In a significant decision, a panel of the Second Circuit recently held that a French citizen who was charged with violating the Commodity Exchange Act (CEA) in connection with the LIBOR scandal, but who lives in France and has remained there, is not a fugitive and that the trial court abused its discretion in applying the fugitive disentitlement doctrine to her. That doctrine, which "disentitles" a defendant from advancing merits arguments while a fugitive, would have prevented the district court from hearing her jurisdictional and other challenges to that indictment. United States v. Bescond, No. 19-1698, 2021 WL 3412115 (2d Cir. Aug. 5, 2021). This decision may now provide certain criminal defendants with an avenue to challenge aggressive extraterritorial applications of U.S. law without putting their liberty at risk by being forced to appear first in person in U.S. courts.
Muriel Bescond, a French citizen who lived and worked in France, was the head of the Paris treasury desk at Société Générale. Id. at *1. An indictment against her in the Eastern District of New York charged that, between May 2010 and October 2011, she participated in a scheme, from her office in Paris, to manipulate the United States Dollar London Interbank Offered Rate in violation of the CEA. Id. Bescond has remained in France - the French government, which does not extradite its own citizens, will not extradite her - and has not submitted to the court's jurisdiction. Id. at *2. Bescond moved to dismiss the indictment on several grounds, including a challenge to the extraterritorial application of the CEA, but District Judge Joanna Seybert ruled that she was a fugitive and declined, in an exercise of the court's discretion under the fugitive disentitlement doctrine, to decide her motion on the merits. Id. at 3. A split panel of the Second Circuit reversed.1
The majority held that Bescond was neither a "traditional fugitive," because she had not fled the country, nor a "constructive-flight fugitive" (i.e., a person who commits a crime within the jurisdiction, leaves for innocent reasons and then stays abroad to avoid prosecution), because she was outside the United States at the time of the alleged crimes. Id. at *8. Her "presence abroad," the court explained, "is unrelated to the American prosecution." Id. at *10. Instead, she is abroad because "[s]he is a French citizen, living in France, where she supports a family, and is employed in a legitimate line of work." Id.
Though the analysis could have stopped there - because a trial court cannot apply the fugitive disentitlement doctrine to a nonfugitive - the majority proceeded to hold that the trial court abused its discretion in applying the doctrine to Bescond. Id. at *10 - 11. The court reasoned that, even if Bescond were a fugitive, disentitling her from pursuing her motion to dismiss, given her innocent absence from the country, would be "a disproportionately severe response ... and therefore too harsh a means of ensuring mutuality in the litigation." Id. at *10. It rejected the trial court's finding of substantial prejudice to the government resulting from Bescond's absence. The majority reasoned that the "prejudice to consider is that 'caused by the defendant's escape'" and found none because the government failed to identify a "need to acquire new evidence related to Bescond's period of absence" and because, having waited "about six to seven years" to bring charges, the government had shown no concern about the potential staleness of the evidence. Id. (quoting Empire Blue Cross & Blue Shield v. Finkelstein, 111 F.3d 278, 280 (2d Cir. 1997)). The majority also faulted the trial court for its failure to find prejudice in the coercive nature of an indictment that forced the defendant into a choice between living under the stigma of being branded a fugitive and putting her liberty at risk by coming here to face trial. Id. at *11.
In another recent case, preceding Bescond, Judge Richard Berman of the Southern District of New York denied a request from an attorney for Halkbank - a Turkish bank accused of a conspiracy to evade sanctions on Iran - to make a special appearance to challenge the court's personal jurisdiction over the bank. United States v. Turkiye Halk Bankasi A.S., 426 F. Supp. 3d 23, 34 (S.D.N.Y. 2019). The court held that even if a special appearance were appropriate, the court would apply the fugitive disentitlement doctrine and decline to hear the motion to dismiss. Id. at 39. The Second Circuit denied Halkbank's subsequent mandamus petition, because the bank "ha[d] not demonstrated that it lacks an adequate, alternative means of obtaining relief." In re: Turkiye Halk Bankasi A.S., No. 19-4203 (2d Cir. Feb. 21, 2020). Though the court did not elaborate, it was likely referring to Halkbank's ability to submit to the trial court's jurisdiction and move for dismissal after arraignment. While it is not clear that the Halkbank rulings necessarily survive the Second Circuit's recent decision, they are also distinguishable on a number of grounds. The circumstances facing an entity like Halkbank differ from those facing an individual like Bescond. A corporation, unlike an individual defendant, obviously does not risk incarceration. And the criminal jurisdictional issues relating to corporations may differ as well.
So long as federal prosecutors continue to push the boundaries of their authority to prosecute foreigners for conduct abroad, there will continue to be defendants in Bescond's position who seek to challenge those assertions of authority without submitting to the jurisdiction of the federal courts. This decision may give defendants an opportunity to have those challenges heard prior to arraignment and without risk to their liberty. The decision is key in potentially limiting the application of the disentitlement doctrine in the face of expansive assertions of extraterritorial power by domestic prosecutors. The ruling limits the definition of fugitive to those who have fled or otherwise taken affirmative steps to avoid the United States - in line with traditional concepts of fugitivity - and also, in its discretionary application, requires a court considering disentitlement claims to give substantial weight to the defendant's interest in avoiding the stigma of indictment.
1 The panel majority and dissent dealt first and at length with the appellate court's jurisdiction to consider the appeal. The majority held that it could hear the appeal on the disentitlement issues under the collateral order doctrine, but not the merits of the appeal under its pendent appellate jurisdiction. Id. at *7. The majority reasoned that the burden of disentitlement was especially heavy in this case because it forced Bescond to choose between traveling to the United States at substantial peril to her liberty and livelihood or remaining in France to "live indefinitely with the imputation of being a fugitive." Id. at *4. The court stressed that under these facts, "disentitlement ... imposes a penalty for staying home." Id. The court noted that it was breaking from out-of-circuit precedent; by creating a circuit split, it may have invited intervention from the Supreme Court. Id. at *6. The dissent would have avoided the circuit split in asserting that the appellate court lacked jurisdiction to consider the merits of the appeal. Id. at *13 (Livingston, J., dissenting).
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