TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Sunday, August 25, 2013

9th Circuit Reverses Tax Fraud Conviction for Using Charitable Contribution to Arm Chechnyan Terrorists, Rather Than to Purchase Mosque

AlIn United States v. Sedaghaty, No. 11-30342 (9th Cir. Aug. 23, 2013), the majority reversed the defendant's conviction in a tax fraud case arising from a false declaration on the tax return of the U.S. branch of the Saudi Arabian charity Al-Haramain Islamic Foundation claiming that a donation was used to purchase a mosque in Missouri when it was actually sent to terrorists in Chechnya. The case involved significant amounts of classified materials and in camera, ex parte reviews as well as classified proceedings. From the summary prepared by court staff:

The panel held that the government violated its obligations pursuant to Brady v. Maryland by withholding significant impeachment evidence relevant to a central government witness. After reviewing the classified record, the panel determined that the district court erred in approving an inadequate substitution for classified material that was relevant and helpful to the defense. The panel held that the substitution did not satisfy the requirement in the Classified Information Procedures Act, 18 U.S.C. app. 3 § 6(c)(1), that the summary “provide the defendant with substantially the same ability to make his defense as would disclosure of the specified classified information.” The panel also concluded that the search that the government conducted of the defendant’s computer hard drives went well beyond the explicit limitations of the warrant, and remanded to the district court to consider the appropriate scope of items seized and whether the exclusionary rule should apply. Considering the errors both individually as well as cumulatively in light of the evidence as a whole, the panel concluded that the errors were prejudicial. The panel filed concurrently, under appropriate seal, a classified opinion with respect to the substitution. That opinion also addresses in more detail the defendant’s claim regarding foreign bank records.

The dissent concluded:

A capable district court judge had a daunting task in overseeing this complex case, and the record shows he fairly balanced the competing interests at stake. The search did not exceed the scope of the properly authorized warrant and its incorporated affidavit. The procedures employed in its creation and execution were measured and appropriate. The district court’s factual findings were not clearly erroneous, and the determination that the potential impeachment evidence regarding Barbara Cabral did not warrant a new trial was correct. The unclassified summary appropriately complied with the requirements of CIPA and balanced the need to protect national security with Seda’s right to present a defense. Under these difficult circumstances, Seda got a “fair trial,” even though it might not have been a “perfect one.” Ross v. Oklahoma, 487 U.S. 81, 91 (1988). For these reasons, I would affirm the conviction and the trial court’s rulings. 

(Hat Tip: Bob Kamman.)

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