Opinion ID: 1214506
Heading Depth: 1
Heading Rank: 6

Heading: Whether the prosecutor's use of the civil receiver constituted a violation of respondents' due process rights justifying dismissal

Text: Appellant argues that there is no known privilege which would have kept respondents' civil receiver, Matthew Callister, from testifying before the grand jury. Appellant also points to the Kordel decision, cited above, as an example of a case where the U.S. Supreme Court declined to overturn a parallel criminal conviction although certain discovery in the government's civil case may have been helpful in the pursuit of criminal charges. Using Kordel for support, appellant argues that although items turned over to the receiver may have helped the State's criminal case, this does not constitute grounds for dismissal where the receiver has not been shown to have acted at the State's direction in obtaining information. Moreover, appellant contends that respondents failed to satisfy their burden of proving that the State engaged the receiver to obtain information for use by the State in criminally prosecuting respondents. In Kordel, a company president and vice-president were convicted for the misbranding of drugs in violation of federal law. The government took both civil and criminal action against the offenders. In view of the criminal charges, defendants sought a stay in the civil matter and from the civil discovery procedures. The stay was denied, thus prompting the vice-president to answer the civil interrogatories. The civil matter was thereafter settled, but criminal indictments followed, which later resulted in convictions. The court of appeals reversed the convictions due to the possibility that interrogatories answered in the civil case had given the government useful leads, thereby violating the parties' privilege against self-incrimination. The Supreme Court reversed, reasoning that neither party was obligated to answer the interrogatories, but could have invoked [the] Fifth Amendment privilege against compulsory self-incrimination and passed the interrogatories to some other corporate officer whose answers would not be self-incriminating. Kordel, 397 U.S. at 7-8, 90 S.Ct. at 766-68. In essence, the Supreme Court merely rejected the factual analysis of the court of appeals, which had reasoned that the evidence was submitted to the government under threat of forfeiture. However, the Kordel Court did affirm that [t]he Court of Appeals was correct in stating that `the Government may not use evidence against a defendant in a criminal case which has been coerced from him under penalty of either giving the evidence or suffering a forfeiture of his property.' Id. at 13, 90 S.Ct. at 770. The Court also noted that [w]e do not deal here with a case where the Government has brought a civil action solely to obtain evidence for its criminal prosecution or has failed to advise the defendant in its civil proceeding that it contemplates his criminal prosecution.... Id. at 11-12, 90 S.Ct. at 769. The respondents assert that the receivership was improperly used to build a case or garner evidence for this eventual criminal action. However, the State and the receiver steadfastly deny this allegation, and the prosecutor asserts that the vast majority of the evidence to be used in the prosecution could have been obtained from sources other than from the receivership action. Since no evidentiary hearing was held on this issue, we have no idea what proposed evidence will be part of the State's case and what items could not have been secured but for the receivership action. In short, we are left with conflicting statements of counsel. The evidence concerning whether the respondents were advised of the possibility of a criminal prosecution is equally equivocal. Judge Stone presided over the receivership case and filed an affidavit in the criminal action that stated the respondents were not advised during the receivership that a criminal prosecution was contemplated. However, the judge signed an order in December 1991 where he expressly stated just the opposite: The Nevada State Securities Commission is still investigating Defendant Fullerton's activities and criminal charges may be brought. The prosecutor maintains that the respondents were well aware throughout the processing of the receivership action that prosecution was a distinct possibility. Again, conflicting claims with little persuasive evidence on either side. While we have no problem following the dictates of the Kordel decision, the evidence is insufficient to establish that the receivership action was improperly used and that the respondents did not know that prosecution was a possibility. The evidence to support the district court's finding of a conflict of interest on the part of the attorney general's office is equally problematic. The district court found that the criminal complaint included a RICO charge for which the State sought forfeiture of the respondents' property and Mr. Fullerton's patent. This would have benefited the investors and John Schell, who had represented Fullerton but then ousted Fullerton from corporate control and became President of Zip Nut, Inc. The court also observed that the deputy attorney general had several substantive consultations with Dominic Gentile who was retained by Zip Nut, Inc. and John Schell after Schell had replaced Fullerton; these conversations included the criminal charges to be pursued against the respondents, the witnesses to be called to testify, and factual and legal advice relevant to the forfeiture of the patents. The district court relied upon the billings of attorney Gentile in making the finding that a conflict of interest existed because Gentile was representing Schell and Gentile had conversations with the prosecutor. The assumption is that Gentile revealed confidential information acquired from Schell to the prosecutor. Gentile's legal billings show calls to the deputy attorney general about the RICO charges to be stated in the complaint and that the conversations were factual and substantial. However, we do not know what specific facts were discussed by Gentile and the prosecutor, whether confidential conversations between Schell and the respondents were revealed, or on the other hand whether the discussion merely centered around how to charge a RICO violation and the evidence that was publicly known or legally obtained. Neither the depositions of Dominic Gentile nor the deputy attorney general was ever taken. The deputy attorney general adamantly denies that he secured any privileged information from Gentile. While conversations between a prosecutor and a defendant's former attorney rightfully raised the district judge's concern, the factual content of these conversations is not in the record, and without this information, it cannot be determined whether confidential information was improperly secured by the State.