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USA v. Wells

United States District Court, W.D. North Carolina, Charlotte Division

November 14, 2019



          Robert J. Conrad, Jr., United States District Judge

         THIS MATTER is before the Court on the government's Notice of Appeal, (Doc. No. 19), of the magistrate judge's denial, (Minute Order, Oct. 3, 2019), of its Motion on Status of Counsel, (Doc. No. 16). I. BACKGROUND The defendant was indicted on June 20, 2019, for offenses related to alleged tax preparation fraud. (Doc. No. 3). The Indictment also included one count of destruction of records (Count Thirty-Five) resulting from the alleged arson at one of the defendant's business locations after she had been served with an IRS summons. (Id. at 2-3, 7-8). She was appointed counsel from the Federal Public Defender's Office at her initial appearance. (Oral Order, June 26, 2019).

         The Indictment was superseded on August 22, 2019. (Doc. No. 13). An additional charge of obstruction of justice (Count Thirty-Six) is based, in part, on alleged false statements under oath before the Grand Jury on February 19, 2019.[1] (Id. at 4, 9). After the defendant was arraigned on the Superseding Indictment on September 5, 2019, current counsel entered his appearance on September 9, 2019. (Doc. No. 15).

         The government filed the underlying motion on September 16, 2019, seeking a hearing on whether counsel has an impermissible conflict of interest. (Doc. No. 16). Pursuant to 28 U.S.C. § 636(b)(1)(A), a magistrate judge was designated to hear and determine the government's motion. (No. 3:05-mc-268, Doc. No. 1: Referral Order at 1). After conducting an evidentiary hearing, the magistrate judge found that the matter was subject to interpretation and denied the government's request to disqualify counsel from further representation of the defendant.[2] (Minute Order, Oct. 3, 2019). On October 10, 2019, the government filed the instant Notice of Appeal seeking disqualification of counsel, claiming he is a fact witness who provides substantive evidence of the defendant's alleged false testimony before the grand jury. (Doc. No. 19 at 1).


         Federal Rule of Criminal Procedure 59(a) allows a district judge to refer to a magistrate judge for determination any matter that does not dispose of a charge or defense. When a party objects to a magistrate judge's order on a nondispositive matter, a district judge must determine whether the order is contrary to law or clearly erroneous.


         Although a criminal defendant has the right to hire the counsel of her own choosing, the presumption in favor of retained counsel “may be overcome not only by a demonstration of actual conflict but by a showing of a serious potential for conflict.” United States v. Basham, 561 F.3d 302, 323-24 (4th Cir. 2008) (quoting Wheat v. United States, 486 U.S. 153, 164 (1988)) (emphasis in original). A district court has an “‘independent interest in ensuring that criminal trials are conducted within the ethical standards of the profession and that legal proceedings appear fair to all who observe them.'” Id. at 323 (quoting Wheat, 486 U.S. at 160). Thus, “‘a district court has an obligation to foresee problems over representation that might arise at trial and head them off beforehand.'” Id. (quoting United States v. Howard, 115 F.3d 1151, 1155 (4th Cir. 1997).

         Here, retained counsel is a member of the North Carolina Bar. (Doc. No. 15: Entry of General Appearance). By appearing in this District, attorneys submit themselves to the Court's enforcement of the North Carolina Rules of Professional Conduct. LCrR 44.1 (incorporating LCvR 83.1(a)). Revised Rule 3.7 of that code provides:

(a) A lawyer shall not act as advocate at a trial in which the lawyer is likely to be a necessary witness unless:
(1) the testimony relates to an uncontested issue;
(2) the testimony relates to the nature and value of legal services rendered in the case; or (3) disqualification of the lawyer would work substantial hardship on the client.

         “A witness's testimony is ‘necessary' within the meaning of the rule when it is relevant, material, and unobtainable by other means.” State v. Smith, 749 S.E.2d 507, 510 ( N.C. Ct. App. 2013) (internal quotation marks and citation omitted). However, an attorney who is disqualified from advocating at trial may represent his client on non-trial matters absent a showing of other conflict of interest under Rules 1.7 or 1.9, such as involving other current or former clients. Cunningham v. Sams, 588 S.E.2d 484, 487 ( N.C. Ct. App. 2003).

         The government has demonstrated that retained counsel is likely to be a necessary witness if the case proceeds to trial. First, counsel's testimony would be relevant and material to the contested issue of whether the defendant made false statements before the grand jury. According to the transcript, the defendant testified on February 19, 2019, that she provided records responsive to a grand jury subpoena to counsel on a USB, which she expected to be forwarded to the grand jury. (Doc. No. 19-1, Exhibit 1 at 2-4).[3]However, in an e-mail message sent to the government on February 20, 2019, counsel stated, “I don't have any records that would be responsive to the subpoena, on a thumb drive or otherwise. Ms. Smith seems to think I do, however, I do not!” (Doc. No. 19-2, Exhibit 2 at 2).[4] Before the magistrate judge, counsel explained that the defendant had provided some other kind of drive without anything on it and that records were ultimately produced, including a whole computer. Even so, the government intends to call counsel as a ...

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