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`Case 2:18-cr-00422-DJH Document 1398 Filed 11/18/21 Page 1 of 8
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`
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`GLENN B. McCORMICK
`Acting United States Attorney
`District of Arizona
`
`KEVIN M. RAPP (Ariz. Bar No. 014249, kevin.rapp@usdoj.gov)
`MARGARET PERLMETER (Ariz. Bar No. 024805, margaret.perlmeter@usdoj.gov)
`PETER S. KOZINETS (Ariz. Bar No. 019856, peter.kozinets@usdoj.gov)
`ANDREW C. STONE (Ariz. Bar No. 026543, andrew.stone@usdoj.gov)
`Assistant U.S. Attorneys
`40 N. Central Avenue, Suite 1800
`Phoenix, Arizona 85004-4408
`Telephone (602) 514-7500
`
`DAN G. BOYLE (N.Y. Bar No. 5216825, daniel.boyle2@usdoj.gov)
`Special Assistant U.S. Attorney
`312 N. Spring Street, Suite 1400
`Los Angeles, CA 90012
`Telephone (213) 894-2426
`
`KENNETH POLITE
`Assistant Attorney General
`Criminal Division, U.S. Department of Justice
`
`REGINALD E. JONES (D.C. Bar No. 1620183, reginald.jones4@usdoj.gov)
`Senior Trial Attorney
`Criminal Division, U.S. Department of Justice
`1400 New York Ave N.W., Suite 1200
`Washington, D.C. 20005
`Telephone (202) 616-2807
`Attorneys for Plaintiff
`
`
`
`
`
`United States of America,
`
`
`
`Plaintiff,
`
`
`v.
`
`
`Michael Lacey, et al.,
`
`
`
`Defendants.
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`
`
`IN THE UNITED STATES DISTRICT COURT
`
`FOR THE DISTRICT OF ARIZONA
`
`
`
`
`No. CR-18-422-PHX-DJH
`
`UNITED STATES’ [PROPOSED]
`SURREPLY TO DEFENDANTS’
`MOTION TO PARTIALLY VACATE
`SEIZURE WARRANTS AND
`RELEASE FUNDS (Doc. 1366)
`
`

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`Case 2:18-cr-00422-DJH Document 1398 Filed 11/18/21 Page 2 of 8
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`INTRODUCTION
`In camera review is the exception, not the rule. It is certainly not a tool for a criminal
`defendant to avoid the adversarial process while trying to release funds including tens of
`millions of dollars in criminal proceeds his coconspirators have already agreed to forfeit
`pursuant to guilty pleas. And yet, that is exactly what defendants are attempting here.
`Courts regularly refuse to consider new arguments and evidence raised for the first
`time on reply, and the Court should deny the defendants’ motion outright. If the Court
`nonetheless chooses to consider this new argument and evidence, however, the Court
`should deny defendants’ request for in camera review, order that defendants publicly file
`copies of the in camera declarations within 48 hours, and grant the government 14 days to
`file a supplemental response in accordance with L.R. Civ 7.2(e)(1). No further replies
`should be permitted, as defendants have plainly abused that privilege.
`ARGUMENT
`“The district court need not consider arguments raised for the first time in a reply
`brief.” Zamani v. Carnes, 491 F.3d 990, 997 (9th Cir. 2007); see also United States v.
`Bigley, No. 2:14-CV-0729-HRH, 2015 WL 854474, at *2 (D. Ariz. Feb. 27, 2015) (“This
`new argument is procedurally defective because it was raised in defendants’ reply, thereby
`depriving plaintiff an opportunity to respond to the argument.”). While the prejudice of
`raising new arguments or evidence on reply can at times be cured by permitting a surreply,
`that is not the case here, where defendants are not only presenting new arguments and
`evidence, but are also offering those same new arguments and evidence in camera, so the
`government cannot reasonably respond to them. Even now, the government can only
`speculate as to whether defendants have made their required showings, and this prejudice
`is magnified by the troublingly-brief explanation of these in camera filings disclosed in
`defendant’s reply, which barely consists of one paragraph. See Doc. 1390, at 4. Defendants
`are attempting to deny the United States an opportunity to challenge their purported Sixth
`Amendment injury: first defendants claimed they did not need to make such a showing in
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`Case 2:18-cr-00422-DJH Document 1398 Filed 11/18/21 Page 3 of 8
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`their opening brief (Doc 1366, at 8), then they purported to make this showing in their reply
`brief (Doc. 1390, at 4), but only in camera, while saying as little as possible. Id. This is an
`affront to the adversarial process. The Court should refuse to consider this new purported
`evidence and deny defendant’s Motion (Doc. 1366) for this reason alone.
`Second, defendants cite no precedent – at all – justifying their attempt to make a
`Monsanto showing in camera. This issue was recently analyzed in United States v. Kolfage,
`where a defendant similarly attempted to make a Monsanto showing ex parte, and the
`Kolfage court denied this request, noting that courts have a general policy of “disfavoring
`ex parte submissions to resolve the Fifth and Sixth Amendment tensions.” No. 20 CR. 412,
`2021 WL 1792052, at *7 (S.D.N.Y. May 5, 2021).1 Similarly, in United States v. Bokhari,
`the court held that “[s]ubmissions for the Monsanto hearing may be filed under seal, with
`permission of the reviewing judge, but, absent compelling circumstances, they may not be
`filed in an ex parte manner” and that a court must “balance the proffered need for an ex
`parte filing and the scope, purpose, and design of the Monsanto hearing … bearing in mind
`the presumption against ex parte submissions in our adversarial system.” No. CR 14-
`30044-MGM, 2015 WL 7303535, at *7 (D. Mass. Nov. 19, 2015). In a related context, in
`United States v. Keyes, the court considered whether a challenge to the accuracy of a
`defendant’s sealed CJA Financial Affidavit should be addressed in camera, and concluded
`that “in balancing the interests at issue, contested appointments of counsel under the CJA
`Act are best decided in an adversarial proceeding. It is only through this process that the
`accuracy of the information provided by the defendant can be accurately tested.” 675 F.
`Supp. 2d 988, 991 (D. Ariz. 2009) (citing United States v. Harris, 707 F.2d 653, 662–63
`(2nd Cir.1983))). Finally, in United States v. Wetselaar, which appears to be the lone in-
`circuit case where defense counsel was permitted to file certain Monsanto documents in
`
`
`1 The Kolfage court held that its decision “was not leaving the defendant in an
`untenable spot” as the government would not be permitted to use any such submissions in
`its case in chief a trial, if such information was not otherwise available. Id. The government
`has no objection to a similar condition here.
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`Case 2:18-cr-00422-DJH Document 1398 Filed 11/18/21 Page 4 of 8
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`camera, the defendant was still ordered to provide the government with redacted versions
`of these same documents (apparently redacting the billing diaries reflecting counsel’s
`specific work), and the court nonetheless found that the defendant had failed to make a
`sufficient showing under Monsanto, because a “bare assertion of financial need is
`insufficient to justify a Monsanto hearing.” No. 2:11-CR-00347-KJD, 2013 WL 8206582,
`at *20 (D. Nev. Dec. 31, 2013) (permitting “defense counsel to file an affidavit regarding
`billing for in camera review and provide the Government with a redacted copy”), report
`and recommendation adopted, No. 2:11-CR-00347-KJD, 2014 WL 1366722 (D. Nev. Apr.
`7, 2014). 2 Defendants have cited no precedent for their attempt to subvert the adversarial
`process by making their required Monsanto showing in camera. For this reason, the Court
`should refuse to consider this new evidence and deny the Motion.
`Third, there is simply no reason for defendants to be permitted to make their
`Monsanto showing in camera, as the details of a defendant’s ability to pay counsel are the
`very facts in controversy in a Monsanto (or Luis) motion. It would make little sense for a
`court to permit defendants to file in camera information which the court would necessarily
`disclose in any order which granted the relief requested. See, e.g, United States v.
`Bonventre, 720 F.3d 126, 132-133 (2d Cir. 2013) (detailing assets disclosed in defendant’s
`Monsanto submission including incoming payments, current assets, and expected trial
`costs). Indeed, the point of a Monsanto showing is that a defendant lacks sufficient assets
`
`
`2 Neither is the attorney-client privilege a basis for in camera review: the privilege
`governs communications between an attorney and client, so it plainly would not protect a
`defendant’s disclosure of his own financial information to the Court. Neither would any
`attorney affidavits generally describing their total billing, hours worked, schedules of
`payments, prior expenses, or amounts owed be privileged. See United States v. Amlani, 169
`F.3d 1189, 1194 (9th Cir. 1999) (“[T]he identity of the client, the amount of the fee, the
`identification of payment by case file name, and the general purpose of the work performed
`are usually not protected from disclosure by the attorney-client privilege.”). At most, like
`in Wetselaar, counsel might be permitted to redact the descriptions of their work billed
`which might reveal litigation strategy or client communications. But like in Wetselaar and
`as discussed herein, attorney bills can at most show that counsel is not being paid, but they
`cannot show whether or not defendants actually have unseized funds to pay counsel.
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`Case 2:18-cr-00422-DJH Document 1398 Filed 11/18/21 Page 5 of 8
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`to pay counsel of choice – i.e. she should have little to no wealth to disclose. Permitting
`defendants to make their purported showing in camera simply ensures that the United
`States has no chance to respond to such information until after it appears in the Court’s
`decision, at which point the United States would be left with no option but to seek
`reconsideration if these figures are inaccurate or conflict with the government’s evidence.3
`Fourth, while the United States can only speculate as to what defendants are seeking
`to submit in camera, what little they have disclosed suggests they are still attempting to
`avoid their burden under Monsanto, which the United States should be allowed to
`challenge. Defendants have not disclosed who these in camera declarations are sworn by,
`only writing vaguely that “[a]s set forth in the declarations, defense counsel are currently
`owed substantial amounts of earned legal fees for work that has already been done and
`costs that have already been incurred” and that they “also provide an estimate for the cost
`of a second trial.” Doc. 1390, at 4. But if these in camera declarations are simply counsel
`swearing that they have not been paid,4 then that proves little more than their argument did
`in the Motion – for whatever reason, defendants are not paying their counsel. Perhaps
`defendants truly lack funds, or perhaps they simply prefer to keep their remaining funds
`hidden to hedge their bets on the outcome of their criminal trial. But in any event, and as
`
`3 As one example, an estimated $1,170,000 in luxury vehicles, jewelry, art, and
`personal effects were returned to the defendants last year, see Docs.1036-1037, but
`defendants do not explain why they are not seeking to use this returned property to fund
`their defense, and they have never requested permission to liquidate this property to pay
`their counsel. If these assets are not disclosed in the in camera filings, this might be one
`potential basis for reconsideration of any order granting the Motion.
`4 It also unclear whether these declarations disclose defense counsel’s billings and
`collections to date. Considering the caliber of the defense team and the number of filings
`in the Criminal, Civil, and Backpage Actions (collectively approaching 2000 docket
`entries), as well as three interlocutory appeals, the government estimates this amount likely
`runs well into the millions of dollars. Courts have found no Sixth Amendment injury in
`such circumstances. See, e.g., United States v. Patel, No. 5:11-CR-00031, 2018 WL
`6579989, at *6 (W.D. Va. Dec. 13, 2018) (defendant “did not need the restrained assets to
`retain counsel as he was represented by retained counsel of his choice and had already paid
`counsel fees in an amount the court considered to be sufficient to defend this case”).
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`Case 2:18-cr-00422-DJH Document 1398 Filed 11/18/21 Page 6 of 8
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`described in the United States’ Response, Monsanto relief is reserved for when a defendant
`cannot pay counsel due to the government’s seizures. See Doc. 1384, at 6-7, 10-11. The
`fact that counsel may have exhausted their retainers and may be cause for a motion to
`withdraw, but that alone does not justify Monsanto relief. Defendants are not entitled to
`hide their remaining assets in hopes of using seized assets to fund their defense instead.5
`
`Finally, there is a strong presumption of open access to judicial documents, and
`defendants have offered no explanation why this presumption should not apply here. Courts
`have recognized a “general right to inspect and copy public records and documents,
`including judicial records and documents.” Kamakana v. City & Cty. of Honolulu, 447 F.3d
`1172, 1178 (9th Cir. 2006) (citing Nixon v. Warner Commc'ns, Inc., 435 U.S. 589, 597 &
`n.7 (1978)). Defendants are seeking to release and spend tens of millions of dollars which
`might otherwise be available to pay Backpage’s substantial restitution order to victims, and
`the public and victims have a powerful interest in understanding why the Court might chose
`to grant such a request.6 It is not difficult to speculate why defendants with long histories
`of civil litigation and victim lawsuits might not want to publicly disclose their assets, but
`embarrassment or annoyance is no justification for deny public access to a judicial record.
`See Kamakana, 447 F.3d at 1179 (“[A] litigant’s embarrassment, incrimination, or
`exposure to further litigation will not, without more, compel the court to seal its records.”).
`
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`5 Nowhere in the reply do defendants explain what would become of any released
`funds which were ultimately not used to pay counsel, so presumably defendants have either
`ignored this point or argued it in camera. Whether under Monsanto or Luis, relief is limited
`to those funds actually needed to retain counsel of choice. Defendants are seeking to release
`an amount that runs well into the tens of millions of dollars, and even counsel of this caliber
`might be hard-pressed to spend every last dollar of this money.
`6 The government submits that granting the Motion would effectively be dispositive
`of these assets, and thus the “compelling reasons” rather than “good cause” standard should
`apply, see Kamakana, 447 F.3d at 1180-1181, but under either standard, defendants have
`not attempted to meet their burden. See also United States v. Nicholas, 594 F. Supp. 2d
`1116, 1130 (C.D. Cal. 2008) (holding that closure of records and proceedings in a criminal
`action “although not absolutely precluded, must be rare and only for cause shown that
`outweighs the value of openness”).
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`Case 2:18-cr-00422-DJH Document 1398 Filed 11/18/21 Page 7 of 8
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`CONCLUSION
`For the reasons stated herein and in the United States’ Response (Doc. 1384),
`Defendants’ Motion to Partially Vacate Seizure Warrants and Release Funds (Doc. 1366)
`should be denied. Alternately, the Court should Order defendants to publicly file within 48
`hours all declarations and exhibits filed in support of their Reply (Doc. 1390), and permit
`the United States to file a supplemental response within 14 days of such a public filing.
`Respectfully submitted this 18th day of November, 2021.
`
`GLENN B. McCORMICK
`Acting United States Attorney
`District of Arizona
` s/Dan G. Boyle
`
`
`DAN G. BOYLE
`Special Assistant U.S. Attorney
`
`KEVIN M. RAPP
`MARGARET PERLMETER
`PETER S. KOZINETS
`ANDREW C. STONE
`Assistant U.S. Attorneys
`
`
`
`KENNETH POLITE
`Assistant Attorney General
`U.S. Department of Justice
`Criminal Division, U.S. Department of Justice
`REGINALD E. JONES
`Senior Trial Attorney
`U.S. Department of Justice, Criminal Division
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`Case 2:18-cr-00422-DJH Document 1398 Filed 11/18/21 Page 8 of 8
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`CERTIFICATE OF SERVICE
`I hereby certify that on November 18, 2021, I electronically transmitted the
`
`attached document to the Clerk’s Office using the CM/ECF System for filing and
`transmittal of a Notice of Electronic Filing to the CM/ECF registrants who have entered
`their appearance as counsel of record.
`
`s/Marjorie Dieckman
`U.S. Attorney’s Office
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