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Federal judge's decision upheld in securities case

The 9th U.S. Circuit Court of Appeals upheld a federal judge's decision to declare a mistrial and dismiss an indictment against three men involved in a multimillion-dollar securities fraud case.

The appeals panel agreed with U.S. District Judge James Mahan that federal prosecutors bungled their case against Daniel Chapman, Sean Flanagan and Herbert Jacobi.

The panel concluded that Mahan had no choice after the federal government failed to turn over more than 650 pages of information to the defense teams before the 2004 trial.

"The government egregiously failed to meet its constitutional obligations," the appeals opinion reads. "This is prosecutorial misconduct in its highest form."


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  • The three men were accused of forming shell corporations, then selling securities while failing to disclose the fact that they controlled all the shares of stock.

    Such a scheme commonly is referred to as a "box job" in the securities industry.

    During the three-week trial, the defense team complained that it had not received all of the government's evidence and was not informed of issues such as the criminal history of government witnesses.

    Assistant U.S. Attorney Gregory Damm insisted that the defense had received all the documents and offered to make duplicates.

    The next day, the government handed over hundreds of documents.

    "They totaled some 650 pages and consisted of rap sheets, plea agreements, cooperation agreements, and other information related to numerous government witnesses," according to the appeals panel's opinion.

    Prosecutors had claimed that Mahan called a mistrial without weighing the importance of the documents. They also complained that Mahan "criticized the government's legal strategy."

    "We are disappointed in the appellate court's decision," U.S. Attorney Gregory Brower said.

    Brower said that after the case was dismissed, his office reported Mahan's actions to the Department of Justice's independent Office of Professional Responsibility.

    After a lengthy investigation, the office concluded that the U.S. attorney's office "did not engage in any intentional misconduct," Brower said.

    Contact reporter Adrienne Packer at apacker@reviewjournal.com or 702-384-8710.



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    C. Gray wrote on May 09, 2008 09:55 PM: So the Just-Us Department got to review its own agents and found no intentional coverup. What's new? It's standard operating proceedures. If you ever have had to deal with them you realize how dishonest, manipulative, and self serving they are. They engaged in criminal activities at high rates while choosing and picking what they want to enforce. They operate through intimidation and fear, with no fear of consequences. For the Judge to dismiss the case when the prosecution attempted to obstruct justice . . . is really something. I know the appeals court had tight butts when they had to up hold the decision. The judge must have really had kahunas to go against the U. S. prosecutor. I clearly remember a black judge in Atlanta turning white when the U. S. Attorney's Office had a little ex parte discussion with him. All of the judge's fortitude and authority simply diminished and his tail went between his legs in order to placate the rogue U. S. Attorneys.
    I have come to believe that they are all corrupt. Like Napoleon said, "What is history, but a fable retold." The origin of the word "lawyer" is undoubtedly related to the word "liar." Undoubtedly. All of this stuff didn't just start.
    Gonzales thought he had no accountability for his deceptions and coverups. Now the law firms have shunned him like a pariah....the former Attorney General of the United States, worth about as much as the U. S. dollar.
    I have learned not to care that nobody cares. Learned helplessness is a hard thing to overcome. Bind them down by the Constitution.