The opinion of the court was delivered by: Joe Billy McDADE United States Senior District Judge
Monday, 18 July, 2011 02:21:15 PM
Clerk, U.S. District Court, ILCD
This case is before the Court pursuant to a writ of mandamus order issued July 1, 2011, from the Seventh Circuit to promptly rule on Defendant Hijazi's motions to dismiss (Docs. 15, 131, 174) the Indictment pending against him. Before the Court are Defendant's Motion to Dismiss Indictment (Doc. 15) and Memorandum in Support (Doc. 16), Defendant's Motion to Dismiss Second Superseding Indictment (Doc. 131) and Memorandum in Support (Doc. 180), Defendant's Motion to Dismiss Based on Sixth Amendment Right to a Speedy Trial (Doc. 174) and Memorandum in Support (Doc. 175), Memorandum of Amici Curiae in Support of Defendant's Motion to Dismiss Based on Lack of Jurisdiction (Doc. 166), the Government's Consolidated Response to Defendant Hijazi's Motions to Dismiss the Indictment (Doc. 217), and Defendant's Reply Brief in Support of his Motions to Dismiss (Doc. 222). On May 7, 2010, Magistrate Judge Cudmore issued a Report and Recommendation recommending that Defendant's Motions to Dismiss be denied (Doc. 230). Defendant filed Objections to the Report and Recommendation (Doc. 233), the Government filed a Response to Defendant's Objections (Doc. 235) and Defendant filed a Reply thereto (Doc. 238).*fn1 For the following reasons, the Report and Recommendation is AFFIRMED and Defendant's Motions to Dismiss are DENIED.
On March 16, 2005, the United States Government ("Government") charged Defendant Ali Hijazi ("Hijazi") and Jeff Mazon ("Mazon") with violations of the Major Fraud Act, 18 U.S.C. § 1031(a), the wire fraud statute, 18 U.S.C. § 1343, and the aiding and abetting statute, 18 U.S.C. § 2. (Doc. 1). On May 20, 2005, the Government filed a Superseding Indictment against Hijazi and Mazon (Doc. 21), and on August 3, 2006, it filed a Second Superseding Indictment (Doc. 59). The Second Superseding Indictment alleges the following information, taken as true for purposes of ruling on the pending motions to dismiss. See United States v. White, 610 F.3d 956, 959 (7th Cir. 2010).
In late 2001, the U.S. Army contracted with Kellogg Brown & Root Services ("KBR"), an American company, to provide property and services to the military at locations around the world, including Kuwait. (Doc. 59 ¶¶ 3-8). One service that KBR contracted to perform was to store and dispense fuel at the Aerial Port of Debarkation ("APOD") in Kuwait. (Doc. 59 ¶ 11). The APOD was the airport used by the United States military for military operations in Kuwait. (Doc. 59 ¶ 11). As was common practice for KBR, it sought out a subcontractor to perform work related to the storage and dispensation of fuel at the APOD; the subcontractor would invoice KBR for their work, which KBR would then pay and subsequently invoice the United States. (Doc. 59 ¶¶ 8, 20).
From December 2002 through June 2003, Jeff Mazon was the Procurement, Materials, and Property Manager for KBR stationed in Kuwait. (Doc. 59 ¶ 12). Accordingly, it was his duty to negotiate, execute, and administer subcontracts such as the one for fuel storage and dispensation at the APOD. (Doc. 59 ¶¶ 12, 20). On February 2, 2003, Mazon solicited bids by electronic mail from potential subcontractors for fuel tankers to store and dispense fuel for a six month period at the APOD; KBR had estimated that the cost of the subcontract would be $685,050. (Doc. 59 ¶ 20). One of the bids received by Mazon was from LaNouvelle General Trading & Contracting Co. ("LaNouvelle"), a Kuwaiti company of which Hijazi*fn2 was the managing partner. (Doc. 59 ¶¶ 13, 21). The LaNouvelle bid was approximately $1,673,100. (Doc. 59 ¶ 21). Mazon received one other bid for $1,891,890. (Doc. 59 ¶ 21).
Prior to awarding the subcontract, Mazon substantially inflated both bids. (Doc. 59 ¶ 22). He raised LaNouvelle's bid to approximately $5,521,230, and the competing bid to approximately $6,243,237. (Doc. 59 ¶ 22). On February 14, 2003, Mazon and Hijazi signed a subcontract ("Subcontract 39") under the inflated price, which was more than $4.8 million more than KBR's estimate for the work, and more than $3.8 million more than LaNouvelle's original bid. (Doc. 59 ¶ 23). Hijazi signed Subcontract 39 knowing that the price was inflated and that Hijazi would pay Mazon money for Mazon's favorable treatment of LaNouvelle. (Doc. 59 ¶ 16). Subcontract 39 indicates that the United States Government was the Owner, for whom work was being performed, and that all escorts and security monitors and fuel costs incurred in the sublet work would be covered by the United States. (Doc. 226-1 at 4-5).
From March 2003 through August 2003, Mazon and Hijazi caused LaNouvelle to submit six different invoices to KBR for payment under Subcontract 39 in the total amount of $5,521,230, which was the inflated price. (Doc. 59 ¶ 26). KBR paid LaNouvelle in full on each of these six invoices. (Doc. 59 ¶ 26). Mazon and Hijazi then caused KBR to submit four invoices to the United States Government for the costs incurred pursuant to Subcontract 39, which the Government paid in September and December of 2003. (Doc. 59 ¶ 27).
Sometime in September 2003, Hijazi gave a $1 million draft to Mazon in exchange for Mazon's favorable treatment of LaNouvelle. (Doc. 59 ¶ 28). The men also executed a promissory note as a ruse to make the $1 million payment appear to be a loan from Hijazi to Mazon. (Doc. 59 ¶ 28). However, on September 24, 2003, Hijazi sent Mazon an e-mail telling him that Hijazi considered "this whole lown [sic] (principal and interest) as totally your money . . . ." (Doc. 59 ¶ 29). On October 1, 2003, Mazon tried unsuccessfully to deposit the $1 million in a U.S. bank. (Doc. 59 ¶ 30). On October 9, 2003, Hijazi sent Mazon a second e-mail, instructing him on how to deposit the money. (Doc. 59 ¶ 31). Hijazi told Mazon to open an offshore account with three different financial institutions and to deposit around $300,000 in each, under the auspices that it was from "consultancy work, business associates [sic], salaries abd [sic] bonuses, or any other reasoning." (Doc. 59 ¶ 31). On October 28, 2003, Mazon again attempted to deposit the $1 million at a second financial institution in the United States. (Doc. 59 ¶ 32).
In November 2003, a KBR investigator questioned Hijazi about Subcontract 39. (Doc. 59 ¶ 33). The next day, Hijazi sent a third e-mail to Mazon stating "Please when you call your ex-friends in Kuwait [sic] please be very careful [sic] on what you say." (Doc. 59 ¶ 33). Mazon opened this e-mail while he was in the United States. (Doc. 59 ¶ 33).
Shortly after the original Indictment was returned against him, Hijazi voluntarily surrendered himself to authorities in Kuwait. (Doc. 133 at 2). However, he was quickly released and his posted bond was returned to him. (Doc. 133 at 2). On May 3, 2005, Hijazi, via American counsel, filed his first Motion to Dismiss the Indictment (Doc 15), claiming that his prosecution violated principles of extraterritoriality, international law, and due process. (Doc. 16). Rather than substantively respond to his Motion to Dismiss, the Government filed a Motion to Strike (Doc. 20), arguing that because Hijazi had not yet appeared for arraignment, the Court should not entertain his motion. After receiving a Report and Recommendation from Magistrate Judge Gorman (Doc. 30), this Court determined that it would not strike Hijazi's Motion to Dismiss, however it would defer its ruling until such time as Hijazi appeared for arraignment. (Doc. 36).*fn3
Approximately one year later, on August 3, 2006, the Government filed the Second Superseding Indictment against Hijazi. (Doc. 53). On December 21, 2007, Hijazi filed a Motion to Dismiss the Second Superseding Indictment (Doc. 131). In this Motion, Hijazi raised the same three objections as he did to the original Indictment, and inserted two additional arguments: 1) that the Defense Cooperation Agreement between the United States and Kuwait barred his prosecution, and 2) that his case should be dismissed due to lack of prosecution. (Doc. 180). Again, the Government decided not to respond to the merits of Defendant's arguments and instead filed a Motion to Stay Ruling and Hold in Abeyance (Doc. 136). On September 4, 2008, this Court entered another Order in which it indicated that it would not consider Defendant's motions to dismiss until such time as he appeared for arraignment (Doc. 178).*fn4
On December 11, 2009, the United States Court of Appeals for the Seventh Circuit granted Hijazi a writ of mandamus, and ordered this Court to rule upon Hijazi's pending motions to dismiss. (Doc. 213).*fn5 Although Hijazi had invited the Seventh Circuit to also rule upon the merits of his motions, the Court expressly declined to do so. In re Hijazi, 589 F.3d 401, 403 (7th Cir. 2009). This Court referred Defendant's Motions to Magistrate Judge Cudmore, who entered a Report and Recommendation recommending that they be denied. (Doc. 230). Hijazi timely filed Objections (Doc. 233), to which the Government responded (Doc. 235), and the matter is now ripe for review by this Court. In his Objections, Hijazi claims that the Report and Recommendation erred for four main reasons: 1) the R&R erred in concluding that the Court has jurisdiction over Hijazi; 2) the R&R erred in construing the Major Fraud Act and the wire fraud statute to apply extraterritorially to Hijazi; 3) the R&R erred in finding that the Defense Cooperation Agreement does not bar this prosecution; and 4) the R&R erred in concluding that the long pre-trial delay does not violate Hijazi's right to a speedy trial. (Doc. 233).*fn6
A district court reviews de novo any portion of a Magistrate Judge's R&R to which an objection has been made. FED. R. CRIM. P. 59(b)(3). "The district judge may accept, reject, or modify the recommendation, receive further evidence, or resubmit the matter to the magistrate judge with instructions." Id. Accordingly, the Court will address each of Hijazi's objections in turn.
I.This Court's Jurisdiction Over Hijazi
Hijazi argues that the R&R erred in finding that the Court has jurisdiction over him because: 1) he has minimal contacts with the United States and the contacts of Mazon may not be imputed to him; 2) jurisdiction violates his due process rights; and 3) jurisdiction is precluded by the dictates of international law. As will be discussed below, the Court finds that the statutes under which Hijazi has been charged are to apply extraterritorially, such that none of his conduct needed to take place within the United States for jurisdiction to be proper. See United States v. Moncini, 882 F.2d 401, 403 (9th Cir. 1989) ("Jurisdiction is proper if the offense, or part of the offense, occurred within the United States . . . Alternately, jurisdiction may be proper even if no part of the offense occurred in the United States, if grounds for exercising extraterritorial jurisdiction are present." (emphasis added)). Further, the Court finds that due process concerns are nearly identical to international law concerns, both of which require for jurisdictional purposes that Hijazi's conduct is alleged to have had, or was intended to have had a substantial effect within the United States, or was directed against the security of the state. Therefore, all three of these questions can be determined by an analysis of whether Hijazi's conduct was such that he can fairly be prosecuted pursuant to international law.*fn7
In his Motion to Dismiss the Second Superseding Indictment, Hijazi argues that the exercise of criminal jurisdiction over him would violate due process. (Doc. 180 at 27). Hijazi bases his initial argument upon the due process standard created by the Supreme Court for civil cases in Ashai Metal Indus. Co. v. Superior Court, 480 U.S. 102, 112 (1987). Accordingly, he claims that "for the exercise of jurisdiction over a foreign defendant to comport with due process, there must be a 'substantial connection between the defendant and the forum' based on 'an action of the defendant purposefully directed toward the forum state.'" (Doc. 180 at 28 (quoting Ashai, 480 U.S. at 112)). While Hijazi recognizes that this standard had only been applied in the civil context, he claims that it could be adopted in his criminal case, because, if anything, "Due Process should provide greater protection in this context." (Doc. 180 at 28). Hijazi also relies on civil cases to argue that he did not purposefully direct any actions towards the United States, and thus that it cannot establish jurisdiction over him.*fn8
In its Consolidated Response, the Government counters that the appropriate due process analysis in a criminal context such as this is whether the extraterritorial prosecution of a foreign defendant is "arbitrary or fundamentally unfair." (Doc. 217 at 39 (quoting United States v. Yousef, 327 F.3d 56, 111-12 (2d Cir. 2003)). The Government goes on to point out that different courts have interpreted this language differently, with the Second and Ninth Circuits applying a test of whether there is a "sufficient nexus" between the defendant and the United States, Yousef, 327 F.3d at 111-12; United States v. Davis, 905 F.2d 245, 248-49 (9th Cir. 1990), and others looking to principles of international law, United States v. Cardales, 168 F.3d 548, 553 (1st Cir. 1999); United States v. Martinez-Hidalgo, 993 F.2d 1052, 1056 (3rd Cir. 1993). (Doc. 217 at 39).
Neither the Seventh Circuit nor the Supreme Court have explicitly addressed due process requirements in the context of criminal jurisdiction over a foreign defendant. However, in its Opinion in this case, the Seventh Circuit indicated that this Court should look to principles of international law to determine whether Hijazi's contacts with the United States were sufficient to support his prosecution. In re Hijazi, 589 F.3d at 411-12. After examining the alleged contacts between Hijazi and the United States, the Seventh Circuit posited: "Critical to the decision of whether these contacts are adequate to support the U.S. proceeding is the question of 'how much is enough?'" Id. at 412. The Court immediately went on to say, "The Restatement (Third) of Foreign Relations Law . . .. takes the position that 'subject to § 403, a state has jurisdiction to prescribe law with respect to . . . conduct outside its territory that has or is intended to have substantial effect within its territory.'" Id. Given this language by the Seventh Circuit and the fact that numerous other courts have applied principles of international law to the determination of whether due process was satisfied, the Court finds the appropriate due process analysis in this case to be performed under the rubric of international law.*fn9 Thus, it will address Hijazi's due process and international law concerns at the same time.
B.International Law Concerns
i.Substantial, Direct, Foreseeable Effect upon ...