Kuehne Case Hanging By A Thread

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Published on Sunday, 04 January 2009

Written by John Pacenti, Daily Business Review

The prosecution of Miami attorney Benedict P. Kuehne hasn't gone well for the federal government. In fact, it's arguably been a disaster.

Kuehne vetted the money to pay legal bills for convicted drug trafficker Fabio Ochoa of Colombia. His job was to find money untainted by crime but prosecutors say he funneled $5.2 million in drug proceeds to Ochoa's defense team led by renowned Miami criminal defense attorney Roy Black.

A federal judge last month essentially ripped the heart out of the case by dismissing the substantive money laundering conspiracy charge, leaving counts of wire and mail fraud and money laundering by concealment.

"The other counts are hanging on by a thread," said David O. Markus, Miami attorney and a representative of the National Association of Criminal Defense Lawyers. "The legal theory the government is proceeding on are novel at best and realistically do not have the support in the law."

Miami lawyer Kendall Coffey, a former U.S. Attorney and a close friend of Kuehne's, said, "It is becoming increasingly apparent this case was a tragic miscalculation."

From the start, the Kuehne case was elevated by his defense team and the NACDL as an effort by the Justice Department to chill attorneys from accepting high-profile drug and fraud cases where the defendant's source of money is interminably questionable. They say it's an ideological-driven effort to undermine the exception in the money laundering statutes protecting defense counsel from criminal prosecution in accepting payment.

The Justice Department did not return phone calls seeking comment on the case.

To come up with the funds to pay Ochoa's legal bill, Kuehne vetted money stemming from the sale of Ochoa family property, cattle and horse holdings. He was assisted by co-defendants Gloria Flores Velez, an accountant, and Oscar Saldarriaga, an attorney.

Kuehne then went to money broker Hernando Saravia to exchange the pesos to dollars to send to the United States. Unknown to Kuehne was that Saravia was under indictment himself for money laundering and working for the government as a confidential informant. Saravia exchanged the pesos for dollars used in federal drug stings in the United States.

Problems for the government emerged almost immediately after the indictment was unsealed last February. The Justice Department replaced lead prosecutor John Seller with a courtroom bulldog, Assistant U.S. Attorney Robert Feitel. It responded to the first flurry of defense motions by amending the indictment by dropping the obstruction of justice charge.

Then in a July 31 bill of particulars to support the indictment, the government said it planned to offer no trial evidence directly linking Kuehne to drug profits.

But it announced last month that it planned to call as a witness at trial a convicted Colombian drug trafficker nicknamed "Rasguno."

Hernando Gomez Bustamante, his real name, was a leader of the North Valley Cartel and will testify that in 2001 he paid $10 million to purchase land owned by the Ochoas. He said the family told Gomez they needed the money to pay legal fees, prosecutors say.

The government's case has gotten sloppy, as well.

Feitel blamed a scrivener's error in the wire fraud counts that will make the case harder to prove for the government.

U.S. District Court Judge Marcia Cooke refused to fix the mistake last month. "That this charge may have been made in error, either of apprehension or judgment, does not allow the government to ask this court to ex post facto alter the indictment and effectively lessen the government's burden at trial," Cooke wrote in a Dec. 22 order.

But Cooke really dealt a blow to the government in another order delivered three days before Christmas when she dismissed the money laundering conspiracy count against Kuehne and his two co-defendants.

"The judge's ruling is a court ruling not only for us but an important ruling for the criminal justice system," said John Nields of the Howry firm in Washington, D.C. He is one of Kuehne's chief attorneys.

In her order, Cooke said Congress was clear when carving out the exception in 1988 and that the U.S. Supreme Court has only clarified that the government can force an attorney to forfeit any fees that can be proven to be tainted proceeds. "If I were to construe the statutory exemption as the Government suggests, the exemption for such transactions would amount to no exemption at all," Cooke wrote in her order.

She said Congress explicitly exempted from the money laundering statute transactions "necessary to preserve a person's right to representation as guaranteed by the Sixth Amendment to the Constitution."

Cooke explicitly disagreed with the Justice Department's arguments that a congressional exception in the money laundering statutes protecting criminal defense attorneys was not relevant or at any event congressional intent should be left to a jury.

So where does that leave the government? Kuehne is not out of the woods yet, but he can see some daylight.

Coffey, now in private practice as a partner with Coffey Burlington in Miami, said Cooke's ruling makes a difficult case less prosecutable. "It was a well-written opinion," Coffey said. "Its results were not remarkable. It's a judge according basic respect to the language Congress chose."

He said the Justice Department might not like the precedent set in the Kuehne case if it continues to pursue a conviction. The department now must decide whether to appeal Cooke's ruling on the money laundering charge to the 11th U.S. Circuit Court of Appeals in Atlanta, and risk setting the exception for criminal defense attorneys it so disdains further in concrete.

"The main thing in my mind now is the government going to take an appeal, and how long is that going to take?" asked Henry Bell, the South Miami attorney representing Flores. The trial is currently set for Jan. 20 but almost certainly will be postponed.

Nields said the defense may learn the government's intention Jan. 12 when the case is scheduled for a status conference.

The arena also will switch to the wire fraud charges. Prosecutors have asked Cooke to reset a hearing on the matter, tentatively set for Tuesday in front of U.S. Magistrate Ted Bandstra, as expert witnesses won't be available until later this month.

The wire fraud charges have withstood defense motions to dismiss on the basis of statute of limitations and lack of clarity. Prosecutors say the defendants did an end-around the Colombian government by using Saravia on the Black Market Peso Exchange, thus prohibiting it from seizing $5.2 million in drug proceeds.

Kuehne's legal team says the wire fraud charges should be dismissed because the Colombian government's right to seize drug proceeds does not constitute a "property right," a necessary element to charge mail and wire fraud.

Expect high-wire lawyering as both sides evoke in the upcoming hearing both U.S. and Colombian law, and as Nields put it, the "storied history" of the mail and wire fraud statute.

A potential wild card in the case is that there is a new president, a lawyer no less, who will take office later this month. Under a Barack Obama administration, could the Justice Department change course on Kuehne, especially if the prosecution continues to struggle?

"It's not common, but in some exceptional situations, there can be a second look," Coffey said.

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