Taking the Fifth for Financial Information: The Blankenship Case Is (Almost?) Done

Thomas KlebestreifenLast December, Donald Blankenship was found guilty of conspiracy to violate mine safety laws. This is a misdemeanor. He was acquitted of the more serious felony charge against him for false SEC filings. In early April 2016, Mr. Blankenship was sentenced to one year in prison.

This was the most serious penalty he  faced. Given the length of the trial—and the numerous rulings against him by this judge—this sentence was no surprise.

During sentencing, however, an interesting issue arose involving the Fifth Amendment.

Prior to imposing the sentence, the judge requested that the probation officer assigned to the case draft a presentence report (commonly known as a “PSR”). This is normal practice. When that report was submitted, however, the section devoted to detailing Mr. Blankenship’s financial information was blank.

The government learned that Mr. Blankenship’s team refused to turn over any information pertaining to his financial condition, asserting his Fifth Amendment rights. The government filed a motion to compel the information.

The Restitution Argument

The government argued in its motion that having Mr. Blankenship’s financial information is absolutely necessary, because there is a request for restitution. Federal statutes permit restitution to victims of crimes in very limited circumstances.

Victim and Witness Protection Act (VWPA), 18 U.S.C. §3663, and the Mandatory Victims Restitution Act (MVRA), 18 U.S.C. §3663A, are the primary statutes under which federal courts may impose restitution on criminal defendants.

The VWPA provides for discretionary restitution and limits it to a “victim,” who is defined as a “person directly and proximately harmed as a result of the commission of an offense for which restitution may be ordered.” Precedent limits its use to compensating victims of the conduct for which the defendant was convicted, not for “related conduct.” Here, then, restitution for Mr. Blankenship could be based only on the conviction for conspiracy to violate mine safety laws.

The possible “victims” here were (1) Alpha, the company that took over Massey and spent considerable amounts ($13 million) to cooperate with the government’s investigation as part of a non-prosecution agreement ; and (2) the families of the victims of the explosions.

In a conspiracy case, determining whether a victim was harmed by the conduct of conviction is a little more complicated. The court relied on Fourth Circuit precedent that “an award of restitution is only appropriate if the act that harms the purported victim ‘is either conduct underlying an element of the offense of conviction, or an act taken in furtherance of a scheme, conspiracy, or pattern of criminal activity that is specifically included as an element of a conviction.’”

The Government’s Argument to Compel Financial Information

The government, which sought restitution, argued that the PSR had to include the defendant’s financial information:

Under Rules 32(c)(1)(B) and 32(d)(2)(A)(ii) of the Federal Rules of Criminal Procedure, the PSR must contain “defendant’s financial condition” and “sufficient information for the court to order restitution.” Section 3663 of Title 18 requires the Court to consider Defendant’s financial resources in deciding whether to order restitution, and § 3664 requires the PSR to include “information relating to the economic circumstances of [the] defendant.”

Then the government argued that this information was required even if restitution were not an issue:

Even without regard to restitution, this information completes the “history and characteristics of the defendant” and is necessary for the consideration of § 3553 factors for the imposition of a sentence. 18 U.S.C. § 3553(a). Under
§ 3553(d) the United States must have this information for “collecting an assessment, criminal fine, forfeiture or restitution imposed.”

Most of the time, it is no big deal for a defendant to disclose his financial information. PSRs are kept under seal, so even though they appear on the docket, they will not be made public because they contain so much private and confidential material. The assets of the vast majority of criminal defendants are minimal.

Mr. Blankenship’s Basis for Asserting the Fifth Amendment

Mr. Blankenship, of course, is not your typical criminal defendant. He is a successful business person, presumably with considerable assets.

In his opposition to the government’s motion, Mr. Blankenship argued that his Fifth Amendment rights apply all the way through sentencing and appeal.

He argued that Fourth Circuit precedent is on his side of the argument:

[I]n United States v. Jeffers, 570 F.3d 557 (4th Cir. 2009), the Fourth Circuit held that a defendant had validly “invo[ked] . . . the Fifth Amendment” by refusing “to divulge his financial assets to the probation officer, for fear that doing so could incriminate him and thus hamper his chances for a successful appeal.”

Mr. Blankenship made it clear that he intended to appeal (he filed his notice of appeal on April 7). So, according to him, if he turns over his financial information, the government could use that information against him in a retrial in the event that the conviction is overturned.

Because the Fifth Amendment applies to answers that would “furnish a link in the chain of evidence needed to prosecute the claimant for a federal crime,” the government could use the information against him later. Plus, in support of this point, Mr. Blankenship pointed out that the government used what financial information it had on Blankenship at trial in its opening, closing, and examination of witnesses.

Sidenote: Of course, Mr. Blankenship’s motion does not explain exactly how such information could be used against him. That would give away his concerns. But I’m sure the government, on receipt of the motion, immediately starting trying to figure out how his financial information could reveal other crimes. It couldn’t have been happy with the outcome at trial—a massive investigation, a very public trial and an outcome that resulted in a near-total defense victory. Charging him with another crime might take away that sting.

In addition (and what turned out to be the winning argument), Mr. Blankenship argued that this information is irrelevant because restitution is not appropriate here as a matter of law.

It’s All Moot

Ultimately, the court concluded that restitution was not appropriate, in two separate orders.

First, the court concluded that Alpha was not a victim. It had acquired Massey a year after the conspiracy and had voluntarily entered into a non-prosecution agreement after agreeing to make its employees available to the government. The losses that Alpha incurred in this effort (mostly attorneys’ fees, it seems) were not a victim “directly and proximately harmed” by the conduct.

Second, in what was clearly a tougher decision, the court concluded that the individuals who had applied for restitution were not victims either. Most of them had sought restitution as a result of the explosion of the Upper Big Branch mine in April 2010. However, the government had (successfully) excluded evidence of the cause of that explosion from the trial. Therefore, losses as a result of that explosion were not an issue in the trial, Mr. Blankenship was not to blame for the explosion and the injuries as a result of it were not appropriate for restitution.

In the end, the court did to have to decide Mr. Blankenship’s Fifth Amendment argument. It concluded that because restitution was not appropriate that the motion to compel was moot.

This an interesting argument by Mr. Blankenship. It likely raises the interest of the government in his financials, but at least it kept them from being disclosed.

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