous that due process principles would absolutely bar the government from invoking judicial processes to obtain a conviction, the instant case is distinctly not of that breed. . . . The law enforcement conduct here stops far short of violating that "fundamental fairness, shocking to the universal sense of justice," mandated by the Due Process Clause of the Fifth Amendment. Russell, 411 U.S. at 431-32, 93 S. Ct. at 1643 (citation omitted). And in Hampton, the Court's most recent opportunity to visit the outrageous government conduct issue, Justice Powell, concurring in the judgment, noted that "[p]olice overinvolvement in crime would have to reach a demonstrable level of outrageousness before it could bar conviction." Hampton, 425 U.S. at 495 n.7, 96 S. Ct. 1653 n.7 (Powell, J., concurring in the judgment). *fn5
We have also noted that the judiciary is extremely hesitant to find law enforcement conduct so offensive that it violates the Due Process Clause. In United States v. Janotti, 673 F.2d 578 (3d Cir.) (in banc), cert. denied, 457 U.S. 1106, 102 S. Ct. 2906 (1982), we observed that "the majority of the Court has manifestly reserved for the constitutional defense only the most intolerable government conduct." Id. at 608 (emphasis added). Relying on well-settled separation-of-powers principles, we cautioned that
[w]e must necessarily exercise scrupulous restraint before we denounce law enforcement conduct as constitutionally unacceptable . . . . Unless the behavior of the F.B.I. agents rose to the level of outrageousness which would bar conviction, the conduct of agents of the executive branch who must protect the public from crime is more appropriately considered through the political process where divergent views can be expressed in the ballot box. Id. at 607, 609.
Subsequent decisions have heeded Janotti's call for judicial restraint. As a result, the doctrine of outrageous government misconduct, although often invoked by defendants, is rarely applied by courts. See United States v. Santana, 6 F.3d 1, 4 (1st Cir. 1993) ("The banner of outrageous misconduct is often raised but seldom saluted."). Although litigants continue to assert the doctrine as a defense against conviction, "courts have rejected its application with almost monotonous regularity." Id. at 4 (collecting cases). Indeed, the doctrine has only once been applied by a federal appellate court since the Supreme Court's Hampton decision in 1976: in this court's decision in United States v. Twigg, 588 F.2d 373 (3d Cir. 1978). Since Twigg, however, "this court and other appellate courts have . . . exercised extreme caution in finding due process violations in undercover settings." United States v. Gambino, 788 F.2d 938, 945 n.6 (3d Cir.), cert. denied, 479 U.S. 825, 107 S. Ct. 98 (1986). See United States v. DeRewal, 10 F.3d 100, 105 n.3 (3d Cir. 1993), cert. denied, 114 S. Ct. 1544 (1994).
Bearing in mind the amount of restraint we must exercise in subjecting law enforcement conduct to judicial review, we must determine whether, as a matter of law, the conduct that Voigt alleges occurred in this case raises a cognizable claim of outrageous government conduct. Despite the paucity of directly relevant authority, we are not writing on a clean slate. Our review of the case law demonstrates that a claim of outrageous government conduct premised upon deliberate intrusion into the attorney-client relationship will be cognizable where the defendant can point to actual and substantial prejudice.
In United States v. Ofshe, 817 F.2d 1508 (11th Cir.), cert. denied, 484 U.S. 963, 108 S. Ct. 451 (1987), for example, the government used a defense attorney as an informant against the defendant in a matter unrelated to the subject of the attorney's representation (a drug prosecution). With the attorney's permission, the government placed a body bug on him to record conversations with the defendant. Despite strict instructions to the attorney not to elicit privileged information, secret defense strategy concerning Ofshe's drug prosecution was recorded by government agents. Nevertheless, the Eleventh Circuit concluded that this government misconduct was not so outrageous as to violate the Fifth Amendment. Id. at 1516. This conclusion was based on two findings: (1) that the attorney's cooperation concerned a different crime from the one for which he was representing the defendant, thus the invasion of the attorney-client relationship did not produce any evidence against the defendant; and (2) that the defendant was not prejudiced in his defense because the attorney's co-counsel continued to provide zealous representation to the defendant throughout the trial. Id. The court noted, however, that "[h]ad there been demonstrable evidence of prejudice, we would be compelled to reverse." Id. Accord United States ex rel. Shiflet v. Lane, 815 F.2d 457 (7th Cir. 1987) (dismissal not warranted where disclosure of privileged information to police lead to discovery of crucial evidence against defendant because government played no role in the breach of the privilege), cert. denied, 485 U.S. 965, 108 S. Ct. 1234 (1988); cf. United States v. Levy, 577 F.2d 200 (3d Cir. 1976) (dismissal of indictment on Sixth Amendment grounds warranted where government employs co-defendant as confidential informant in order to obtain and reveal confidential defense strategy).
Only one decision has ordered that an indictment be dismissed due to preindictment intrusion into the attorney-client relationship so pervasive and prejudicial as to be considered "outrageous." United States v. Marshank, 777 F. Supp. 1507 (N.D. Cal. 1991). In Marshank, Ronald Minkin, the attorney for two cooperating defendants, provided information to the government leading to the indictment of another one of his clients. Minkin then encouraged that client to cooperate with the government in order to secure an indictment against Marshank, with whom Minkin also had an ongoing attorney-client relationship. The government never warned the attorney to avoid ethical impropriety, and affirmatively hid from both the court and the defendants the attorney's multiple, conflict-ridden representation while acting as a government informant. Granting Marshank's motion to dismiss the indictment based on a due process violation for outrageous preindictment conduct, the district court distinguished between passive tolerance and active encouragement of impropriety:
[T]he government actively collaborated with Ron Minkin to build a case against the defendant, showing a complete lack of respect for the constitutional rights of the defendant and Minkin's other clients and an utter disregard for the government's ethical obligations. . . . [T]he agents and the prosecutor here never warned Minkin not to engage in unethical behavior and in fact facilitated that behavior by hiding it from the defendant. Moreover, the government colluded with Minkin to obtain an indictment against the defendant, to arrest the defendant, to ensure that Minkin would represent the defendant despite his obvious conflict of interest, and to guarantee the defendant's cooperation with the government. Id. at 1524 (second emphasis added).
Voigt claims that, at the very least, the factual disputes raised by his moving papers and the government's response warranted an independent evidentiary hearing prior to trial, and that the district court's determination that he had failed to make out a prima facie showing of "outrageous government conduct" was erroneous. The district court had before it: (1) Agent Powell's affidavit, to which contemporaneous notes of his contacts with Travis were attached as exhibits; (2) Voigt's affidavit, in which Voigt claimed that Travis had been the Trust's and his attorney from the summer of 1990 through June of 1993; (3) Travis' affidavit; and (4) Travis' and Powell's grand jury testimony. Although we agree with Voigt that conducting a hearing prior to trial would have been more prudent and the better practice, a remand is unnecessary under the facts of this case since we find that the record developed at trial, taken together with Voigt's moving papers and the government's response, provided the district court an adequate basis with which to resolve Voigt's constitutional claim.
Rule 12(b)(1) of the Federal Rules of Criminal Procedure requires that all "defects in the institution of the prosecution" be raised by pretrial motion. Fed. R. Crim. P. 12(b)(1). Although Rule 12 does not by its terms specify when such a motion entitles a defendant to a pretrial evidentiary hearing, we have held that a defendant's moving papers must demonstrate a "colorable claim" for relief. United States v. Brink, 39 F.3d 419, 424 (3d Cir. 1994) (remanding for hearing where Brink alleged facts that, if true, "could violate a defendant's rights under the Sixth Amendment"). See United States v. Soberon, 929 F.2d 935, 941 (3d Cir.) (if district court had "reasonable suspicion" of prosecutorial misconduct proper course was to hold evidentiary hearing), cert. denied, 502 U.S. 818, 112 S. Ct. 73 (1991). In order to be "colorable," a defendant's motion must consist of more than mere bald-faced allegations of misconduct. United States v. Sophie, 900 F.2d 1064, 1071 (7th Cir.) ("A district court does not have to hold evidentiary hearing on a motion just because a party asks for one."), cert. denied, 498 U.S. 843, 111 S. Ct. 124 (1990). There must be issues of fact material to the resolution of the defendant's constitutional claim. See United States v. Panitz, 907 F.2d 1267, 1273-74 (1st Cir. 1990) (refusal to hold evidentiary hearing on outrageousness claim proper because material facts were not in dispute); Sophie, 900 F.2d at 1071 (refusal to hold hearing proper where defendant's own submissions refuted his claim).
As our survey of the relevant case law indicates, see supra III.B.2, in order to raise a colorable claim of outrageousness pertaining to alleged governmental intrusion into the attorney-client relationship, the defendant's submissions must demonstrate an issue of fact as to each of the three following elements: (1) the government's objective awareness of an ongoing, personal attorney-client relationship between its informant and the defendant; *fn6 (2) deliberate intrusion into that relationship; and (3) actual and substantial prejudice. See Ofshe, 817 F.2d at 1516; Lane, 815 F.2d at 466; United States v. Santopietro, 809 F. Supp. 1008, 1015 (D. Conn. 1992) (no due process violation where defendant fails to demonstrate that attorney/informant revealed client confidences); Marshank, 777 F. Supp. at 1524.
Although the issue is a close one, after comparing Voigt's motion and Travis' affidavit with the government's response, we think the district court should have conducted an evidentiary hearing. Travis' relationship with both Powell and Voigt was highly disputed. Furthermore, Voigt's moving papers raised enough of a specter of ethical impropriety on the government's part to warrant closer scrutiny. Even the district court, skeptical though it was as to the degree of purposeful intrusion, believed that whatever factual disputes existed on that issue would be resolved at trial. This was an acknowledgement by the court that there were some disputed factual issues raised by Voigt's motion that needed to be resolved. Since the government itself notes that suppression of evidence is a more appropriate remedy than dismissal of the indictment, factual determinations that can lead to suppression logically should be resolved at an evidentiary hearing conducted prior to trial. *fn7
Conducting a pretrial evidentiary hearing certainly has its advantages. The district court is then in a position to place in the record its findings of facts and conclusions of law, see Fed. R. Crim. P. 12(e), which greatly facilitates appellate review. Prieto-Villa, 910 F.2d at 610. This is especially true where the legal claim, outrageous government conduct, is so highly fact sensitive. While we are not unmindful of the district court's strong interest in avoiding duplicative proceedings, judicial economy is not fostered when substituting trial testimony for a pretrial hearing generates postverdict and appellate litigation and potentially frustrates appellate review.
Nevertheless, any "error" arising from the district court's failure to hold an independent evidentiary hearing in this case is unquestionably harmless. Most of the factual issues depended for their resolution on assessing Powell's and Travis' credibility. In our view, their trial testimony, when taken together with Voigt's motion papers and the government's response, provided the district court with a sufficient evidentiary record against which to measure Voigt's outrageousness claim. At trial, Voigt cross-examined Powell thoroughly about whether he in fact believed that Travis had acted in a legal capacity on behalf of the Trust or Voigt when she first approached the government. Powell also was cross-examined extensively about the degree to which he encouraged Travis to re-establish contact with the Trust and whether it was his understanding that she would do so in her capacity as an attorney. Travis testified in her own behalf and was cross-examined at length by the government as to her understanding of her relationship with Powell and her role as a confidential informant. Finally, during the trial the district court ruled on numerous claims of attorney-client privilege, which certainly provided it with insight into the nature and degree of any alleged government intrusion into the attorney-client relationship. Thus, the district court's failure to conduct a hearing, although ill-advised, was at worst harmless error.
Voigt claims, however, that even assuming the record as it now stands is sufficiently developed, and we determine that it is, the district court should have dismissed the indictment because the record unequivocally demonstrates outrageous government conduct. Relying on the three-part test we set forth above, supra III.C.1.a, we hold that Voigt's claim of outrageousness fails as a matter of law with respect to the period between July 13, 1991, and May 1, 1992, because Voigt failed to establish the first element -- the government's objective awareness of an attorney-client relationship between Travis and Voigt during that time. We further agree with the district court's implicit determination that there is insufficient evidence in the record on the second and third elements, purposeful intrusion and prejudice, as to the period thereafter.
Voigt's claim of outrageousness based on the government's contacts with Travis during the period from July 13, 1991 (when Travis first approached the government), to May 1, 1992 (when Travis first announced that she was representing Voigt in response to the grand jury subpoenas), fails as a matter of law for two reasons. First, the record is wholly devoid of any evidence that the government was or should have been aware of a personal attorney-client relationship between Travis and Voigt during that time. Voigt argues that the tax opinion Travis prepared for him should have alerted Powell that by February or March of 1992 Travis had an ongoing personal attorney-client relationship with Voigt. According to Powell, however, Travis claimed that it was a "one-shot deal" and did not share the opinion with him. The district court credited Powell's version of the events, and we find nothing in the record to indicate that the district court's finding in this respect was clearly erroneous. In any event, the record clearly indicates that at about the same time Travis informed Powell of the tax opinion AUSA Zoubek discontinued Travis as a confidential informant.
Voigt also argues inferentially that the government's entire case at trial was based on the premise that the Trust was essentially his "alter ego." Since the Trust was a fictitious entity, Voigt reasons, any legal work Travis performed for the Trust in reality must have been performed for him personally. In this way Voigt attempts to bootstrap himself into an attorney-client relationship that is essential to the maintenance of his outrageousness claim, at least with respect to the period preceding May 1, 1992. Voigt cannot have it both ways. Having abused the corporate structure such that the Trust, in effect, became his "alter ego," we think that Voigt may not now rely on that abuse as a shield by claiming a personal attorney-client relationship with the attorney for the fraudulent corporate entity. Moreover, far from creating additional protections for officers of fraudulent corporations, the "alter ego" doctrine exists to pierce the corporate veil, thereby stripping those officers of the protections normally associated with the corporate form. See generally Charles Clark, Corporate Law Section(s) 2.4, at 71 (1986).
In any event, even if Travis' status as an attorney for the Trust were relevant to our resolution of the outrageousness issue, the record fully supports the district court's implicit finding that Powell reasonably believed that Travis was not acting as counsel for the Trust during the period between July 13, 1991, and May 1, 1992. Accordingly, any claim of outrageousness must be premised upon the government's contacts with Travis after May 1, 1992, for that is the day Travis informed the government that she was representing the Trust and Voigt in connection with the very investigation in which she had acted as an informant.
As for Travis' contacts with the government from May 1, 1992, until her indictment, the record falls woefully short of establishing the sort of purposeful intrusion into her attorney-client relationship with Voigt that would rise to the level of outrageousness. For example, Travis made two phone calls to Powell on May 1 1992. Contending that these calls were "staged" to maintain Travis' cover, Voigt asserts that they constitute proof of "purposeful intrusion." We are not persuaded. First, by the time Travis placed these calls to Powell, AUSA Zoubek had affirmatively cut off contact with Travis given her decision to rejoin the Trust as counsel. This demonstrates the government's awareness of and sensitivity to Travis' ethical obligations and belies Voigt's sinister characterization. Second, Powell asserted that he did nothing to solicit the calls, and the record supports his contention. Thus, to the extent that Travis disclosed privileged information, and there is no proof that she did, it was not at the behest of government agents.
All of Travis' post-May 1, 1992, contacts with the government were unsolicited except for her appearances before the grand jury. The government's actions during this period demonstrated sensitivity to potential ethical problems and contradicts Voigt's claim of "purposeful intrusion." Illustrative of the government's sensitivity was Travis' call to AUSA Ernst in September of 1992. Ernst did not attempt to extract information from Travis. Instead, he informed her that she was a target of the investigation and admonished her to withdraw as counsel given her obvious conflict of interest. Travis' next contact with the government was her unsolicited call to Powell in November of 1992 to warn him about an impending fraud. To the extent that such information was privileged, it was volunteered and cannot have constituted "deliberate intrusion" on the part of the government. Similarly, we find no impropriety in Powell's asking Travis to appear before the grand jury. By this time Travis knew she was a target of the investigation and had been warned to withdraw as counsel for Voigt. Therefore, to the extent Travis continued to provide legal advice to Voigt in connection with the criminal investigation, she was violating her ethical obligation to avoid a conflict of interest. Finally, AUSA Ernst's efforts to steer clear of privileged information during Travis' grand jury testimony demonstrate that the government was attentive to ethical constraints. We fail to see any purposeful intrusion on the government's part.
Voigt's alternative claim of purposeful intrusion, which arguably has some merit, might be that the government had an affirmative duty to inform him that Travis had acted as an informant when it discovered that she was representing him in connection with the very criminal investigation in which she had acted as an informant. At least one court of appeals has speculated as to whether the government, during the investigative phase of a prosecution, may have some affirmative duty to inform a defendant of a potential conflict of interest caused by its prior association with the defendant's lawyer. See, e.g., United States v. Lopez, 71 F.3d 954, 963-64 (1st Cir. 1995) (attorney for defendant had begun grand jury investigation into his client as AUSA before switching sides). We need not reach that issue, however, because as our discussion in the next subsection indicates, Voigt has made no showing of prejudice.
We find no evidence in the record of significant prejudice -- the third element of our outrageous government conduct test. As the party bearing both the burden of production and persuasion on his outrageousness claim, Voigt has failed to demonstrate that he suffered any ill effects flowing from the government's allegedly improper investigative activity. For instance, Voigt does not cite even a single occasion on which Travis gave him legal advice that was calculated to damage him to the benefit of the government. Nor does he claim that Travis intentionally declined to assert the attorney-client privilege in response to the government's grand jury subpoenas *fn8 or that Travis advised him to pursue a course of conduct she knew to be illegal simply to help the government build its case. More significantly, however, Voigt failed to demonstrate that any of the information Travis provided the government after May 1, 1992, was in fact privileged. We think this alone is fatal to his claim of outrageousness. Voigt contends on appeal that he does not assail the district court's attorney-client privilege rulings because of the lenient standard of review we would apply. But we think if Voigt's assertion that "the evidence introduced both prior to and at the trial included hundreds, if not thousands, of privileged attorney-client communications" (Voigt's Br. at 12) had any merit whatsoever, he would have pointed to at least one document Travis provided the government that was privileged. By failing to meet his burden to establish the privilege he claims, Voigt has precluded us from finding that an attorney-client relationship between Travis and him ever existed, let alone that it was violated.
Finally, Voigt invokes our decision in Levy, 577 F.2d at 200, along with other similar decisions, in an attempt to have us find that the government's intrusion into his attorney-client relationship, standing alone, is per se prejudicial. Levy, however, is distinguishable on two fronts. First, Levy was decided under the Sixth Amendment. Second, and more importantly, Levy, like most of the cases that Voigt has cited, concerned the government's deliberate intrusion into a defendant's attorney-client relationship in order to gain access to confidential defense strategy. See, e.g., United States v. Valencia, 541 F.2d 618 (6th Cir. 1976) (dismissal appropriate where government obtains defense strategy). *fn9 The record in this case demonstrates that the government was scrupulous in its effort to avoid procuring confidential defense strategy. See generally Ofshe, 817 F.2d at 1516 (no dismissal warranted where inadvertently intercepted defense strategy not used against the defendant). If any privileged information was disclosed to the government in this case, it ...