Title: Hambarian v. Super. Ct.

State: california

Issuer: California Supreme Court

Document:

1
Filed 4/18/02
IN THE SUPREME COURT OF CALIFORNIA
JEFFREY HAMBARIAN,
)
)
Petitioner,
)
)
S097450
v.
)
)
Ct.App. 4/3 G026447
THE SUPERIOR COURT OF
)
ORANGE COUNTY
)
)
Orange County
Respondent;
)                 Super. Ct. No. 98CF3696
)
THE PEOPLE,
)
)
Real Party in Interest.
)
__________________________________ )
Once again we are asked to consider the circumstances under which a
superior court may or must recuse a prosecutor’s office because of the office’s use
of consultants compensated by the victim.  In People v. Eubanks (1996) 14 Cal.4th
580 (Eubanks), we found the superior court did not abuse its discretion in ordering
recusal of the Santa Cruz County District Attorney’s Office which, when faced
with a “ ‘substantial’ ” debt for consultants in comparison to its resources, had
asked the victim to pay the debt as well as “other significant costs of the
investigation.”  (Id. at p. 598.)  Focusing on “the possible sense of obligation the
district attorney would feel for [the victim’s] payment of a debt owed by the
district attorney’s office,” we held that “[t]he trial court did not err in concluding
these circumstances evidenced a ‘reasonable possibility’ the prosecutor might not
2
exercise his discretionary functions in an evenhanded manner” and would not have
abused its discretion “in finding the conflict so grave as to render fair treatment of
the defendants in all stages of the criminal proceedings unlikely.”  (Id. at pp. 598-
599, 601.)
In the present case, the superior court declined to disqualify the Orange
County District Attorney (District Attorney), which had accepted the services of a
forensic accountant employed and compensated by the victim, the City of Orange.
We conclude that the superior court did not abuse its discretion and therefore
affirm the Court of Appeal.
I
For over 40 years, businesses owned and operated by the Hambarian family
have held trash collection and disposal contracts with the City of Orange (City).
Under the most recent contract, Orange Disposal Service, Inc. (ODS) agreed to
deliver all solid wastes and recyclable materials collected in the City to a material
recovery facility for processing and recycling by Orange Resource Recovery
Systems, Inc. (ORRS).  ORRS agreed to document its costs and provide that
information annually to the City, which in turn relied on that information to adjust
the rates charged to its residents for trash collection.
Following a 1995 audit of ORRS, certified public accountant Steven
Nakada discovered the misappropriation of salvage revenues from ORRS to
unknown bank accounts.  Nakada identified petitioner Jeffrey Hambarian, a
corporate vice-president, and Rod Agajanian, ORRS operations manager, as the
perpetrators of a massive fraud that appeared to include money laundering.  The
apparent purpose of the scheme was to artificially increase ODS’s costs and to
underreport ORRS’s salvage revenues, resulting in higher trash rates for City
residents and businesses and higher profits for the Hambarian companies.  In
February 1997, Nakada—who had been the accountant and financial advisor for
3
the Hambarian companies since 1988—resigned, due in part to the deterioration of
his relationship with the Hambarians and their failure to implement the internal
controls he had recommended.  However, he continued to bill ODS and ORRS for
his services during the companies’ transition to a new accounting firm and, until
February 1998, for his time spent assisting the City in its investigation of those
companies.
When the City learned of possible fraud involving the trash collection and
disposal contracts, it initiated its own investigation.  In early March 1997, the City
retained Arthur Andersen, LLP, to audit the recycling revenues.  Nakada worked
with Arthur Andersen during this period and continued to bill ODS and ORRS.
Based in part on Arthur Andersen’s findings, the Orange Police Department
(Police Department) began an investigation in April 1997 into the apparent theft of
funds related to the refuse and recycling operations performed by the Hambarian
companies for the City.  Arthur Andersen assisted the Police Department in the
drafting and execution of search warrants and other aspects of the investigation.
Because the investigation involved financial and accounting issues, the chief of
police sought and obtained authorization from the City to engage a certified public
accountant to continue assisting the police in the investigation.  On July 1, 1997,
Jeff Franzen, a certified public accountant (CPA), entered into a contract with the
City1 to perform accounting services to assist police investigators in their
                                                
1
Because the Police Department’s contracting authority was limited to
$2000, the City was the official counterparty to the Franzen contract.  The original
contract was funded by an appropriation added to the Police Department budget.
Subsequent authorizations were paid from the City’s sanitation fund.  In both
cases, Franzen’s paychecks, like the paychecks of City police officers and other
employees, were issued by the City.  The dissenting opinion thus errs in ascribing
significance to the superior court’s comments that the Police Department was
paying Franzen’s salary.  (See dis. opn., post, at p. 3.)
4
investigation of possible theft or other fraud in connection with the City’s
contracts with ODS and ORRS, to submit written reports detailing the work
performed when required to do so by the Police Department, and to testify in court
regarding work performed when required to do so by the Police Department or the
District Attorney.  During this period, the City (through the Police Department)
directed Franzen’s conduct of the investigation.
Subsequently, the chief of police determined that his department still did
not have sufficient resources to perform what appeared to be a complex, long-term
investigation and, at a meeting in early August 1997, asked the District Attorney
to assume responsibility for it.  The chief agreed to continue supporting the
investigation by assigning to the District Attorney, full time, the two investigators
who had initiated the investigation, as well as the contract CPA, Jeff Franzen.  The
chief also offered a third detective on a part-time basis.  The District Attorney
agreed to assume full responsibility for the investigation, and all documents and
personnel were physically transferred to the District Attorney’s major fraud unit in
Santa Ana.
Following this meeting, the City transferred supervision of Franzen to the
District Attorney.  Franzen’s role in the District Attorney’s investigation was to
perform financial analyses of the documents obtained by the District Attorney.  He
summarized data and prepared memos, but did not direct the course of the
investigation.  Once he reached conclusions about what the financial documents
meant, he informed the deputy district attorneys or their investigators.
Periodically, he prepared loss summaries, which are an enumeration of the various
categories of thefts.  He has not reported to the city attorney, the city manager, or
5
the city council and has not worked with the City’s lawyers in the City’s civil suit
against petitioner.2
As part of the investigation, Franzen visited ODS and ORRS to obtain
evidence and meet with employees and participated in the execution of search
warrants and interviews of numerous other witnesses.  He was “actively” involved
in the District Attorney’s investigation and met regularly with investigators and
attorneys from the District Attorney’s Office.  Sometimes these meetings have
included representatives from the state Franchise Tax Board and the Internal
Revenue Service, which is conducting its own investigation.
When Franzen was first retained by the Police Department, he worked out
of his home.  Following the August 1997 meeting, he “basically” worked out of
the District Attorney’s offices, where he was given a desk and telephone.  He
considered himself “a full member of the prosecution team” and the team’s expert
on financial matters, since no one else on the team performed that function.  The
District Attorney’s investigative auditor, Scott Weitzman, was not involved in this
                                                
2
The “scope of work” of Franzen’s contract with the City directed him to
“[s]ubmit written reports detailing the work performed when required by the
Police Department” and provided further that “[t]he documents, study materials
and other products produced by Consultant for this Agreement shall become the
property of the City and upon payment by the City for the work involved in their
production, Consultant shall deliver all such products to the City prior to payment
for same.”  However, Franzen has submitted only two reports to the City—a report
on the ODS’s gate fee balance and a report on certain public allegations made by a
City-hired consultant concerning the construction costs of the material recovery
facility.  Those reports initially were presented to the District Attorney “to enable
the District Attorney to make a decision on whether or not there were criminal
implications involved in these transactions.”  Subsequent to that review, the
District Attorney authorized Franzen to forward the reports to the City.  All the
other reports prepared by Franzen have been distributed only to the District
Attorney and have not been forwarded to the City.
6
investigation.  As part of his training for this investigation, Franzen observed
Weitzman testify at a preliminary hearing in a different matter.
At all stages of the investigation, Franzen has submitted his bills to the
Police Department and has been paid by the City.  As of the recusal hearing in
November 1999, Franzen, who bills at $75 per hour, had been paid a total of
$314,155.20.  Over the subsequent 18 months, Franzen was paid an additional
$140,000.  The city attorney has not discussed Franzen’s fees with the District
Attorney.
On December 15, 1998, the District Attorney filed a 65-count felony
complaint that charged petitioner with grand theft, presenting false claims,
commercial bribery, breach of fiduciary duty, receipt of corporate property, filing
false tax returns, and money laundering.  Under those charges, petitioner faces a
possible punishment of over 20 years in prison and over $17 million in fines.
Petitioner has pleaded not guilty.  The preliminary hearing has been stayed
pending resolution of this recusal motion.
In May 1999, the Hambarian companies and several other members of the
Hambarian family (the Hambarian parties), without admitting fault, entered into a
lump-sum settlement of $9.8 million with the City and assigned to the City any
claims they might have against petitioner arising out of the trash contracts and any
rights to restitution from him under Penal Code section 186.11.  The City had
previously filed a civil lawsuit against petitioner, his wife, and 15-year-old son,
City of Orange v. Hambarian et al. (Super. Ct. Orange County, No. 807419).
In November 1999, petitioner filed a motion to recuse the District
Attorney’s Office.  The motion, inter alia, challenged Franzen’s involvement in
the District Attorney’s investigation.  It did not object to the assistance provided
by the Police Department investigators.  Following an evidentiary hearing, the
superior court denied petitioner’s motion.  The superior court determined that the
7
Police Department had retained Franzen to help with “complex forensic
accounting issues and fraud investigation[s]” and that “the fact that the [City]
foot[s] the bill for this investigation . . . and then turns the investigation over to the
district attorney’s office doesn’t create a conflict for the district attorney’s office.”
Invoking the two-pronged test we set forth in Eubanks, the superior court
concluded (1) that “there is no conflict because there is no evidence in this court’s
view of a reasonable possibility that the district attorney’s office may not exercise
its discretionary function in an even-handed manner” and (2) that “even if a
conflict exists, it is not so grave as to render it unlikely that the defendant would
receive fair treatment.”3
A divided panel of the Court of Appeal denied the petition for a writ of
mandate.  All three justices agreed that a conflict existed as a matter of law
because Franzen’s impartiality would be affected by “knowing how his
benefactor’s financial position depended in a substantial measure on his actions
and conclusions.”  They parted ways in their review of Eubanks’s second prong.
The majority found that the trial court did not abuse its discretion by deeming it
unlikely that the District Attorney would be affected by the conflict.  Presiding
Justice Sills disagreed, concluding that “[t]he victim’s paying [for] and placing of
an expert witness or investigator inside the bowels of the district attorney’s office
could only be justified, if ever, in a truly exceptional case.”
                                                
3 
Petitioner also argued that the District Attorney was indebted to the
corporate victims ODS and ORRS to the extent that those companies had been
billed for Nakada’s initial investigation and had then reimbursed the City for a
portion of Franzen’s salary and a portion of Arthur Andersen’s fee as part of the
civil settlement.  The superior court found that the District Attorney was
“insulated” from the financial “arrangements” the City had made with ODS and
ORRS.  Since petitioner has not renewed those objections in this court, we find it
unnecessary to consider them.  (Cf. dis. opn., post, at p. 3.)
8
We granted review.
II
The standard for a motion to disqualify the prosecutor is set forth in Penal
Code section 1424:  “The motion may not be granted unless the evidence shows
that a conflict of interest exists that would render it unlikely that the defendant
would receive a fair trial.”  We detailed the history of this statute and the
associated legal principles in Eubanks, where we explained that a “conflict,” for
purposes of section 1424, “ ‘exists whenever the circumstances of a case evidence
a reasonable possibility that the DA’s office may not exercise its discretionary
function in an evenhanded manner.’ ”  (Eubanks, supra, 14 Cal.4th at p. 592,
quoting People v. Conner (1983) 34 Cal.3d 141, 148.)  However, “the conflict is
disabling only if it is ‘so grave as to render it unlikely that defendant will receive
fair treatment’ ” during all portions of the criminal proceedings.  (Eubanks, supra,
at p. 594.)  The statute thus articulates a two-part test:  “(i) is there a conflict of
interest?; and (ii) is the conflict so severe as to disqualify the district attorney from
acting?”  (Ibid.)4
Both the majority and the dissenting justices below found that the City’s
relationship with Franzen created a “reasonable possibility” that the District
Attorney may not exercise its discretionary function in an evenhanded manner,
which is the first prong of the test.  We find it unnecessary to revisit this
conclusion because petitioner has failed to show the trial court abused its
                                                
4
In addition to his statutory claim, petitioner makes occasional reference to
“due process” principles.  However, he nowhere articulates whether those
principles apply here and how, if at all, they differ from the state statutory
standard.  Accordingly, we will discuss only the legal test set forth in Penal Code
section 1424.  (Cf. Eubanks, supra, 14 Cal.4th at p. 596, fn. 8.)
9
discretion by finding, under the second prong, that the conflict was not so grave as
to render it unlikely that he will be treated fairly.  Under this prong, “the potential
for prejudice to the defendant—the likelihood that the defendant will not receive a
fair trial—must be real, not merely apparent, and must rise to the level of a
likelihood of unfairness.”  (Eubanks, supra, 14 Cal.4th at p. 592.)
The superior court found no evidence showing the District Attorney “is
under the influence of any of these victims” and thus concluded that any conflict
was “not so grave as to render it unlikely that defendant would receive fair
treatment.”  Petitioner’s challenge to that ruling rests primarily on three factors:
(1) the “enormous” sum of money the City has paid Franzen while he has worked
for the District Attorney, (2) Franzen’s “critical position as the sole financial
expert investigator” on the case, and (3) Franzen’s contractual duty to report his
findings to the City.  We must review the superior court’s factual findings for
substantial evidence and, based on those findings, determine whether the trial
court abused its discretion in denying the recusal motion.  (People v. Breaux
(1991) 1 Cal.4th 281, 293-294.)
A
The City has paid Franzen over $450,000 for his work on the District
Attorney’s investigation.  In Eubanks, we held that the trial court did not abuse its
discretion in ordering recusal where the alleged victim had paid approximately
$13,000 toward the costs of the investigation.  (Eubanks, supra, 14 Cal.4th at pp.
586-587.)  Petitioner, comparing the two sums, reasons that recusal is mandated
here.
Petitioner’s reasoning is faulty.  Our decision in Eubanks did not purport to
fix a limit on the financial assistance that may be provided by an aggrieved victim.
Rather, we stated that the trial court would have been within its discretion to find a
likelihood of unfairness where the crime victim, Borland International (Borland),
10
was asked to pay for substantial investigative expenses already incurred by the
prosecutor.  The problem was not the “fact” of the investigatory assistance itself,
but the “potential bias arising out of [the district attorney’s] sense of obligation to
Borland . . . .”  (Eubanks, supra, 14 Cal.4th at p. 599.)  As we explained, no one
factor will compel disqualification in all cases; “the entire complex of facts” must
be reviewed to determine “whether the conflict makes fair and impartial treatment
of the defendant unlikely.”  (Ibid.)  Accordingly, a review of the facts in both
cases is in order.
In Eubanks, Borland, through a review of the e-mail files of an employee
who had recently resigned, discovered that confidential information had been
transmitted to a competitor, Symantec Corporation.  Borland contacted police
who, in turn, sought investigative assistance from the district attorney’s office.
The district attorney, in consultation with Borland officials, prepared warrant
affidavits for the search of the employee’s residence and Symantec headquarters
and asked for additional Borland personnel to assist in the search of the computers
that would be found there.  When Borland suggested that independent consultants
be used instead, the district attorney retained David Klausner, who was referred by
Borland’s outside counsel, and Stephen Strawn, who had worked with the district
attorney’s office on prior occasions.  The district attorney’s office, because of
budgetary constraints, asked Borland to pay for Klausner’s services.  Borland
agreed and paid the $1,400 bill.  (Eubanks, supra, 14 Cal.4th at pp. 585-586.)
Strawn continued to work on the investigation after the warrants were
executed.  When the chief police inspector asked whether Borland “ ‘was still
willing to assist us by carrying the cost of the technicians that were necessary to
process this case,’ ” Borland once again agreed and paid the $9,450 bill.
(Eubanks, supra, 14 Cal.4th at p. 586.)  Borland also paid for a private service to
transcribe audiotapes of interviews because of a “clerical backlog” in the district
11
attorney’s office that was preventing the in-house staff from transcribing the tapes.
(Id. at p. 587.)
In discussing the existence of the disabling conflict, we did not rely merely
on “the fact of investigatory assistance itself” and consequently declined to hold
that a victim’s financial assistance of any amount “necessarily subjects the
defendant to unfair prosecutorial treatment.”  (Eubanks, supra, 14 Cal.4th at
p. 599.)  We required the defendant instead to show that the financial assistance is
of “a nature and magnitude likely to put the prosecutor’s discretionary
decisionmaking within the influence or control of an interested party.”  (Ibid.)
That likelihood existed in Eubanks from “the possible sense of obligation the
district attorney would feel for Borland’s payment of a debt owed by the district
attorney’s office,” an obligation derived from the fact that the district attorney had
asked Borland to discharge a sizable debt the office had already incurred.  (Ibid.)
As the Chief Justice pointed out in his concurring opinion, “it would be quite
difficult for the district attorney to tell Borland that he has decided not to prosecute
Borland’s case, after Borland, at the district attorney’s request, agreed to pay
substantial bills that were submitted to, and that were the responsibility of, the
district attorney’s office.”  (Id. at p. 602 (conc. opn. of George, C. J.).)
Petitioner has not identified anything in the record here, other than the
“huge” sum the City has paid Franzen, that would have created a similar sense of
obligation.  Although Franzen has been paid handsomely for his services, it is also
true that Orange County is several orders of magnitude larger than Santa Cruz
County.  Moreover, in Eubanks, the Santa Cruz County District Attorney testified
that, at the time Borland paid the investigative bills, his office was experiencing
“ ‘serious budgetary constraints in a particular fund that we utilize to pay
professional and special witnesses and we really had very little money in our
budget . . . .’ ”  (Eubanks, supra, 14 Cal.4th at p. 586.)  Petitioner, on the other
12
hand, has offered no evidence that the financial assistance the City provided was
of equal significance to the District Attorney, which already had an investigative
auditor, Weitzman, in its fraud unit.  Although petitioner is correct that the City’s
assistance freed the District Attorney’s auditor to work on other cases, this would
be true of any assistance the City might have provided.  For example, by collecting
and organizing information from internal sources, the City would have saved the
District Attorney at least that many person-hours of documentary discovery and
review.  Or, by dedicating a City police officer or by hiring a private investigator,
the City would have freed a full-time District Attorney investigator.  That the
victim’s assistance has freed up prosecutorial resources to work on other
investigations does not compel a finding that the prosecutor will feel indebted to
the victim.
We therefore cannot agree with the dissent that recusal is required
whenever “the victim is paying for a prosecutorial expense that otherwise would
have been incurred by the District Attorney’s office.”  (Dis. opn., post, at p. 5.)
Every type of assistance provided by the victim reduces the true “cost” of the
investigation and thus affects the relative costs and benefits of launching or
maintaining an investigation.  The test, however, is not whether the prosecution is
“ ‘subject to the same economic restraints that limit all other prosecutions’ ”
(Eubanks, supra, 14 Cal.4th at p. 599) but whether the financial assistance is of a
nature and magnitude “likely to put the prosecutor’s discretionary decisionmaking
within the influence or control of an interested party.”  (Ibid.)
The fact that the City was already pursuing its own civil action against
petitioner further reduced the likelihood that the District Attorney would have felt
a sense of obligation to the City.  Even if the District Attorney were to decline to
prosecute, the City still would be able to use Franzen’s work product against
petitioner in the civil action.  Since Franzen’s work product would not thereby
13
seem a wasted effort, it is unlikely that the District Attorney would feel obligated
to the City to pursue the prosecution merely because it had used Franzen’s
services.
The dissent also suggests that a sense of obligation is created by “the
knowledge that for over two years the City has been paying the salary of a
financial investigator to aid the prosecution.”  (Dis. opn., post, at p. 5.)  Yet the
record indicates that, until the recusal motion was filed, the District Attorney was
unaware of the sums the City had paid Franzen.  Moreover, the dissent’s analysis
would prove too much, inasmuch as the District Attorney also had “knowledge”
that the City had been paying the Police Department investigators who were
assisting in the investigation and who, like Franzen, had been working out of the
District Attorney’s offices.
Finally, as the People point out, the City is not a private victim.  In
Eubanks, the victim, Borland, was a competitor of Symantec Corporation, whose
president and chief executive officer was one of the defendants in the criminal
prosecution.    (Eubanks, supra, 14 Cal.4th at p. 585.)  One risk of Borland’s
involvement in the district attorney’s prosecution was that the prosecution itself
could be used as a strategic weapon to disrupt and distract a competitor for reasons
wholly unrelated to the public administration of justice.  (See id. at pp. 602-603
(conc. opn. of George, C. J.).)  Here, of course, the City had no interest in
crippling petitioner or the Hambarian companies in order to obtain a competitive
economic advantage.  (See United States v. Witmer (M.D.Pa. 1993) 835 F.Supp.
208, 214 [finding no disabling conflict of interest arising from the involvement of
an attorney from the Army, whose “loyalty to his own financial interests and those
of other private parties is not brought into play”], affd. without opn. (3d Cir. 1994)
30 F.3d 1489.)  The City’s interest was instead to secure refunds for its residents
for alleged overcharges by defendant and the Hambarian companies—which is
14
precisely the public interest shared by the District Attorney by constitutional
mandate.  (See Cal. Const., art. I, § 28, subd. (b) [“It is the unequivocal intention
of the People of the State of California that all persons who suffer losses as a result
of criminal activity shall have the right to restitution from the person convicted of
the crimes for losses they suffer”].)  To secure those refunds, the City had
statutory authority to investigate possible crimes, such as those alleged here, that
fell within its geographic jurisdiction (see Pen. Code, § 830.1, subd. (a)(1)), and
even to prosecute the misdemeanors itself.  (See Gov. Code, § 41803.5, subd. (a).)
That it sought to conduct its investigation in conjunction with the District Attorney
does not inevitably create a likelihood of unfairness.  (See People v. Parmar
(2001) 86 Cal.App.4th 781, 796, fn. 1 [a government entity that “shares the
interests of the public at large is not the type of private interest to which a motion
to disqualify is directed”].)
This is not to say, however, that the interplay among government entities
can never create a disabling conflict of interest (see People v. Parmar, supra, 86
Cal.App.4th at p. 796),  and we do not intend here to shield all interagency
conduct from conflict of interest principles.  Yet, as petitioner concedes, the City’s
status as a government victim is a relevant factor in analyzing the recusal motion.
In this case, where the City’s goals appear to coincide with the District Attorney’s,
the City has independent statutory authority to undertake the investigation, and the
City does not appear to have any improper strategic interest in the prosecution,5
                                                
5
Petitioner contends that the City relinquished its status as a “public” victim
by having acquired, as part of the settlement, the private causes of action the
settling Hambarian parties may have had against him.  Petitioner has offered no
evidence, however, that the City acted improperly in acquiring such rights.
Presumably, the assignment of those rights reduced the cash damages the settling
parties paid the City.  The City undoubtedly hopes to pursue those causes of action
as part of its overall effort to make its residents whole from the fraud allegedly
(footnote continued on next page)
15
the superior court was within its discretion to find that any conflict of interest was
not disabling.
Petitioner repeatedly asserts that the City’s “gift” of Franzen’s expertise “is
every bit as likely to make the District Attorney beholden to the victim City as if
Franzen’s fees were initially an obligation of the District Attorney and then passed
on to the City,” but offers no explanation of why this would be so.  Although a
direct solicitation from the district attorney to the victim may not be essential to
every recusal motion, such a request was the foundation for the finding in Eubanks
of a “possible sense of obligation the district attorney would feel for Borland’s
payment of a debt owed by the district attorney’s office.”  (Eubanks, supra, 14
Cal.4th at p. 599; id. at p. 603 (conc. opn. of George, C. J.) [“[T]he district
attorney—knowing the strategic importance of the matter to Borland, and having
asked Borland to pay the district attorney’s obligations—likely would feel a great
sense of obligation to pursue the prosecution and would be reluctant to exercise
objectively his prosecutorial discretion.”].)  Here, by contrast, petitioner identifies
no reason why the District Attorney’s Office would believe itself similarly
indebted, except the sense of gratitude that accompanies the assistance any victim
provides the authorities.  This is merely another way of asserting that a victim’s
financial assistance necessarily subjects the defendant to unfair prosecutorial
treatment, a proposition we rejected in Eubanks.  (Id. at p. 599.)  Certainly, on this
                                                                                                                                                
(footnote continued from previous page)
perpetrated by the Hambarian companies.  Nothing about the assignment of those
rights suggests that the City is acting for any interests other than those of the
People at large.  (See generally Crowe v. Boyle (1920) 184 Cal. 117, 156 [“All
presumptions of the law are in favor of the good faith of public officials . . . .”].)
16
record, the superior court was well within its discretion in finding the District
Attorney’s Office would not feel obligated to the City.
B
Petitioner claims next that a likelihood of unfairness arises from Franzen’s
direct role in “influencing the prosecutor’s decisionmaking” and “running the
financial investigation for the District Attorney.”  There can be little dispute that
Franzen, who was retained and compensated by the City and who will be assisting
in the City’s civil suit, appears to have an interest in the District Attorney’s
investigation.  Yet, even if we indulge petitioner’s premise that Franzen is biased,
it does not follow that the District Attorney’s Office must be recused.
The problem with petitioner’s argument is that the record does not support
his grandiose claims that Franzen is “the driving force” within the District
Attorney’s Office to treat petitioner “as harshly as possible, to disable him, and
make it more likely the City will prevail in its related civil suit . . . .”  True,
Franzen is actively involved in the investigation and considers himself “a full
member of the prosecution team.”  But he is not directing the course of the
investigation, as petitioner belatedly acknowledges.  Franzen analyzes financial
documents, summarizes data, and prepares memoranda that are presented to the
District Attorney and its investigators, who are directing the investigation.
Periodically, Franzen has prepared loss summaries and, at the time of the hearing,
was preparing a summary of the costs of the investigation.  But, at all points, it is
the District Attorney’s Office that has decided what use to make of Franzen’s
findings and whether the conduct uncovered was criminal.
Franzen’s lack of control over the investigation distinguishes this case from
those on which petitioner relies.  In Ganger v. Payton (4th Cir. 1967) 379 F.2d
709, 711, for example, the attorney prosecuting Ganger criminally also
represented Ganger’s wife in a divorce action, which was based on the same
17
alleged assault.  The prosecuting attorney offered to drop the assault charge if
Granger would make a favorable property settlement in the divorce action.  (Ibid.)
The prosecutor’s personal interest in the criminal action—the possibility that the
size of his fee would be determined by what he could extract from the defendant—
and his apparent surrender of his discretion to his private client meant he could not
exercise “fair-minded judgment with respect to (1) whether to decline to
prosecute, (2) whether to reduce the charge to a lesser degree of assault, or (3)
whether to recommend a suspended sentence or clemency.”  (Id. at p. 713, fn.
omitted.)  Here, by contrast, Franzen has no control over these critical
prosecutorial decisions.  By virtue of his specialized knowledge, he naturally
serves an important function in the financial investigation.  Yet this is true of any
expert the prosecutor might retain.  The medical personnel who examined
Ganger’s wife following the assault also had specialized knowledge of critical
facts underlying both the criminal and civil actions, but it would not necessarily
follow that recusal would be required if a prosecutor were to rely on the medical
expert the wife had retained.
After all, it is the public prosecutor, not the witness, who is bound by law,
by a canon of professional ethics, and by the Constitution to act in an impartial
manner.  The prosecutor, unlike an expert witness, “ ‘is in a peculiar and very
definite sense the servant of the law, the twofold aim of which is that guilt shall
not escape or innocence suffer.’ ”  (People v. Superior Court (Greer) (1977) 19
Cal.3d 255, 266, quoting Berger v. United States (1935) 295 U.S. 78, 88, italics
added.)  One justification for the requirement of impartiality is that the prosecutor,
unlike the expert witness, has broad discretion over the entire course of the
criminal proceedings, from the investigation and gathering of evidence, through
the decisions of whom to charge and what charges to bring, to the numerous
choices at trial to accept, oppose, or challenge judicial rulings.  (See Eubanks,
18
supra, 14 Cal.4th at p. 589.)  But another justification is that the expert witness,
unlike the prosecutor, may be called to the stand to submit to cross-examination,
“the ‘greatest legal engine ever invented for the discovery of truth.’ ”  (California
v. Green (1970) 399 U.S. 149, 158, fn. omitted.)  The witness’s biases may thus be
laid bare to the trier of fact, while private influences on the prosecuting attorney
are invisible to the fact finder and must be addressed by rule.  (See State v.
Culbreath (Tenn. 2000) 30 S.W.3d 309, 316 [“the foundation for the exercise of
the vast prosecutorial discretion is freedom from conflict of interest and fidelity to
the public interest”].)  In this case, the trier of fact will surely learn of the City’s
arrangement with Franzen when he is called to testify.  (See, e.g., Evid. Code, §
780, subd. (f).)  Consequently, recusal is not necessary to ensure petitioner’s right
to fair treatment during all portions of the criminal proceedings.  (Cf. People ex
rel. Clancy v. Superior Court (1985) 39 Cal.3d 740, 746.)  Indeed, petitioner has
not identified a single case in which a prosecutor’s office was disqualified because
of the influence of a nonattorney participant in the investigation.6
Petitioner’s attempt to portray the loss estimates performed by Franzen as a
uniquely critical component of this financial fraud investigation is unpersuasive.
As the People point out, prosecutors routinely rely on loss estimates prepared by
the victims.  (Cf. CALJIC No. 14.27; 2 Witkin & Epstein, Cal. Criminal Law (3d
ed. 2000) Crimes Against Property, § 8, p. 28.)  A prosecutor’s decision to rely on
                                                
6
Some jurisdictions go so far as to permit private counsel for interested
parties to prosecute a criminal action “so long as the Criminal District Attorney
retains control and management of the prosecution.”  (Powers v. Hauck (5th Cir.
1968) 399 F.2d 322, 325; see also Faulder v. Scott (5th Cir. 1996) 81 F.3d 515,
517-518; Person v. Miller (4th Cir. 1988) 854 F.2d 656, 663.)  We express no
views whether California law, which “does not authorize private prosecutions”
(Eubanks, supra, 14 Cal.4th at p. 588), permits attorney assistance of this type.
19
that estimate without first obtaining an independent confirmation of the loss does
not mean, as petitioner contends, that the People have “ceded the victim the right
to shape prosecution decisionmaking.”  This type of assistance may “influence”
the course of the investigation, but that does not mean that the investigation is
“under the influence” of the party providing the assistance.  “Assistance in
investigations and prosecutions does not translate into control.”  (Commonwealth
v. Ellis (1999) 429 Mass. 362 [708 N.E.2d 644, 653].)
The dissent contends that Franzen’s “critical role” as the financial
investigator, whose reports have not been reviewed “by an impartial financial
analyst to verify their accuracy and fairness,” renders the conflict disabling.  (Dis.
opn., post, at p. 7.)  But the availability of an independent accountant to advise the
prosecutor about the accuracy and fairness of information supplied by the victim is
not the determining factor in evaluating a motion to recuse—otherwise a
defendant would prevail on a recusal motion whenever the district attorney has
accepted the fruits of the victim’s in-house or external inquiry.  Rather, the test, as
we have stated, is whether the prosecutor’s discretionary decisionmaking has been
placed within the influence or control of an interested party.7
In Eubanks, we acknowledged that victims of commercial crimes
sometimes “may even hire private investigators for external investigation of
suspected crimes against the company.”  (Eubanks, supra, 14 Cal.4th at p. 598.)
In this case, Franzen, the City’s investigator, worked at the offices of the District
Attorney in conducting his external investigation.  (See Commonwealth v. Ellis,
                                                
7 
Moreover, the standard proposed by the dissent—i.e., whether the
assistance provided by the victim was a “critical” or “crucial” aspect of the
investigation (dis. opn., post, at p. 7)—is difficult to apply and susceptible to
different outcomes as the investigation proceeds.
20
supra, 708 N.E.2d at p. 653 [Massachusetts Insurance Fraud Board’s provision of
“in-kind support to assist the division with the investigation of cases assigned for
prosecution . . . . presents no problem”].)  While unusual, this arrangement did not
mean that the District Attorney had surrendered control of the investigation to
Franzen.  (See id. at p. 654 [“The defendants fail to identify any real or potential
leverage that the [Insurance Fraud Board] or any insurer had to coerce the
Attorney General’s office to abandon its independence and disinterest”]; cf. FTC
v. American Nat’l Cellular (9th Cir. 1989) 868 F.2d 315, 320 [“The prospect of
interested decisionmaking and of the appearance of impropriety is substantially
lessened where the U.S. Attorney retains control of the prosecution in which the
agency attorneys participate”].)  Indeed, petitioner does not explain why the
proper exercise of the District Attorney’s discretion would turn on whether
Franzen was operating out of an office at the District Attorney or was providing
the same assistance from an office at the Police Department.
The superior court’s implied finding below that the District Attorney—not
Franzen—was in control of the prosecution is supported by substantial evidence.
Hence, the superior court did not abuse its discretion in finding that Franzen’s
assistance did not require recusal of the District Attorney.  (Cf. People v. Merritt
(1993) 19 Cal.App.4th 1573, 1581 [misconduct of prosecution investigator cannot
justify recusal of entire district attorney’s office].)
C
Petitioner also complains that Franzen is required, by his contract, to report
on his work to the Police Department when requested to do so and that Franzen’s
work product is deemed the property of the City.  Sharing information with the
victim, however, does not as a matter of law create a likelihood that the prosecutor
will treat petitioner unfairly.  On this point, we find persuasive the analysis of the
federal district court in International Business Machines Corp. v. Brown (C.D.Cal.
21
1994) 857 F.Supp. 1384.  In that civil fraud case, the defendant complained that
IBM and the district attorney’s office “have benefitted unfairly from IBM’s
cooperation with law enforcement officials” in parallel criminal proceedings.  (Id.
at p. 1387.)  Defendant alleged in particular that documents seized from its offices
by the Los Angeles Police Department (LAPD) were viewed and photocopied by
IBM and that documents it had provided to IBM were shared with the LAPD.  The
court first rejected the claim relating to the assistance IBM had provided the
LAPD, noting that “[b]usiness frauds often involve very complex schemes” for
which private investigation can be helpful.  (Id. at p. 1389.)  “Defendants, of
course, point out that the sharing of information in this case went not only from
plaintiff to the government, but also from the government to the plaintiff.
Although they assert this fact as a particular outrage, it is no more than a red
herring, at least in such a case as this, where a prosecution results.  Indeed, if the
prosecution proceeds before the civil trial, material information will become
public.  Therefore, there seems little reason to preclude the civil plaintiff from
obtaining this information.”  (Id. at p. 1389, fn. 2; see also Commonwealth v. Ellis,
supra, 708 N.E.2d at p. 654 [“It is not wrong for a prosecutor to meet with an
alleged victim or its representative to discuss progress in the investigation of a
crime”].)
Moreover, petitioner points to nothing in the record to suggest that
Franzen’s communications with the City have enabled the City to exercise control
or influence over the District Attorney’s investigation or prosecution.  Only two of
Franzen’s reports were ever given to the City.  Each involved areas that the City
had asked him to investigate, and their purpose was to present facts to enable the
District Attorney to decide whether the conduct was criminal.  Both reports were
submitted to the District Attorney, which then authorized Franzen to forward the
22
reports to the City.  Periodic briefing of the victim on the status of the
investigation does not compel disqualification of the prosecuting office.8
D
The parties’ remaining contentions can be quickly dismissed.
Petitioner challenges the incentives provided to Franzen by hourly billing
as “[o]ver and above” the bias that derives from the City’s paying Franzen’s
salary.  This “lucrative financial arrangement,” he argues, gave Franzen “every
incentive to prolong his time” working for the District Attorney “to generate more
billings.”  But this would be true of any consultant retained by the District
Attorney and, indeed, would be true of any employee who is paid on an hourly
basis or who is eligible for overtime pay, including police officers, deputy sheriffs,
and District Attorney investigators.  Petitioner cites no authority to suggest that the
recusal of the duly elected district attorney depends on whether experts or other
investigators are salaried or hourly.
Petitioner also places great emphasis on the District Attorney’s zeal through
these early stages of  the prosecution.  According to petitioner, the District
Attorney “has not taken any measure that was not as harsh as possible.”  In
petitioner’s view, “such a pattern is one-hundred percent consistent with the
alleged victim agent being the driving force within the [District Attorney’s] office
. . . .”  We do not agree.  “In an adversary system, [prosecutors] are necessarily
permitted to be zealous in their enforcement of the law.”  (Marshall v. Jerrico, Inc.
                                                
8
We are not presented here with the sharing of protected materials, such as
transcripts of grand jury proceedings, and therefore express no opinion whether
such information may be shared among government agencies.  We likewise
express no opinion on the effect, if any, that the sharing of investigative materials
with a victim government entity has on the confidentiality of those materials under
the Public Records Act.  (See Gov. Code, §§ 6254, subd. (f), 6254.5, subd. (e).)
23
(1980) 446 U.S. 238, 248.)  So long as their zeal remains within legal limits—as
petitioner concedes it has here—the lawful execution of their duty does not
establish as a matter of law that they have surrendered their independence and
impartiality.  (See Commonwealth v. Ellis, supra, 708 N.E.2d at p. 654 [“That in
the performance of their duties they have zealously pursued the defendants, as is
their duty within ethical limits, does not make their involvement improper”].)
The District Attorney, on the other hand, places too great an emphasis on
the strength of the People’s case against petitioner in the criminal prosecution.
The District Attorney contends that in the absence of a showing that the case is
weak, any finding concerning the likelihood of unfair treatment is “merely
speculative.”  This is a misreading of Eubanks, which cautioned trial courts to
consider “the entire complex of facts surrounding the conflict to determine
whether the conflict makes fair and impartial treatment of the defendant unlikely.”
(Eubanks, supra, 14 Cal.4th at p. 599, italics added.)  Although a weak case may
tend to corroborate the existence of a disabling conflict, it is not an essential
predicate for such a finding.  Especially at the early stages, it may be difficult to
assess the strength or weakness of the prosecution case.  Even if the case appears
strong, its strength could be derivative of the very conflict about which the
defendant is complaining.  That a case appears strong, therefore, sheds little light
on whether the asserted conflict will be disqualifying.
III
The dissenting justice below was greatly troubled by the growing trend of
private financing of criminal prosecutions and wondered whether it would
culminate in a preference to seek criminal justice only for the wealthy, with the
result that “[i]ndividuals of limited means, small companies, and nonprofit
organizations may forgo asking for [prosecution] of their claims, or simply may be
24
turned down by the local prosecutor, because they cannot afford the costs.”  In
Eubanks, we too recognized the risk that financial assistance from purported
victims raised “an obvious question as to whether the wealth of the victim has an
impermissible influence on the administration of justice” and whether such a
system would deserve or receive the confidence of the public.  (Eubanks, supra,
14 Cal.4th at p. 593.)  At the same time, however, we noted that large corporations
“often have difficulty interesting local prosecutors, whose resources are already
being strained by the fight against violent crime, in the investigation and
prosecution of business fraud and other complicated crimes against corporate
victims.”  (Id. at p. 593, fn. 5.)  The provision of substantial financial assistance by
crime victims thus raises important and difficult policy questions.
But balancing these weighty and seemingly conflicting concerns is beyond
the scope of Penal Code section 1424, which considers neither whether the
prosecutor’s arrangements tend to reduce public confidence in the impartiality and
integrity of the criminal justice system (see Eubanks, supra, 14 Cal.4th at p. 592)
nor whether the benefits to society of accepting the victim’s assistance outweigh
the costs.  The courts’ role in this debate is therefore limited.  In this case, we hold
only that the superior court did not abuse its discretion in finding that the District
Attorney need not be disqualified for accepting the assistance of a forensic
accountant employed and compensated by the City, the alleged victim.  The
judgment of the Court of Appeal is therefore affirmed.
BAXTER, J.
WE CONCUR:
GEORGE, C.J.
KENNARD, J.
WERDEGAR, J.
CHIN, J.
BROWN, J.
1
DISSENTING OPINION BY MORENO, J.
I respectfully dissent.  The Court of Appeal in this case found that the
prosecutor’s use of a victim-funded investigator, operating for nearly three years
from within the offices of the Orange County District Attorney (District Attorney),
creates a conflict of interest.  The majority does not revisit this conclusion, but
holds that even if there is a conflict, the trial court did not abuse its discretion in
finding that the conflict does not prejudice defendant.  Given the substantial
expenditure by the City of Orange (City) in funding the sole financial investigator
in this case, as well as the critical role played by the investigator in the criminal
prosecution of Hambarian, I find that the conflict of interest in this case is so grave
as to render it unlikely that defendant will be treated fairly during all portions of
the criminal proceedings.  Accordingly, I find that the trial court abused its
discretion in failing to recuse the District Attorney.
I.
Our analysis is governed by Penal Code section 1424.  Under subdivision
(a)(1), a motion for recusal of a district attorney “may not be granted unless the
evidence shows that a conflict of interest exists that would render it unlikely that
the defendant would receive a fair trial.”  (Pen. Code, § 1424, subd. (a)(1).)  In
People v. Eubanks (1996) 14 Cal.4th 580 (Eubanks), we observed that Penal Code
section 1424 involves a two-pronged analysis: (1) whether a conflict exists, and
2
(2) whether the conflict is prejudicial to the defendant.  (Eubanks, supra, 14
Cal.4th at p. 592.)
In the present case, the trial court applied the Eubanks test and determined
that (1) there is no conflict in this case, and (2) even if there is a conflict, this
conflict is not so grave as to render it unlikely that defendant would receive fair
treatment.  The Court of Appeal unanimously found that the trial court erred in
determining that there is no conflict of interest, stating, “[a] conflict existed and it
continues to exist.”  In applying the second prong of the Eubanks test, however, a
majority of the justices below found that the trial court did not abuse its discretion
in finding that even if there is a conflict, it did not prejudice defendant.
The majority below only reluctantly reached this conclusion.  As the court
noted, “[t]he district attorney should not take great solace in our result, however.
. . . [W]e applied the abuse of discretion standard with due deference, but we
might not have reached the same result had we been sitting as trial judges.”
Noting that the preliminary hearing has not yet been held in this case, the court
stated that “[a]t some point the amount the City has underwritten might become so
large no rational jurist could say the prosecutor would not be unduly influenced.
. . . [C]hanged circumstances may merit further consideration by the trial court.”
I agree with the majority of this court that we should review under an abuse
of discretion standard the trial court’s finding that any conflict in this case is not so
grave as to render it unlikely that defendant would receive fair treatment.  “Our
role is to determine whether there is substantial evidence to support the [trial
court’s] findings [citation] and, based on those findings, whether the trial court
abused its discretion in denying the [recusal] motion.  [Citations.]”  (People v.
Breaux (1991) 1 Cal.4th 281, 293-294.)  But unlike the majority, I conclude that
two of the trial court’s findings were not supported by substantial evidence and
3
that the trial court abused its discretion in determining that the conflict of interest
does not warrant recusal of the District Attorney.
First, the trial court found that the involvement of the City’s investigator in
this prosecution is proper and does not create a conflict of interest.  This is wrong,
as the Court of Appeal held and this court does not challenge.  The involvement of
the City’s investigator, Franzen, does create a conflict of interest.  Clearly, the trial
court’s mistaken conclusion that no conflict exists affected its determination that
the conflict was not so grave as to warrant recusal of the District Attorney.  The
trial court could not accurately judge the severity of the conflict of interest when it
mistakenly believed that the involvement of the City’s investigator in the criminal
prosecution did not create a conflict of interest at all.
The trial court’s conclusion that any conflict did not warrant recusal also
was based upon a second erroneous premise.  The trial court determined that the
District Attorney’s use of the City’s investigator did not create a conflict of
interest because the financial arrangements insulated the District Attorney from
any conflict.  The trial court found significant, first, that the District Attorney had
not solicited funds from the victim, and second, that the Orange Police
Department, not the City, was paying the investigator’s bill.  This second point is
factually wrong; the City is paying the bills, not the police department.
Therefore, two of the trial court’s findings, that the involvement of the
City’s investigator does not create a conflict of interest and that the City was not
paying for the investigator’s services, are not supported by substantial evidence.
Without understanding that the involvement of the City’s investigator in the
prosecution created a conflict of interest, and without knowing that the City, not
the police department, was paying the investigator’s salary, the trial court could
not properly determine the gravity of the conflict of interest.  With this in mind, I
4
consider whether the trial court abused its discretion in concluding that the conflict
was insufficient to warrant recusal of the District Attorney.
II.
To establish whether the prosecutor suffers from a disabling conflict of
interest, “the trial court must consider the entire complex of facts surrounding the
conflict to determine whether the conflict makes fair and impartial treatment of the
defendant unlikely.”  (Eubanks, supra, 14 Cal.4th at p. 599.)  The majority of this
court analyzes each potentially prejudicial fact separately, concluding that no one
fact mandates recusal.  Eubanks, however, requires us to consider all of the facts
together.  The majority in Eubanks concluded that based on the totality of the
circumstances, the trial court did not abuse its discretion in recusing the
prosecutor.  In his concurrence, Chief Justice George found that under the
circumstances presented in Eubanks, recusal was mandated by law and a failure to
recuse would have been an abuse of discretion.  (Eubanks, supra, 14 Cal.4th at p.
601-602 (conc. opn. of George, C.J.).)
In the present case, I find several individual factors, such as the substantial
investment of the City in the prosecution, the crucial prosecutorial role played by
the City’s investigator, and the City’s position as a private victim, potentially
prejudicial to the defendant.  It is in light of the entire complex of facts in this
case, however, that I conclude that fair treatment of the defendant is unlikely and
therefore recusal is required by law.
First, as the majority acknowledges, the City has paid its private financial
investigator, Franzen, over $450,000 to work with the District Attorney’s office on
this one case.  The case is still in an early stage; it has not yet gone to a
preliminary hearing.  The City’s financial investment in this case will only
increase.  In Eubanks, we looked to the size of the victim’s contributions in
determining that the trial court was reasonable in recusing the district attorney.
5
(Eubanks, supra, 14 Cal.4th at p. 600.)  The amount of contributions in Eubanks
was around $13,000.  This case already involves an investment by the victim of
over 34 times that amount.  This substantial expenditure raises the serious
possibility of a disabling conflict of interest.
The majority points out that in Eubanks the district attorney solicited the
victim to pay the investigator’s fees, whereas in this case the City volunteered to
pay for the investigator.  I do not believe this distinction makes a difference.  In
either case, the victim is paying for a prosecutorial expense that otherwise would
have been incurred by the District Attorney’s office.1  As in Eubanks, the District
Attorney is aware that the victim, not the District Attorney’s office, is paying the
investigator’s salary.  As the trial court in this case found, “[t]here is no doubt, for
the record, that the District Attorney’s office has been the beneficiary of some
financial assistance through these victims.”  Although, as the majority notes, the
District Attorney does have an in-house financial investigator, this investigator is
not working on Hambarian’s case.  If the City was not providing the investigator,
the District Attorney would have to incur the costs of performing the financial
analysis in the case.  By accepting the services of the City’s financial investigator,
the District Attorney does not have to make the ordinary cost/benefit decisions of
whether to pursue criminal charges against Hambarian.  Further, the knowledge
that for over two years the City has been paying the salary of a financial
investigator to aid the prosecution, may create, on the part of the District Attorney,
a sense of obligation to pursue this case.
                                                
1  Contrary to the majority’s assertion, I am not suggesting that recusal is required
“whenever” the victim pays for a prosecutorial expense.  (Maj. opn., ante, at p.
12.)
6
The majority argues that the District Attorney is less likely to feel a sense
of obligation to prosecute Hambarian because even if the District Attorney does
not bring the case to trial, the City can use Franzen’s work product in its civil
action against Hambarian.  In Eubanks, however, the fact that the victim had
brought a concurrent civil suit against the defendant did not alter our conclusion
that the District Attorney could suffer from a disabling conflict in accepting
investigatory services paid for by the victim.  (Eubanks, supra, 14 Cal.4th at pp.
600-601.)  Additionally, the second prong of the Eubanks test requires us to
consider fairness to the defendant at all stages of the criminal prosecution.  As
Chief Justice George noted in his concurrence in Eubanks, “[c]ertainly, the district
attorney would have appreciated that [the victim] stood to benefit from the
criminal prosecution of defendants. . . . [B]y keeping the prosecution ‘alive a little
longer,’ [the victim] would benefit completely vis-à-vis [the defendant.]  Thus, the
district attorney could ‘reimburse’ [the victim] . . . simply by exercising discretion
to continue or extend the criminal investigation for longer than it otherwise
would.”  (Eubanks, supra, 14 Cal.4th at p. 602-603 (conc. opn. of George, C.J.).)
Prejudice to a defendant can arise merely by maintaining an open criminal
investigation.  As Presiding Justice Sills pointed out in his dissent below, “[s]uch a
prosecution would assist the city in its parallel civil action against Hambarian,
deter the Hambarian parties from contesting civil suits against them for fear of
criminal prosecution, assist the city in enforcing its monetary settlement with the
Hambarian parties which depends in large part on Hambarian’s conviction in the
criminal proceeding, and ensure that Hambarian would be forced to sell his trash-
hauling business.  Such a prosecution would also compromise Hambarian’s ability
to simultaneously defend both the criminal and civil actions because he would be
subject to a significant bail, his assets would be frozen, and relevant evidence
could be gathered within the standards of criminal proceedings, an advantage over
7
procedures applicable in civil proceedings.”  Just as in Eubanks, the District
Attorney in this case is aware that maintaining an open investigation of Hambarian
and filing charges against him will provide benefits to the City in its civil case
against Hambarian.  Even if the District Attorney were ultimately to decide not to
bring this case to trial, the District Attorney might pursue its charges against
Hambarian for longer than it otherwise would have, out of a sense of obligation to
the City.  This in itself constitutes prejudicial treatment of defendant.
A second factor contributing to a potentially disabling conflict of interest is
Franzen’s critical role in the criminal prosecution.  Franzen is the sole financial
investigator in what is a financial investigation.  As the majority mentions,
Franzen prepared the loss summaries in the case.  These loss summaries serve two
purposes.  They were used as the basis for alleging sentencing enhancements in
the criminal case and could be used as a measure for the restitution Hambarian
might be ordered pay the City in the event of a conviction.  The City has an
interest in obtaining the largest possible recovery from Hambarian.  It is probable
that Franzen will take his employer’s interests into account when performing his
financial analysis of the loss.  The District Attorney is relying on Franzen’s reports
without any review by an impartial financial analyst to verify their accuracy and
fairness.  Even though Franzen can be cross-examined at trial, the reliance on
Franzen’s loss summaries may cause pretrial unfairness to defendant, something
that cannot be cured on cross-examination.2  The District Attorney’s heavy
                                                
2   The 65-count information in this case included six counts of grand theft, as well
as many counts of alleged money laundering (counts 38-65), filing false tax
returns (counts 24-37), making false claims (counts 7-17) and charges of
Corporations Code violations (counts 18-23).  Many of these counts are subject to
enhancements under Penal Code sections 186.1, subdivision (a)(1), 186.10,
subdivision (c)(1)(C), (D) & (2)(B), and 12022.6, subdivision (d).  All of these
(footnote continued on next page)
8
reliance on the victim-funded investigator for such a crucial aspect of the case
raises a doubt as to whether it is possible for defendant to be fairly treated during
all stages of the prosecution.
Franzen’s role in the District Attorney’s investigation of Hambarian is
potentially prejudicial, since Franzen was serving concurrently as an employee
under contract with the City, the victim in this case, and as a full-fledged member
of the prosecution’s team.  Franzen essentially served as an agent of the District
Attorney during the investigation.  While in Eubanks the victim-funded
investigators assisted the district attorney’s office for a few weeks, in this case
Franzen had been working from inside the District Attorney’s office for over two
years at the time of the filing of the recusal motion in November 1999; he has
since continued working there and billing the City for his services.  Franzen has
been working from his own office located inside the District Attorney’s
headquarters.  He has used the District Attorney’s resources and has written
memos on District Attorney letterhead.  Under the auspices of the District
Attorney’s Office, Franzen conducted or participated in over 55 interviews of
witnesses.  He often made decisions about whom to interview.  In these
interviews, he has been referred to by the District Attorney’s office as “[o]ur
CPA.”  In addition, Franzen was present at the execution of most of the search
warrants in the case.  Due to Franzen’s close connection with the District
Attorney’s office during the prosecution, while at the same time under contract
                                                                                                                                                
(footnote continued from previous page)
enhancements are dependant on the loss determinations made by Franzen, and no
doubt contributed to the high bail of $5 million which was initially set in this case.
9
with and paid by the victim in the case, a likelihood of prejudice to the defendant
arises.
A third relevant factor in this case is the City’s role as a private victim.  The
majority argues that the City is not a private victim like Borland, the victim in
Eubanks, and therefore prejudice to Hambarian is less probable.  While I agree
that when a disinterested public entity assists in a prosecution, unfair prejudice to
the defendant is less likely, the City’s role in this case is neither disinterested nor
exclusively public.  Like Borland, the City has a direct financial interest in the
criminal prosecution.  The City has filed a concurrent civil suit against Hambarian,
his wife, and his 15-year old son.  Additionally, the City has settled with the
corporate victims in this case, acquiring their private causes of action against
defendant.  Therefore, the City’s interest is not exclusively as a public entity; the
City stands to recover the restitution owed to private victims as well.
The majority contends that defendant will not be prejudiced by the
involvement of the City’s investigator since the City’s interest as a public entity in
recovering restitution from Hambarian mirrors the interest of the District Attorney.
It is true that the City’s recovery of funds in its civil case will benefit the public.
The City’s sole interest in this case is financial, however.  Presumably, the City
has invested over $450,000 in order to maximize its recovery from Hambarian.
The District Attorney’s interest, however, goes beyond securing civil
restitution for the residents of the City of Orange.  As we said in Eubanks, “‘[t]he
prosecutor speaks not solely for the victim, the police, or those who support them,
but for all the People.  That body of “The People” includes the defendant and his
family and those who care about him.’”  (Eubanks, supra, 14 Cal.4th at p. 589.)
Fair and impartial treatment of the defendant must pervade the exercise of all of
the prosecutor’s discretionary functions, from the investigation and gathering of
evidence, through the decisions of whom to charge and what charges to bring, to
10
the numerous choices the prosecutor must make at trial.  (Ibid.)  As we have said,
“[t]he importance, to the public as well as to individuals suspected or accused of
crimes, that these discretionary functions be exercised ‘with the highest degree of
integrity and impartiality, and with the appearance thereof’ [citation] cannot easily
be overstated.”  (Ibid.)  This broad interest in promoting justice cannot be equated
with the City’s more limited goal of obtaining civil restitution from defendant.
III.
As we said in Eubanks, a disabling conflict of interest is demonstrated
when the victim’s financial contributions “are of a nature and magnitude likely to
put the prosecutor’s discretionary decisionmaking within the influence or control
of an interested party.”  (Eubanks, supra, 14 Cal.4th at p. 599.)  Here, the totality
of the circumstances, including the amount of the contributions, the active role of
the victim’s investigator in the case, and the City’s financial stake in the outcome
of the investigation, suggests that the discretionary decisions of the prosecutor are
within the influence and control of an interested party.
The fact that this “interested party” is the City of Orange should, as the
majority asserts, impact our assessment of potential prejudice to the defendant in
this case.  However, this is not a case where the City has performed an
independent investigation of Hambarian and then turned its financial analysis over
to the District Attorney’s office.  Nor is this a case involving a joint multi-agency
task force in which the City and other public entities have assigned their
employees to work with the District Attorney’s office to prosecute a class of
individuals who had defrauded the public.  The investigation of Hambarian is not
part of a broad anti-fraud effort, but rather is a targeted investigation in a case
where the City is involved in a civil dispute and has obtained the restitution rights
of private victims.
11
Here, the City has spent over $450,000 to hire an outside financial
investigator who has the sole task of pursuing the prosecution of one defendant.
The City’s investigator has performed all of the financial analysis in the criminal
case, using the authority and resources of the District Attorney’s office to pursue
the criminal investigation.  The District Attorney, in turn, has relied heavily on the
services donated by the City in prosecuting this action.  It has not expended any of
its resources on the financial investigation in the case nor has it needed to make
the decision whether such an investigation is worth the resources it consumes.
The District Attorney’s office has not used an impartial financial analyst in this
case, despite the fact that, as a civil litigant expecting restitution from Hambarian,
the City has an interest in maximizing the losses attributed to defendant.  The City
stands to recover not only public funds but also funds owed to private
corporations.  Given the entire complex of facts in this case, it is unlikely that
defendant will receive fair and impartial treatment.  Therefore, I find that recusal
is required as a matter of law.
I would reverse the judgment of the Court of Appeal.
MORENO, J.
1
See next page for addresses and telephone numbers for counsel who argued in Supreme Court.
Name of Opinion Hambarian v. Superior Court
__________________________________________________________________________________
Unpublished Opinion
Original Appeal
Original Proceeding
Review Granted XXX 88 Cal.App.4th 163
Rehearing Granted
__________________________________________________________________________________
Opinion No. S097450
Date Filed: April 18, 2002
__________________________________________________________________________________
Court: Superior
County: Orange
Judge: Frank F. Fasel
__________________________________________________________________________________
Attorneys for Appellant:
Marshall M. Schulman; Cleary & Sevilla, Charles M. Sevilla; Geragos & Geragos and Mark J. Geragos for
Petitioner.
__________________________________________________________________________________
Attorneys for  Respondent:
No appearance for Respondent.
Bill Lockyer, Attorney General, Robert R. Anderson and David P. Druliner, Chief Assistant Attorneys
General, Gary W. Schons, Assistant Attorney General, Carl H. Horst and Douglas P. Danzig, Deputy
Attorneys General; Tony Rackauckas, District Attorney, David S. Kirkpatrick and Brian N. Gurwitz,
Deputy District Attorneys, for Real Party in Interest.
Wiley, Rein & Fielding, David J. Kulik, Kirk J. Nahra and Brian F. Chandler for National Insurance Crime
Bureau and Coalition Against Insurance Fraud as Amici Curiae on behalf of Real Party in Interest.
Dennis L. Stout, District Attorney (San Bernardino), Lance A. Cantos and Grover D. Merritt, Deputy
District Attorneys, for California District Attorneys’ Association as Amicus Curiae on behalf of Real Party
in Interest.
2
Counsel who argued in Supreme Court (not intended for publication with opinion):
Charles Sevilla
Cleary & Sevilla
1010 Second Avenue, Suite 1825
San Diego, CA  92101
(619) 232-2222
Brian N. Gurwitz
Deputy District Attorney
401 Civic Center Drive West
Santa Ana, CA  92701
(714) 347-8790