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Government Refuses to Let Steve Bannon Sneak Away from His Federal Fraud Indictment

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On February 11, Steve Bannon’s pardon was lodged in his federal docket with no explanation, entered with a date of January 19. As compared to the Mike Flynn pardon, there was no DOJ request to dismiss the prosecution nor an indication that Bannon had accepted it.

Apparently, on February 18, Bannon’s lawyer wrote Judge Analisa Torres an email requesting that she dismiss the indictment against Bannon. In response, yesterday the government submitted a letter agreeing that Bannon can be terminated from the docket and have his bond returned, but opposing that the indictment be dismissed.

As prosecutors explain, a pardon is only meant to forgive punishment, it is not intended to forget the crime. And if the court dismissed the indictment, prosecutors point out, it would have consequences beyond the pardon.

The fact that Bannon was pardoned does not extinguish the fact that a grand jury found probable cause to believe that he committed the offenses set forth in the Indictment, nor does it undercut the evidence of his involvement therein which the Government expects to elicit as part of its presentation at trial. Were the Court to dismiss the Indictment against Bannon, it could have a broader effect than the pardon itself, among other things potentially relieving Bannon of certain consequences not covered by the pardon.

[snip]

Accordingly, because Bannon does not set forth any legal authority for the proposition that a court should dismiss an indictment following a pardon, and the only stated basis for his request is to “clarify” his status, the Court should deny the request.

The government also demands that Bannon file the letter in the docket.

Finally, the Court should direct Bannon to publicly file his February 18th letter on the docket. Bannon’s counsel submitted the letter to the Court by email—and therefore effectively under seal—because, in his view, “Bannon should no longer be a defendant in the case.” However, until the defendant is administratively terminated, he remains a named defendant and more important, Bannon’s status in the case is not a basis to make his submission under seal.

The government submitted the filing on the same day that CNN reported an accelerating state investigation into Bannon for the same crimes.

The Manhattan district attorney’s office has subpoenaed financial records related to Steve Bannon’s crowd-funding border-wall effort, signaling that its criminal investigation into former President Donald Trump’s chief strategist is advancing, according to people familiar with the matter.

Prosecutors sent the subpoenas after Trump pardoned Bannon in late January for federal conspiracy crimes tied to the southern border-wall project, making Bannon among the Trump world figures — including the former president — subjects of criminal investigations by Manhattan district attorney Cyrus Vance.

The grand jury subpoenas were sent to Wells Fargo, one of the financial institutions that handled some of the accounts used in the fundraising effort, and to GoFundMe, the crowdfunding platform where Bannon’s project, “We Build the Wall,” once operated, the people said.

The state grand jury investigation revives the possibility that Bannon, the conservative and outspoken political strategist, could face state criminal charges after shedding the federal case last month.

In addition to the criminal investigation, the New Jersey attorney general’s office has launched a civil inquiry into We Build the Wall. In September, the New Jersey Division of Consumer Affairs subpoenaed We Build the Wall for documents seeking a wide range of records, according to court filings.

This all suggests that Bannon may be in a far worse place for having obtained a Trump pardon.

In mentioning its intent to elicit testimony of Bannon’s actions in the letter, the government seems to be alluding to the fact that Bannon is a named co-conspirator. They will want (and need) to introduce his actions and statements as a co-conspirator into evidence to convict the others. Thus, it is important for prosecutors that he remain a named — albeit pardoned — co-conspirator in the Federal crimes.

Forcing Bannon’s attorney to submit the letter in the docket itself will effectively force him to officially accept the pardon, which prosecutors will then argue is admission of guilt, making the co-conspirator evidence from him even more valuable by association.

The public filing may also be necessary before Cy Vance can request the grand jury materials from Judge Torres, as referenced in the CNN piece.

And, of course, rather than facing a sentence at some Club Fed prison, Bannon might now be facing a crappier New York State prison like Rikers.

All that’s before any other federal charges facing Bannon related for foreign influence peddling.

It was never going to be easy for Bannon to pull off a Trump pardon. Thus far, his attorney Robert Costello may be making things worse.

Paulie’s Very Bad Day: “If the People Don’t Have the Facts, Democracy Can’t Work.” 

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Recently, I got a new makeup artist for my TV appearances (which, of course, all have to do with the Russian investigation). She came to the US from Ukraine in the wake of Yanukovych’s ouster. When I told her I was talking about the Manafort the first time I met her, she expressed her hope that he would pay a price, here, for what he helped Yanukovych do to her country.

I like to think today is for her. Amy Berman Jackson sentenced Paul Manafort to an additional 43 in months in prison on top of the 47 from EDVA for crimes were tied to Manafort’s efforts to whitewash a brute, in Ukraine, Western Europe, and the US, and then hide the “blood money” (as his daughter called it) from tax authorities.

Immediately after the sentencing ended, Cy Vance announced a 16-count indictment in New York State, on charges that Trump cannot pardon. Whatever you think of Vance’s grandstanding, the NY indictment immediately shifts Manafort’s incentives for a pardon, because prison in NY State would be significantly less comfortable than FCI Cumberland, where Manafort will serve his federal charges. So any pardon might just hasten a move to less comfortable surroundings.

That means the entire strategy Manafort has pursued for the last 18 months, refusing to cooperate and then, when he did enter a plea deal, using it only to waste prosecutors’ time and share information with Trump, will serve no purpose.

Which is why I think today can best be summed up by the contrast between two statements. In the middle of a long judgment that was not televised but was superbly livetweeted by Zoe Tillman, Andrew Prokop, Ryan Reilly, and others, ABJ observed the gravity of Manafort’s FARA crimes by noting that, “If the people don’t have the facts, democracy can’t work.”

Immediately after the sentencing, Kevin Downing — the Manafort lawyer who, more than the others, has been cultivating Manafort’s pardon strategy — stepped out on the courtroom stairs and made a false statement that serves that pardon strategy (as he did last week) “Judge Jackson conceded that there was absolutely no evidence of Russian collusion in this case.” Protestors immediately called him a liar, and noted that that’s not what ABJ had said, hopefully to be picked up by every TV feed filming Downing.

Indeed, ABJ had just criticized that ploy in the courtroom.

During Wednesday’s sentencing, Jackson slammed Manafort and his lawyers for their focus on the fact that he was not charged in connection with his work on the Trump campaign or accused of colluding with the Russian government. She said that the “non-collusion mantra was a non sequitor,” unrelated to what sentence Manafort should receive, and that his lawyers made the “unsubstantiated” claim that Manafort was only charged with financial crimes predating his campaign work because Mueller’s office couldn’t charge him with anything to do with Russia.

The live-tweeting is what made it possible for protestors to spoil Downing’s effort to perform as Trump wanted him to, undermining Downing’s (and with it, Trump’s) effort to spin this verdict as an exoneration in the case in chief.

Today’s verdict was about Paul Manafort’s efforts to prevent voters in both Ukraine and the US from obtaining real facts.

And it turns out that President Trump isn’t going to be able to help Manafort avoid the consequences for that.

As I disclosed last July, I provided information to the FBI on issues related to the Mueller investigation, so I’m going to include disclosure statements on Mueller investigation posts from here on out. I will include the disclosure whether or not the stuff I shared with the FBI pertains to the subject of the post. 

James Orenstein’s Order Sets Up Congressional Hearing

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As Rayne noted this morning, yesterday James Orenstein released his order stating that the government can’t use the All Writs Act to force Apple to unlock the phone of a meth dealer, Jun Feng, who has already pled guilty. My favorite part of the order comes in the middle where he argues that those who passed the All Writs Act in 1789 were substantially the same people who wrote the Constitution guaranteeing Congress the right to legislate. He argued it would be unlikely that those same men would so quickly hand off that authority to the courts.

It is wholly implausible to suppose that with so many of the newly-adopted Constitution’s drafters and ratifiers in the legislature, the First Congress would so thoroughly trample on that document’s very first substantive mandate: “All legislative Powers herein granted shall be vested in a Congress of the United States[.]” U.S. Const. Art. I, § 1. And yet that is precisely the reading the government proposes when it insists that a court may empower the executive to exercise power that the legislature has considered yet declined to allow.

I’m sad that that argument, which is probably the first in a series of court rulings that will end up at SCOTUS, won’t have Scalia there to enjoy it.

Ultimately, though, Orenstein makes the very same argument he made back in October when he asked Apple to weigh in on this issue, updated with the point that I made — the same day the government asked for this order Jim Comey told Congress they don’t need legislation to get the same result.

It is also clear that the government has made the considered decision that it is better off securing such crypto-legislative authority from the courts (in proceedings that had always been, at thetime it filed the instant Application, shielded from public scrutiny) rather than taking the chance thatopen legislative debate might produce a result less to its liking. Indeed, on the very same day that thegovernment filed the ex parte Application in this case (as well as a similar application in the SouthernDistrict of New York, see DE 27 at 2), it made a public announcement that after months of discussionabout the need to update CALEA to provide the kind of authority it seeks here, it would not seek suchlegislation. See James B. Comey, “Statement Before the Senate Committee on Homeland Security andGovernmental Affairs,” (Oct. 8, 2015), https://www.fbi.gov/news/testimony/threats-to-the-homeland (“The United States government is actively engaged with private companies to ensure theyunderstand the public safety and national security risks that result from malicious actors’ use of theirencrypted products and services. However, the administration is not seeking legislation at this time.”).

Whether because it knew it would lose (and had lost), or because it wanted to pretend it respected encryption when in fact it did not, the Obama Administration adopted a strategy by which it told Congress it didn’t need new legislation, all while asking the courts to rewrite CALEA in secret.

Whether accidentally or not (I suspect it is no accident), Orenstein’s order comes at a particularly useful time, hours before the House Judiciary Committee will have what will be one of the more important hearings on this debate, featuring Jim Comey first, and then NY District Attorney Cy Vance, Apple’s General Counsel Bruce Sewell, and rock star academic Susan Landau. It is likely to be the one hearing to which Apple will willingly provide a witness, and the committee is made up of a mix of former US Attorneys, shills for law enforcement, but also defenders of privacy and online security.

In his testimony for the hearing, Sewell said much the same thing Orenstein did:

The American people deserve an honest conversation around the important questions stemming from the FBI’s current demand:

Do we want to put a limit on the technology that protects our data, and therefore our privacy and our safety, in the face of increasingly sophisticated cyber attacks? Should the FBI be allowed to stop Apple, or any company, from offering the American people the safest and most secure product it can make?

Should the FBI have the right to compel a company to produce a product it doesn’t already make, to the FBI’s exact specifications and for the FBI’s use?

We believe that each of these questions deserves a healthy discussion, and any decision should be made after a thoughtful and honest consideration of the facts.

Most importantly, the decisions should be made by you and your colleagues as representatives of the people, rather than through a warrant request based on a 220 year old-statute.

For years, the government has stopped short of demanding legislation, presumably because they knew they wouldn’t get what they wanted. They’re finally being called on it.

District Attorneys Use Spying as Cover To Demand a Law Enforcement Back Door

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In response to a question Senate Intelligence Committee Chair Richard Burr posed during his committee’s Global Threat hearing yesterday, Jim Comey admitted that “going dark” is “overwhelmingly … a problem that local law enforcement sees” as they try to prosecute even things as mundane as a car accident.

Burr: Can you, for the American people, set a percentage of how much of that is terrorism and how much of that fear is law enforcement and prosecutions that take place in every town in America every day?

Comey: Yeah I’d say this problem we call going dark, which as Director Clapper mentioned, is the growing use of encryption, both to lock devices when they sit there and to cover communications as they move over fiber optic cables is actually overwhelmingly affecting law enforcement. Because it affects cops and prosecutors and sheriffs and detectives trying to make murder cases, car accident cases, kidnapping cases, drug cases. It has an impact on our national security work, but overwhelmingly this is a problem that local law enforcement sees.

Much later in the hearing Burr — whose committee oversees the intelligence but not the law enforcement function of FBI, which functions are overseen by the Senate Judiciary Committee — returned to the issue of encryption. Indeed, he seemed to back Comey’s point — that local law enforcement is facing a bigger problem with encryption than intelligence agencies — by describing District Attorneys from big cities and small towns complaining to him about encryption.

I’ve had more District Attorneys come to me that I have the individuals at this table. The District Attorneys have come to me because they’re beginning to get to a situation where they can’t prosecute cases. This is town by town, city by city, county by county, and state by state. And it ranges from Cy Vance in New York to a rural town of 2,000 in North Carolina.

Of course, the needs and concerns of these District Attorneys are the Senate Judiciary Committee’s job to oversee, not Burr’s. But he managed to make it his issue by calling those local law enforcement officials “those who complete the complement of our intelligence community” in promising to take up the issue (though he did make clear he was not speaking for the committee in his determination on the issue).

One of the responsibilities of this committee is to make sure that those of you at at the table and those that comp — complete the complement of our intelligence community have the tools through how we authorize that you need. [sic]

Burr raised ISIS wannabes and earlier in the hearing Comey revealed the FBI still hadn’t been able to crack one of a number of phones owned by the perpetrators of the San Bernardino attack. And it is important for the FBI to understand whether the San Bernardino attack was directed by people in Saudi Arabia or Pakistan that Tashfeen Malik associated with before coming to this country planning to engage in Jihad.

But only an hour before Jim Comey got done explaining that the real urgency here is to investigate drug cases and car accident cases, not that terrorist attack.

The balance between security, intelligence collection, and law enforcement is going to look different if you’re weighing drug investigations against the personal privacy of millions than if you’re discussing terrorist communications, largely behind closed doors.

Yet Richard Burr is not above pretending this about terrorism when it’s really about local law enforcement.

Apple’s Transparency Numbers Suggest Claims of Going Dark Overblown

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Apple recently released its latest transparency report for the period ending June 30, 2015. By comparing the numbers for two categories with previous reports (2H 2013, 1H 2014, 2H 2014)  we can get some sense of how badly Apple’s move to encrypt data has really thwarted law enforcement.

Thus far, the numbers show that “going dark” may be a problem, but nowhere near as big of one as, say, NY’s DA Cy Vance claims.

The easier numbers to understand are the national security orders, presented in the mandated bands.

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Since the iPhone 6 was introduced in September 2014, the numbers for orders received have gone up — one band in the second half of 2014, and two more bands in the first half of this year. Curiously, the number of accounts affected haven’t gone up that much, possibly only tens or a hundred more accounts. And Apple still gets nowhere near the magnitude of requests Yahoo does, which number over 42,000.

Equally curiously, in the last period, Apple clearly received more NatSec orders than accounts affected, which is the reverse of what other companies show (before Apple had appeared close to one-to-one). One thing that might explain this is the quarterly renewal of Pen Register orders for metadata of US persons (which might be counted as 4 requests for each account affected).

In other words, clearly NatSec requests have gone up, proportionally significantly, though Apple remains a tiny target for NatSec requests compared to the bigger PRISM participants.

The law enforcement account requests are harder to understand.

Screen Shot 2015-09-30 at 1.51.47 PM

Note, Apple distinguishes between device requests, which are often users seeking help with a stolen iPhone, and account requests, which are requests for either metadata or content associated with an account (and could even include purchase records). The latter are the ones that represent law enforcement trying to get data to investigate a user, and that what I’ve laid out the latter data here [note, I fully expect to have made some data errors here, and apologize in advance — please let me know what you see!!].

Here, too, Apple has seen a significant increase, of 23%, over the requests it got in the second half of last year. Though, note, the iPhone 6 introduction would not be the only thing that would affect this: so would, probably, the June 2014 Riley Supreme Court decision, which required law enforcement to get a warrant to access cell phones, would also lead law enforcement to ask Apple for data more often.

Interestingly, however, there were fewer accounts implicated in the requests in the last half of the year, suggesting that for some reason law enforcement was submitting requests with a slew of accounts listed for each request. Whereas last year, LE submitted an average of over 6.5 accounts per request, this year they have submitted fewer than 3 accounts per request. This may reflect LE was submitting more identifiers from the same account — who knows?

The percentage of requests where content was obtained has gone up too, from 16% in 2013 to 24% in the first period including the iPhone 6 to 30% last quarter. Indeed, over half the period-on-period increase this period may stem from an increase in content requests (that is, the 107 more requests where content was obtained in the first half of the year, which was a period in which Apple got 183 more requests overall). Still, that number, 107 more successful requests for content this year than the second half of last year, seems totally disproportionate to NYC DA Cy Vance’s claim that the NYPD was unable to access the content in 74 iPhones since the iPhone 6 was established (though note, that might represent 1 request for content from 74 iPhones).

Perhaps the most interesting numbers to compare are the number of times Apple objected (because the agency didn’t have the right kind of legal process or a signed document) and the number of times Apple disclosed no data (which would include all those times Apple successfully objected — which appears to include all those in the first number — as well as those times Apple didn’t have the account, as well as times Apple was unable to hand over the data because a user hadn’t used default iCloud storage for messages. [Update, to put this more simply, the way to find the possible number of requests where encryption prevented Apple from sharing information is to subtract the Apple objected number from the no data number.] In the second half of 2013, Apple did not disclose any data 28.5% of the time. In the first half of this year, Apple did not disclose any data in just 18.6% of requests. Again, there are a lot of reasons why Apple would not turn over any data at all. But in general, cops are getting data more of the time when they give Apple requests than they were a few years ago.

More importantly, for just 65 cases in the first half of this year and 80 cases in the second half of last year did Apple not turn over any data for a request for reasons other than some kind of legal objection — and those numbers are both lower than the two half years preceding them. Each of those requests might represent hundreds of phones, but overall it’s a tiny number. So tiny it’s tough to understand where the NYPD’s 74 locked iPhones (unless they did request data and Apple actually had it).

There’s one more place where unavailable encrypted data might show up in these numbers: in the number of specific accounts for which data was disclosed. But as a percentage, what happened this year is not that different from what happened in 2013. In the second half of 2013, Apple provided some data (and this can be content or metadata) for 57.6% of the accounts specified in requests. In the first half of this year, Apple provided some data for 51.6% of the accounts specified in requests — not that huge a difference. And of course, the second half of last year, which may be an outlier, but during much of which the iPhone 6 was out, Apple provided data for 88.5% of the accounts for which LE asked for data.

Overall, it’s very hard to see where the FBI and other law enforcement agencies are going dark — though they are having to ask Apple for content more  often (which I consider a good thing).

Update: In talking to EFF’s Nate Cardozo about Apple’s most recent report, we agreed that Apple’s new category for Emergency Requests may be one other place where iPhone data is handed over (it doesn’t exist in the reports for previous half year periods). Apple defines emergency content this way:

Table 3 shows all the emergency and/or exigent requests that we have received globally. Pursuant to 18 U.S.C. §§ 2702(b)(8) and 2702(c)(4) Apple may voluntarily disclose information, including contents of communications and customer records, to a federal, state, or local governmental entity if Apple believes in good faith that an emergency involving imminent danger of death or serious physical injury to any person requires such disclosure without delay. The number of emergency requests that Apple deemed to be exigent and responded to is detailed in Table 3.

Given the scale of Apple’s other requests, though not in the scale of cloud requests comparatively, these are significant numbers, especially for the US (107) and UK (98).

Of significant note, Apple may give out content under emergency requests.

This is more likely to be a post-Riley response than an encryption response, but still notable given the number.

Under What Jurisdiction Did DHS Send Out an Army of Agents Against RentBoy?

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The NYT had a great editorial that echoes my amazement that the Department of Homeland Security sent an army of agents to take down RentBoy.com this week.

It’s somewhat baffling, though, that taking down a website that operated in plain sight for nearly two decades suddenly became an investigative priority for the Department of Homeland Security and federal prosecutors in Brooklyn. This week, the website’s founder and six employees were charged with violating federal law by facilitating paid sexual encounters.

Kelly Currie, the acting United States attorney for the Eastern District of New York, trumpeted the case against Rentboy.com, calling it an “Internet brothel” that “made millions of dollars from the promotion of illegal prostitution.” The website pulled in $10 million over the past five years, charging escorts for publishing their profiles, according to prosecutors. That’s less revenue than an average McDonald’s franchise generates.

[snip]

Prosecutors can credibly argue that the site’s operators were breaking the law. But they have provided no reasonable justification for devoting significant resources, particularly from an agency charged with protecting America from terrorists, to shut down a company that provided sex workers with a safer alternative to street walking or relying on pimps. The defendants have not been accused of exploiting sex workers, featuring minors on the website, financial crimes or other serious offenses that would warrant a federal prosecution.

DHS doesn’t seem to know why DHS was involved either. In a statement to the NYT, ICE’s spokesperson, Khaalid Walls, suggests ICE’s jurisdiction arises because this involves the illegitimate movement of people, goods and currency in domestic and foreign transactions, which suggesting the things moved were prostitutes.

Mr. Walls said: “As the investigative arm of the Department of Homeland Security, ICE is responsible for the enforcement of laws that promote the legitimate movement of people, goods and currency in domestic and foreign transactions. Our allegation with this case is that the business and its principals purported itself to be an escort service while promoting criminal acts, namely illegal prostitution.”

I’m rather curious that DHS claims jurisdiction over the movement of goods domestically. But I’m also not sure how a website constitutes moving anything.

But the claim this is about prostitution seems to conflict with ICE’s description of the bust on its website, which claims it’s a financial crime.

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As I’ve suggested, I wouldn’t be surprised if ICE used all those hard drives they seized this week to put together the money laundering case they leaked to some outlets. But they haven’t charged it yet. Which would mean they used the prostitution claim to take down an advertising site to be able to get the evidence to charge something that might be more squarely in ICE’s jurisdiction.

Add in the fact that NY DA Cy Vance — the entity that would have direct jurisdiction over prostitution headquartered in NYC — took his office off this release, and I’m genuinely confused about what DHS is doing.

None of that will mean the RentBoy defendants will be able to challenge this on jurisdictional grounds. But it does raise questions about what DHS is really doing.

Cy Vance Calls It In Dumbly on Smart Phones

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There are two things Cy Vance (writing with Paris’ Chief Prosecutor, the City of London Policy Commissioner, and Javier Zaragoza, Spain’s High Court) doesn’t mention in his op-ed calling for back doors in Apple and Google phones.

iPhone theft and bankster crime.

The former is a huge problem in NYC, with 8,465 iPhone thefts in 2013, which made up 18% of the grand larcenies in the city. The number came down 25% (and the crime started switching to Samsung products) last year, largely due to Apple’s implementation of a Kill Switch, but that still leaves 6,000 thefts a year — as compared to the 74 iPhones Vance says NYPD wasn’t able to access (he’s silent about how many investigations, besides the 3 he describes, that actually thwarted; Vance ignores default cloud storage completely in his op-ed). The numbers will come down still further now that Apple has made the Kill Switch (like encryption) a default setting on the iPhone 6. But there are still a lot of thefts, which can not only result in a phone being wiped and resold, but also an identity stolen. Default encryption will protect against both kinds of crime. In other words, Vance just ignores how encryption can help to prevent a crime that has been rampant in NYC in recent years.

Bankster crime is an even bigger problem in NYC, with a number of the worlds most sophisticated Transnational Crime Organizations, doing trillions of dollars of damage, headquartered in the city. These TCOs are even rolling out their very own encrypted communication system, which Elizabeth Warren fears may eliminate the last means of holding them accountable for their crimes. But Vance — one of the prosecutors that should be cracking down on this crime — not only doesn’t mention their special encrypted communication system, but he doesn’t mention their crimes at all.

There are other silences and blind spots in Vance’s op-ed, too. The example he starts with — a murder in Evanston, not any of the signees’ jurisdiction — describes two phones that couldn’t be accessed. He remains silent about the other evidence available by other means, such as via the cloud. Moreover, he assumes the evidence will be in the smart phone, which may not be the case. Moreover, it’s notable that Vance focuses on a black murder victim, because racial disparities in policing, not encryption, are often a better explanation for why murders of black men remain unsolved 2 months later. Given NYPD’s own crummy record at investigating and solving the murders of black and Latino victims, you’d think Vance might worry more about having NYPD reassign its detectives accordingly than stripping the privacy of hundreds of thousands.

Then Vance goes on to describe how much smart phone data they’re still getting.

In France, smartphone data was vital to the swift investigation of the Charlie Hebdo terrorist attacks in January, and the deadly attack on a gas facility at Saint-Quentin-Fallavier, near Lyon, in June. And on a daily basis, our agencies rely on evidence lawfully retrieved from smartphones to fight sex crimes, child abuse, cybercrime, robberies or homicides.

Again, Vance is silent about whether this data is coming off the phone itself, or off the cloud. But it is better proof that investigators are still getting the data (perhaps via the cloud storage he doesn’t want to talk about?), not that they’re being thwarted.

Like Jim Comey, Vance claims to want to have a discussion weighing the “marginal benefits of full-disk encryption and the need for local law enforcement to solve and prosecute crimes.” But his op-ed is so dishonest, so riven with obvious holes, it raises real questions about both his honesty and basic logic.