Supreme Court Rules That Civil Fines Don't Bar Later Criminal Prosecution
By Joan Biskupic
The Supreme Court yesterday enhanced the government's ability to fine someone for fraud or other regulatory wrongdoing and then later criminally prosecute the person for the same offense.
In a unanimous decision involving a banking scandal case of the 1980s, the justices said the Constitution's double jeopardy clause does not bar the criminal prosecution of three former banking officials who had already been forced to pay civil fines for making bad loans. The double jeopardy clause protects people from being punished twice for the same offense, based on the principle that the government should not be able to use all its power in a repeated attempt to convict an individual.
Because federal and state agencies often impose civil penalties for regulatory wrongdoing, then turn the case over to criminal prosecutors, yesterday's dispute had been closely watched by defense attorneys and prosecutors nationwide.
In a more controversial part of the opinion, a five-justice majority disavowed a 1989 high-court rule that prevented prosecution if the earlier civil sanction was especially harsh and disproportionate to the harm caused to the government. The thrust of the ruling in that case was that a disproportionately high sanction made the civil penalty more like a "punishment." The high court said yesterday that lower-court judges need not look at whether a particular civil sanction lacks proportion to the harm done or was intended to be a deterrent.
Chief Justice William H. Rehnquist's opinion in Hudson v. United States emphasized that civil statutes should be taken at face value and that "only the clearest proof" should be allowed to show that a civil remedy is really a criminal punishment.
The National Association of Criminal Defense Lawyers and the Washington Legal Foundation had urged the court to leave in place the 1989 rule that some civil fines can be so punitive that they prevent further prosecution. But the attorneys general for most of the states said the 1989 rule placed "a high if not impossible burden" on them to show that a civil sanction had a distinctly different purpose from a criminal penalty. The U.S. Justice Department similarly argued that the court should not find that a statute's deterrent purpose makes it "punitive" for double jeopardy purposes.
Yesterday's dispute was brought by three Oklahoma banking executives: John Hudson, who in the 1980s was chairman of the First National Bank of Tipton and the First National Bank of Hammon; Jack Rackley, who was president of the Tipton bank and a member of the board of directors at Hammon; and Larry Baresel, who was a board member for both banks.
After an investigation, the Office of the Comptroller of the Currency (OCC) found that the men used their positions to arrange a series of loans that violated federal banking statutes and ultimately contributed to the failure of their banks. Hudson, Baresel and Rackley agreed in 1989 to pay fines of $16,500, $15,000 and $12,500, respectively, and to no longer work in the banking business.
Three years later they were indicted on federal charges of conspiracy, misapplication of bank funds and making false bank entries, all stemming from the same transactions for which they had been fined. A district court dismissed the indictments on double-jeopardy grounds, but the 10th Circuit Court of Appeals reversed that ruling. Invoking the 1989 Supreme Court case, the appeals court said the fines imposed by the government were not so grossly disproportional to the government's damages in the bank failures to render the fines "punishment." The appeals court also said the civil assessment was "remedial," not punitive, because it compensated the government for its loss.
Yesterday, the Supreme Court affirmed the 10th Circuit but with a rationale that eclipses the 1989 ruling in United States v. Halper. The court said judges should primarily examine a legislature's intentions behind a statute to determine whether it is a civil remedy or criminal penalty. Rehnquist was joined by Justices Sandra Day O'Connor, Antonin Scalia, Anthony M. Kennedy and Clarence Thomas in this portion of the opinion.
In a separate opinion, the justices ruled unanimously that a prosecutor who lies in an affidavit to obtain an arrest warrant can be sued for money damages. Generally, prosecutors are immune from lawsuit when performing the traditional functions of their job. But that immunity no longer applies, the court said in Kalina v. Fletcher, when a prosecutor assumes a role similar to that of a witness or investigating officer in presenting a judge with a complaint.
Lynne Kalina, a King County, Wash., prosecutor, sought an arrest warrant in a Seattle school burglary case by personally swearing that Rodney Fletcher's fingerprints had been found in the school where he had not been authorized to be. She also said he had been identified as a suspect. Both points were untrue, but based on Kalina's statement, Fletcher was arrested and spent a day in jail. The charges eventually were dropped, and he sued Kalina for violating his civil rights.
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