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In re Madison Guaranty Savings & Loan (D.C.Cir. 01/09/2004)

January 9, 2004

IN RE: MADISON GUARANTY SAVINGS & LOAN (MCDOUGAL FEE APPLICATION)


Division for the Purpose of Appointing Independent Counsels Ethics in Government Act of 1978, As Amended Division No. 94-1

Before: Sentelle, Presiding, Fay and Reavley, Senior Circuit Judges.

Per curiam.

ORDER

This matter coming to be heard and being heard before the Special Division of the Court upon the application of Susan McDougal for reimbursement of attorneys' fees and costs pursuant to section 593(f) of the Ethics in Government Act of 1978, as amended, 28 U.S.C. § 591 et seq. (2000), and it appearing to the court for the reasons set forth more fully in the opinion filed contemporaneously herewith that the petition is not well taken, it is hereby

ORDERED, ADJUDGED, and DECREED that the petition of Susan McDougal for attorneys' fees that she incurred during the investigation by Independent Counsel be denied.

ON APPLICATION FOR ATTORNEYS' FEES

Susan McDougal, who was indicted and convicted in connection with the Independent Counsel's investigation of fraudulent activity at the Madison Guaranty Savings and Loan, petitions the court for reimbursement of attorneys' fees in the amount of $345,412 under § 593(f) of the Ethics in Government Act of 1978, as amended, 28 U.S.C. §§ 591-99 (2000) (the Act). Because the Act provides for reimbursement of attorneys' fees only to individuals against whom "no indictment is brought," we hold that McDougal's application is invalid on its face.

Background

Under the unique provisions of the Ethics in Government Act, this court is empowered to award reimbursement for attorneys' fees under the terms of 28 U.S.C. § 593(f)(1). That section states:

Upon the request of an individual who is the subject of an investigation conducted by an independent counsel pursuant to this chapter, the division of the court may, if no indictment is brought against such individual pursuant to that investigation, award reimbursement for those reasonable attorneys' fees incurred by that individual during that investigation which would not have been incurred but for the requirements of this chapter.

We have often discussed the elements of entitlement to attorneys' fees under the Act, see, e.g., In re Madison Guaranty Savings & Loan (Clinton Fee Application), 334 F.3d 1119, 1123 (D.C. Cir., Spec. Div., 2003) (per curiam); In re North (Bush Fee Application), 59 F.3d 184, 188 (D.C. Cir., Spec. Div., 1995) (per curiam); In re North (Dutton Fee Application), 11 F.3d 1075, 1079 (D.C. Cir., Spec. Div., 1993) (per curiam). In most cases in which we have held the applicant not entitled to a fee award, it has been because of the failure of the applicant to prove the "but for" element. We have also held that the fees were not incurred by a "subject" of the investigation or "during" the investigation. In this rare case, we need not probe so far. On the face of her application, McDougal has admitted that she does not meet a threshold requirement for entitlement under the statute. In the words of the statute, the court may only make such award "if no indictment is brought against such individualTTTT" The second sentence of McDougal's application declares that her "participation in this matter has resulted in two multi-count felony indictmentsTTTT" On the face of the application, McDougal is not entitled to any fee award.

Analysis

There is no question that McDougal meets some of the requirements of the statute. She was a subject of the investigation, and she incurred attorneys' fees. However, as McDougal admits in her application, on August 17, 1995, the Independent Counsel obtained from a federal grand jury an indictment charging McDougal with eight counts of criminal wrongdoing and financial transactions involving Madison Guaranty and Capital Management Services, Inc., the principal matter then under investigation by the Independent Counsel. As a result of this indictment, McDougal was convicted on four of the eight counts and sentenced to two years in prison. By the words of the statute, this indictment disqualifies McDougal from the receipt of any counsel fees. Without elaboration, McDougal declares in a footnote to her fee petition that "on January 20, 2001, Ms. McDougal was granted a full and unconditional Presidential pardon in relation to the 1995 indictment and conviction." The pardon is immaterial.

We confronted this question once before. In In re North (George Fee Application), 62 F.3d 1434 (D.C. Cir., Spec. Div., 1994) (per curiam), a subject who had been indicted but pardoned sought attorneys' fees. In that case, we reviewed the effects of pardons in various circumstances throughout our constitutional history. Id. at 1435-36. We relied heavily on Knote v. United States, 95 U.S. (5 Otto) 149 (1877), a case involving a confederate supporter who had lost his property through confiscation. He was thereafter pardoned and sought restoration of his confiscated estate. The Supreme Court held that while a pardon "blots out the offense" so that guilt of it cannot thereafter affect the rights of the pardoned felon, it does not "make amends for the past." 95 U.S. (5 Otto) at 153. Therefore, the Supreme Court held, "[h]owever large TTT may be the power of pardon possessed by the President," that power is not unlimited, and "it cannot touch monies in the treasury of the United States, except as ...


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