United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Filed November 1, 2005
Division No. 94-1
IN RE: MADISON GUARANTY SAVINGS & LOAN
(SCHAUFELE FEE APPLICATION)
Division for the Purpose of
Appointing Independent Counsels
Ethics in Government Act of 1978, As Amended
Before: SENTELLE, Presiding, FAY and REAVLEY, Senior
Circuit Judges.
ORDER
This matter coming to be heard and being heard before the
Special Division of the Court upon the petition of Michael
Schaufele for reimbursement of attorneys' fees and costs
pursuant to section 593(f) of the Ethics in Government Act of
1978, as amended, 28 U.S.C. § 591 et seq. (2000), and it
appearing to the court for the reasons set forth more fully in the
opinion filed contemporaneously herewith, that the petition is
not well taken, it is hereby
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ORDERED, ADJUDGED, and DECREED that the
petition of Michael Schaufele for attorneys’ fees that he incurred
during the Independent Counsel’s investigation be denied.
PER CURIAM
For the Court:
Mark J. Langer, Clerk
By:
Marilyn R. Sargent
Chief Deputy Clerk
1
United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Filed November 1, 2005
Division No. 94-1
IN RE: MADISON GUARANTY SAVINGS & LOAN
(SCHAUFELE FEE APPLICATION)
Division for the Purpose of
Appointing Independent Counsels
Ethics in Government Act of 1978, As Amended
Before: SENTELLE, Presiding, FAY and REAVLEY, Senior
Circuit Judges.
ON APPLICATION FOR ATTORNEYS' FEES
Opinion for the Special Court filed PER CURIAM.
PER CURIAM: Michael Schaufele petitions this Court under
section 593(f) of the Ethics in Government Act of 1978, as
amended, 28 U.S.C. §§ 591-599 (2000) (“the Act” or “the
Independent Counsel Statute”), for reimbursement of attorneys’
fees in the amount of $242,438.14 that he claims were incurred
during and as a result of the investigation conducted by the
Independent Counsel. Because the Act provides for
reimbursement of attorneys’ fees only for individuals not
indicted, we deny the petition in its entirety.
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Background
During the so-called Whitewater investigation, Independent
Counsel Kenneth W. Starr (hereinafter “IC”), under authority
granted to him by this Court, conducted an examination of the
finances of Webster Hubbell, a former Associate Attorney
General and former member of the Rose Law Firm in Little
Rock, Arkansas. Specifically, the examination focused on
whether Hubbell’s payment of personal expenses with funds
from the Rose Law Firm violated mail or wire fraud statutes,
and whether Hubbell unlawfully failed to report this income on
his tax filings. With the evidence from this examination arrayed
against him, Hubbell pled guilty to felony tax evasion and mail
fraud, and was sentenced to prison.
As part of his plea agreement, Hubbell agreed to provide
information to the IC about matters relating to the Whitewater
investigation. Later, when the IC apparently came to believe
that Hubbell was not cooperating, he served Hubbell with a
subpoena seeking certain financial and tax documents. In
response, Hubbell invoked his Fifth Amendment privilege
against self-incrimination and declined to say what, if any,
responsive documents existed. The IC then obtained an order
granting Hubbell immunity and compelled him to reply to the
subpoena.
While reviewing the subpoenaed documents, evidence was
discovered by the IC that Hubbell, along with others including
Michael Schaufele, Hubbell’s accountant and the fee petitioner
here, concealed Hubbell’s income and, in the words of the IC,
“impeded the ascertainment, assessment, and collection efforts
of certain creditors, including the IRS, the State of Arkansas, the
District of Columbia, and the Rose Law Firm.” Using this
evidence, the IC was able to gain an indictment against Hubbell,
Schaufele, and others.
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To resolve this indictment, Hubbell entered a conditional
guilty plea to a willful failure to pay tax. In exchange for his
plea, the IC dismissed the remaining counts of the indictment
against him and the other indictees, including Schaufele. The
Supreme Court subsequently held that the documentary
evidence intended to be used against Hubbell was inadmissible
as it was derived from compelled testimony and would violate
his Fifth Amendment privilege against self-incrimination. See
United States v. Hubbell, 530 U.S. 27, 45-46 (2000). In
accordance with the terms of the plea agreement, the IC then
moved the trial court to dismiss the indictment against Hubbell
and to vacate his guilty plea, and the motion was granted.
Pursuant to § 593(f)(1) of the Act, Schaufele now petitions
the court for reimbursement of attorneys’ fees in the amount of
$242,438.14 that he claims were incurred during and as a result
of the IC’s investigation.
Discussion
The Independent Counsel statute provides:
Upon the request of an individual who is the subject of
an investigation conducted by an independent counsel
pursuant to this chapter, the division of the court may,
if no indictment is brought against such individual
pursuant to that investigation, award reimbursement for
those reasonable attorneys’ fees incurred by that
individual during that investigation which would not
have been incurred but for the requirements of this
chapter.
28 U.S.C. § 593(f)(1). We are thus authorized in an independent
counsel investigation to award attorneys’ fees to a subject of the
investigation against whom “no indictment is brought.”
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Although Schaufele was indicted, he nevertheless argues that his
indictment was “invalid” and therefore he is eligible for a fee
award. Apparently, Schaufele is contending that since the
“Supreme Court . . . made clear that the Indictment was invalid
as to Webster Hubbell,” then the indictment as to him was
invalid also. To support this argument, Schaufele contends that
if the Supreme Court had made its ruling on the Hubbell matter
“before the grand jury returned an indictment, there never would
have been any charges filed against Mr. Schaufele because
knowing that a valid tax indictment could not be brought against
Mr. Hubbell, Mr. Schaufele simply would have been of no
interest to the IC.” Or, as Schaufele himself alternatively puts
it, “the IC would never have sought an indictment of Mr.
Schaufele alone, had Mr. Hubbell not been a target.”
The IC, after reviewing Schaufele’s fee petition, disputes
Schaufele’s argument that his indictment was invalid. To begin,
the IC notes that in only one fee petition filed under the Act has
the court held that an indictment was invalid. See In re
Nofziger, 925 F.2d 428, 435 (D.C. Cir., Spec. Div., 1991) (per
curiam). According to the IC, in Nofziger the fee petitioner had
been indicted, but on appeal his indictment was found to not
allege all the elements of the offense charged. The Court of
Appeals consequently held that the indictment should have been
dismissed, see U.S. v. Nofziger, 878 F.2d 442, 454 (D.C. Cir.
1989), and this court in Nofziger subsequently held the
indictment invalid because “in order for an indictment to be
valid, it must allege the elements of the offense charged.” In re
Nofziger, 925 F.2d at 433. The IC then argues that the situation
in Nofziger is a “far cry” from the one here in that “[t]he
Supreme Court never held that the indictment against Hubbell
was invalid; rather, the Court concluded the indictment had to be
dismissed because the government could not prove that it had
obtained the indictment with evidence that was ‘wholly
independent’ of the testimonial aspect of Hubbell’s production
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documents.”
Furthermore, the IC takes issue with Schaufele’s claim that
he would have been of no interest to the IC’s investigation
absent Webster Hubbell, noting that Hubbell and Schaufele,
among others, were prosecuted because it was “determined that
their criminal scheme wherein they spent hundreds of thousands
of dollars while concealing assets from the IRS and making no
payments whatsoever on their outstanding debt [was] worthy of
prosecution.”
In its evaluation, the DOJ takes the position that because
Schaufele was indicted his fee application is “facially deficient”
and he thus does not qualify for reimbursement of attorneys’
fees. In support of this argument, the DOJ first cites to In re
Nofziger, 925 F.2d at 432, asserting that in that case the court
held that “an indictment that is ultimately ruled to have been
invalid ab initio does not bar an individual from seeking fees,”
but then argues that in a later case, In re North (Fernandez Fee
Application), 37 F.3d 663, 665 (D.C. Cir., Spec. Div., 1994) (per
curiam), the court held that “an individual may not recover fees
when a valid indictment against him is later dismissed.” In
effect the DOJ is arguing that Schaufele’s situation falls under
Fernandez and not Nofziger, because Schaufele’s indictment
was not found to be invalid but rather was dismissed as a result
of prosecutorial discretion. Furthermore, argues the DOJ,
Schaufele does not in fact claim in his application that his
indictment was invalid “but merely urges that the indictment
never would have been brought had it been known in advance
that certain evidence could not be used against Hubbell.”
Analysis
Schaufele is ineligible for any fee reimbursement because,
although his indictment was dismissed, it was nevertheless valid.
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In two previous cases, we disagreed with the fee petitioner’s
claim that a dismissal of the petitioner’s indictment rendered the
indictment invalid. In the first, Fernandez, the petitioner, a CIA
Station Chief, was indicted during the Iran-Contra investigation
for making false statements to federal investigators. He then
invoked the Classified Information Procedures Act, which
“balances the government’s need to prevent the disclosure of
classified information against the need of criminal defendants to
use classified information in their defense.” 37 F.3d at 663-64.
Subsequently, the district court dismissed the indictment
because of the government’s objection to the petitioner’s
proposed disclosure of classified information. In his petition for
attorneys’ fees filed pursuant to the Act, Fernandez argued that
“the independent counsel should have known that a prosecution
of [him] would inevitably result in a dismissal of the
indictment,” that therefore the indictment was invalid and, as in
Nofziger, he was entitled to fee reimbursement. Id. at 665. We
disagreed, stating that Nofziger did not support Fernandez’s fee
petition because, on appeal from the district court, Nofziger’s
indictment was held to be void, not in fact an “indictment” at all,
and was therefore not a bar to recovery of fees. For Fernandez,
although his indictment was subsequently dismissed, he was
nevertheless “validly indicted” and therefore could not recover
fees. Id. at 663-65.
Then, in In re Madison Guar. Sav. & Loan (McDougal Fee
Application), 353 F.3d 53 (D.C. Cir., Spec. Div., 2004) (per
curiam), the petitioner, having been acquitted on one count of
the indictment with the other two counts dismissed after a
deadlock by the jury, claimed that her indictment was, as in
Nofziger, invalid. We stated that “Nofziger is in no sense
parallel to [McDougal’s] case,” noting that “no court [has] held
the indictment against McDougal to be invalid,” and
furthermore that “her petition advances no argument as to any
defect in the indictment.” Id. at 56. The indictment was
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therefore valid and McDougal was not eligible for
reimbursement under the Act. Id.
Here, Schaufele’s situation more closely follows those in
Fernandez and McDougal rather than that in Nofziger. The
dismissal of his indictment was apparently an act of
“prosecutorial discretion,” see ROBERT W. RAY, FINAL REPORT
OF THE INDEPENDENT COUNSEL, IN RE: MADISON GUARANTY
SAVINGS & LOAN ASSOCIATION, VOL. III, 69-70 (2001), which
appears similar to the dismissal made in Fernandez. And as in
both Fernandez and McDougal, there has been no court ruling
that his indictment was void. Consequently, as we stated in In
re North (George Fee Application), 62 F.3d 1434, 1436 (D.C.
Cir., Spec. Div., 1994) (per curiam), “[t]he language of §
593(f)(1) waives sovereign immunity for attorneys’ fees only if
no indictment has been brought. We cannot expand this waiver
to allow an award to a person who has been indicted.” Because
Schaufele was indicted, and his indictment was valid, he is not
eligible under the Act for reimbursement of attorneys’ fees
incurred in the IC’s investigation.
Conclusion
For the reasons set forth above, the petition for fees of
Michael Schaufele is denied as he has failed to satisfy the “no
indictment” requirement of the Act.