[00:00:02] Speaker 00:
May it please the Court, Marcus Burrowsaw here for Mr. Baddawi, the defendant petitioner below and the appellant here.

[00:00:08] Speaker 00:
I'd like to reserve two minutes of argument for rebuttal.

[00:00:11] Speaker 02:
Very well.

[00:00:12] Speaker 01:
We tried talking to the mic a little more.

[00:00:15] Speaker 00:
Sure, Your Honor.

[00:00:15] Speaker 00:
Thank you.

[00:00:16] Speaker 00:
As it stands today, this is a comparatively easy case for the Court for two reasons.

[00:00:21] Speaker 00:
First, Mr. Badawi has demonstrated conclusively that he's factually innocent of the financial aid fraud count.

[00:00:27] Speaker 00:
The facts demonstrating his innocence are undisputed, and as a matter of law, he's innocent of that count.

[00:00:34] Speaker 00:
That's an easy issue.

[00:00:36] Speaker 01:
But the second- Well, that doesn't sound so easy to me.

[00:00:40] Speaker 00:
I know my friend disagrees, but the second reason why this is an easy case is that Mr. Badawi was never given a hearing on non-frivolous claims of ineffective assistance of counsel that infect his 30-year joint stat max consecutive sentence in a variety of ways.

[00:00:59] Speaker 00:
And so I'll start with the conversion issue, the misapplication fraud count and his innocence of that.

[00:01:06] Speaker 01:
Well, first of all, let me just say that we'll give you some more time.

[00:01:11] Speaker 01:
Because we've granted the COA, there are more issues than would appear.

[00:01:14] Speaker 01:
So don't get too bound up in the time.

[00:01:16] Speaker 01:
But what exactly kind of actual innocence claim are you making?

[00:01:28] Speaker 01:
Are you making a schlup actual innocence?

[00:01:33] Speaker 01:
You're making an actual, actual innocence.

[00:01:35] Speaker 00:
We're making two related claims, Your Honor.

[00:01:39] Speaker 00:
The first is a freestanding, he is factually innocent of the financial aid fraud count.

[00:01:46] Speaker 01:
But relatedly... And do we know that that's... I mean, there is no Supreme Court law saying that on habeas, that kind of actual innocence is necessarily cognizable.

[00:02:01] Speaker 01:
Is that right?

[00:02:02] Speaker 00:
Well, the Supreme Court has said that someone can bring a claim if they demonstrate that the act for which they were convicted, the law doesn't make criminal.

[00:02:13] Speaker 00:
That comes from Davis.

[00:02:14] Speaker 00:
And that is this type of claim.

[00:02:17] Speaker 03:
But doesn't this claim of actual innocence relies on us adopting the definition of

[00:02:27] Speaker 03:
conversion that you espouse.

[00:02:31] Speaker 03:
The government espouses that there's several different definitions of conversion, one of which doesn't require that it be property of another.

[00:02:41] Speaker 03:
And the district judge here, well, the Ninth Circuit has never held that conversion is an element of this crime.

[00:02:53] Speaker 03:
And the district court found that misapplied

[00:02:58] Speaker 03:
had its, that conversion wasn't required, that it was misapplication, and that misapplication had its ordinary definition, and under that he misapplied.

[00:03:15] Speaker 03:
So don't you require us to hold that conversion is an element

[00:03:22] Speaker 03:
of this crime, and that conversion is only defined as using the property of another.

[00:03:35] Speaker 03:
And your argument, as I understand it, is the Pell Grant money was his property.

[00:03:40] Speaker 03:
He may have misused it, but he didn't convert it since he didn't take the property of another.

[00:03:48] Speaker 00:
To your question on whether the court has to adopt conversion as an element, the answer is yes, because Bates requires this court to say that.

[00:03:56] Speaker 00:
And the government conceded, in both its answering brief and in Bates, that conversion is an element of this crime.

[00:04:04] Speaker 02:
Should there have been a jury instruction on that?

[00:04:07] Speaker 00:
Absolutely.

[00:04:08] Speaker 00:
And for exactly the reason that Judge Bolton points out, that misapplication and conversion don't, in the ordinary sense, mean the same thing.

[00:04:15] Speaker 02:
But what's the definition?

[00:04:17] Speaker 00:
The definition is the one that the Supreme Court gave in Bates, which is that this statute, 1097A, requires unauthorized control or dominion that interfered with the rights of the fund's true owners.

[00:04:35] Speaker 00:
So the ownership of the funds is critical to whether or not conversion occurred, and the court is required to find that as well, because it comes from Bates, the Supreme Court's only case analyzing the elements of this statute.

[00:04:52] Speaker 00:
So as a matter of law, those are the elements, and I don't take my friend on the other side to really meaningfully dispute that anymore.

[00:05:01] Speaker 01:
didn't really address this question directly.

[00:05:04] Speaker 01:
It said that this is what the Seventh Circuit said, and it seemed to say that it wasn't really an issue in the case, because the issue was in chat.

[00:05:10] Speaker 01:
But where do you think Bates actually said that conversion was an element?

[00:05:14] Speaker 00:
Well, Bates says that this statute survives scrutiny and affirms the Seventh Circuit because of this conversion element that the Seventh Circuit described.

[00:05:25] Speaker 00:
So it's true that Bates is not confronting a student

[00:05:31] Speaker 00:
making a purchase we disagree with.

[00:05:33] Speaker 00:
Those weren't the facts from the Seventh Circuit, but the reasoning of the case depends upon their saying, this is saved, this is not improper because the intent of the crime requires you intend to interfere with somebody else's property.

[00:05:49] Speaker 03:
Let's assume for a minute that we don't agree that Bates holds that conversion with your definition is an element

[00:06:00] Speaker 03:
And yes, the Seventh Circuit, in a context where somebody misused somebody else's money, did hold that.

[00:06:13] Speaker 03:
But the Ninth Circuit, if Bates isn't controlling, the Ninth Circuit gets to decide whether conversion is or is not an element, doesn't it?

[00:06:26] Speaker 00:
If Bates is not controlling, then it would be, it may be an open question before this court, but every other circuit court to address it has ruled the same way, consistent with Bates.

[00:06:36] Speaker 03:
And if- Didn't those cases arise in a totally different context?

[00:06:40] Speaker 03:
It wasn't the grantee of the Pell Grant misapplying the money.

[00:06:48] Speaker 03:
It was the person who came in to

[00:06:52] Speaker 03:
possession of the grantees' money, who converted it to their own use.

[00:07:02] Speaker 00:
Those other cases like Kammer out of the 11th Circuit, they arise in a situation that would normally be more egregious type of misapplication.

[00:07:11] Speaker 00:
Like in Kammer, the defendant was a school administrator who was a trustee over the Title IV funds directly from the Department of Education.

[00:07:21] Speaker 00:
And Kammer held that doesn't qualify, that the moving of those funds into an operating account

[00:07:27] Speaker 00:
that was no longer subject to direct supervision and control by Department of Education because it wasn't the trust fund, that movement of the funds wasn't conversion and therefore wasn't misapplication.

[00:07:38] Speaker 00:
For Mr. Badawi, by contrast, the money has been dispersed at the point that it reaches his account three separate times from the Department of Education, and he's in no way a trustee over them.

[00:07:50] Speaker 01:
Let me ask a question about that.

[00:07:51] Speaker 01:
The account was actually

[00:07:56] Speaker 01:
separate discrete account set up for the receipt of these funds.

[00:08:05] Speaker 01:
So how do we know that it was actually an account that he could use for anything he wanted?

[00:08:12] Speaker 00:
Well, you know that because, and the record demonstrates, he repeatedly pulls funds out in cash, and I don't think the government disputes- Well, right, he pulled it out in cash, but the notion that it was unrestricted ownership

[00:08:32] Speaker 01:
It's not so clear, given the odd character of this account.

[00:08:39] Speaker 01:
As I remember, it was a proprietary company that set up this account for the purpose of receipt of Pell funds.

[00:08:47] Speaker 00:
Right.

[00:08:48] Speaker 00:
And it's a third party called higher one.

[00:08:51] Speaker 00:
And I guess insofar as the court believes that those factual distinctions matter, it has to reverse for an evidentiary hearing.

[00:09:00] Speaker 00:
Because we're at least raising a non-fivolous claim that factually he had complete dominion and control over the funds.

[00:09:05] Speaker 02:
Well, speaking of raising the claim, this was not on direct appeal.

[00:09:09] Speaker 02:
This conversion theory was not raised on direct appeal, correct?

[00:09:13] Speaker 02:
Correct.

[00:09:14] Speaker 02:
So why isn't it procedurally barred?

[00:09:15] Speaker 00:
Because the reason it was not raised before was, and this goes to the second point, and why I said there are two separate related claims, counsel was ineffective in never uttering a word about this.

[00:09:28] Speaker 02:
But if the Ninth Circuit has not clearly said so about the conversion theory, and the Supreme Court, although you may disagree, has not specifically indicated as much, then how was that clearly established?

[00:09:44] Speaker 02:
that he would need to raise that?

[00:09:47] Speaker 00:
Well, two answers.

[00:09:49] Speaker 00:
And first, I emphasize, I don't think the government contends conversion is not an element of this crime.

[00:09:56] Speaker 00:
But second, this court has never said that there's sort of a, to borrow from section 1983 jurisprudence, that there's like a clearly established qualified immunity rule for counsel.

[00:10:09] Speaker 00:
the prevailing professional norms are a mixed question that we should be able to develop at an evidentiary hearing.

[00:10:16] Speaker 00:
And this came up in the context of, oh my gosh, I see my time has expired.

[00:10:21] Speaker 00:
This came up in the context of Mr. Badawi's double jeopardy claim before the district court, where at 1ER 18, the district court said,

[00:10:29] Speaker 00:
Mr. Badawi in his petition raises a claim that he was subject to double jeopardy.

[00:10:34] Speaker 00:
And there is persuasive multiple published appellate decisions saying that he was subject to double punishment in violation of the double jeopardy clause.

[00:10:43] Speaker 00:
But those circuit cases happened to arise outside of the Ninth Circuit, because the factual circumstances presented here hadn't arisen in the Ninth Circuit.

[00:10:51] Speaker 00:
So although there are cases in other circuits saying he was subject to double jeopardy, it's an open question here.

[00:10:57] Speaker 00:
And the district court said,

[00:10:59] Speaker 00:
You may be right about the double jeopardy clause, but prevailing professional norms don't require that counsel research cases in other circuits.

[00:11:07] Speaker 00:
And that can't be right as a matter of law, especially in a case like this where

[00:11:13] Speaker 00:
where we're not allowed to explore the facts.

[00:11:15] Speaker 01:
What is true is that the, first of all, Bates for example, this is an example, it says under the Seventh Circuit's construction 1097A catches only the transgressor who intentionally exercises unauthorized dominion over federally insured student loan funds for his own benefit and for the benefit of a third party.

[00:11:38] Speaker 01:
That definition does not say anything about who has the ownership, and it seems to me applies here.

[00:11:46] Speaker 01:
And then there's the Morissette definition, which seems to apply here.

[00:11:51] Speaker 01:
The government's essential argument is, yes, it's conversion, but it means something like what I just read, and it doesn't depend on the government retaining an ownership interest.

[00:12:02] Speaker 00:
To that point, Your Honor, when Bates uses, and the quote you just read used the phrase unauthorized dominion, that's a reference to other places in the same decision where the court talks about what is authorized and what is unauthorized.

[00:12:15] Speaker 00:
And what is unauthorized is any action that affects the true owner's property rights.

[00:12:22] Speaker 00:
That's what makes the exercise of dominion improper.

[00:12:24] Speaker 00:
And this court's cases, the cases the government

[00:12:27] Speaker 00:
government sites that talk about conversion in the context of other statutes illustrate the same thing.

[00:12:32] Speaker 00:
And I know I won't belabor that.

[00:12:34] Speaker 01:
Paul Morrison, for example, I mean, does in fact have language that seems to suggest that it's not necessarily the full common law tort definition.

[00:12:46] Speaker 01:
And it includes essentially disobeying the conditions on your

[00:12:58] Speaker 01:
custody of these funds, and without much caring about where the technical property right is.

[00:13:08] Speaker 00:
Two responses to that.

[00:13:10] Speaker 00:
First, the government doesn't cite any case in the Ninth Circuit saying that funds under circumstances like this are still under their supervision and control such that they would ever qualify as conversion.

[00:13:22] Speaker 00:
Because they couldn't audit Mr. Badawi.

[00:13:25] Speaker 00:
They couldn't demand an accounting of the spending from Mr. Badawi.

[00:13:28] Speaker 00:
They couldn't do any of those things.

[00:13:29] Speaker 01:
And how do we know any of that?

[00:13:30] Speaker 00:
What's that?

[00:13:31] Speaker 01:
How do we know that they couldn't demand an accounting?

[00:13:34] Speaker 00:
Well, because the use of- I would suspect they could.

[00:13:38] Speaker 01:
You think they couldn't?

[00:13:40] Speaker 00:
I don't think they could, and the government has never claimed otherwise.

[00:13:43] Speaker 00:
Their ability to audit applies to school administrators, and that's really who the target of this statute was to begin with.

[00:13:51] Speaker 00:
But even there, when you look at CAMER, which I acknowledge is not this circuit's case, but in CAMER, the

[00:13:58] Speaker 00:
Court says, even for that school administrator who's a trustee of the funds and has to submit to audits and has to report the use of the funds, there still isn't sufficient supervision and control over these funds.

[00:14:12] Speaker 01:
Well, Mr. Bajawi left school, he has to give the money back, right?

[00:14:16] Speaker 00:
If he, I think if he left mid-semester, he would be subject to the reimbursement provisions for part of the Pell Grant money.

[00:14:25] Speaker 01:
But- Well, that's a strange sort of ownership then.

[00:14:30] Speaker 00:
No, it's exactly the type of debtor-creditor relationship that the court confronted in Lawson, where the bank sends, they send you a bill.

[00:14:43] Speaker 00:
They say, hey, you owe us a little bit of money.

[00:14:45] Speaker 00:
That kind of debt,

[00:14:46] Speaker 00:
doesn't entitle them to claw it back.

[00:14:49] Speaker 00:
It doesn't entitle them to demand an accounting before the money is spent.

[00:14:56] Speaker 00:
It's a debt.

[00:14:57] Speaker 00:
But a debt is not the same as ownership.

[00:14:59] Speaker 00:
Otherwise, like any creditor would continue to be able to claim conversion when someone they loaned money

[00:15:07] Speaker 00:
used it in a way that they disapproved of.

[00:15:09] Speaker 00:
And no court has ever said that.

[00:15:11] Speaker 03:
So you don't think that if a Pell Grant recipient withdrew from school during the semester that the Department of Education couldn't get the money back from a third party like this higher one if it was still in the account?

[00:15:31] Speaker 00:
No, I don't think so.

[00:15:33] Speaker 00:
And there's no evidence to suggest they could.

[00:15:34] Speaker 00:
At that point, the money has been dispersed to three separate entities down to Mr. Badawi.

[00:15:39] Speaker 00:
It is a grant.

[00:15:42] Speaker 00:
And they could send a bill for reimbursement.

[00:15:45] Speaker 00:
That's what the regulations permit them to do.

[00:15:47] Speaker 00:
They could try to enforce that by submitting it to creditors and things.

[00:15:53] Speaker 00:
And the reason Congress drafted the statute

[00:15:56] Speaker 00:
not to allow that, not to treat every student's purchase as conversion is because

[00:16:05] Speaker 00:
It's not a crime to, the definition of misapplication becomes too amorphous otherwise.

[00:16:11] Speaker 00:
And that's really what Bates is about too, because it's not just about the propriety of a student's use of money.

[00:16:17] Speaker 00:
The educational purposes standard that the witness, Ms.

[00:16:21] Speaker 00:
Mendoza, testified to in Mr. Badawi's case, that doesn't arise from the statute anywhere.

[00:16:26] Speaker 00:
But if it's correct, it would encompass all manner of uses of grant money.

[00:16:31] Speaker 03:
You're not seriously contending that buying somebody else an airplane ticket to go to the Middle East was an authorized use of his Pell Grant?

[00:16:42] Speaker 00:
I don't know what the court means by authorized, because- Was it an allowable?

[00:16:46] Speaker 03:
Didn't he sign something that said, I promise I'm going to only use this money for my legitimate educational expenses?

[00:16:55] Speaker 03:
That may not be exactly what it said, but it essentially said that.

[00:17:01] Speaker 00:
The contours of that document that he signed, those don't exist within section 1097A, right?

[00:17:08] Speaker 00:
That's a separate agreement that he's made in applying for the money before it's been dispersed.

[00:17:13] Speaker 00:
And there's no allegation that he knew at that time that he intended to use it in a contrary way.

[00:17:19] Speaker 00:
It's not that type of misrepresentation fraud case.

[00:17:22] Speaker 00:
There's no allegation or evidence that when he applied for Pell Grant funds, he was lying or misleading anybody.

[00:17:29] Speaker 00:
And so the question becomes, what does that prior statement, when applying for a grant, mean about future uses of the funds?

[00:17:38] Speaker 00:
And if it reaches the plane ticket, legally, within the context of 1097A, it would also reach any student's purchase of beer that's not for educational purposes.

[00:17:49] Speaker 00:
It would reach any type of purchase that a jury later thinks they knew was improper.

[00:17:55] Speaker 02:
Council, hold on.

[00:17:57] Speaker 02:
Judge Berzan, any additional questions?

[00:18:00] Speaker 01:
No, unless there's anything you want to say about any of the other issues very quickly.

[00:18:05] Speaker 00:
Quickly, on the ineffective assistance and the sentencing, the court should remand for an evidentiary hearing on the effect of ineffective assistance, and there are related claims.

[00:18:18] Speaker 00:
The core claim is about

[00:18:20] Speaker 00:
whether these sentences at the statutory maximum should have run consecutive.

[00:18:25] Speaker 00:
And the district court ruled against Mr. Badawi on the government here argues that the crime was so heinous that the sentence would have been the same and the sentencing counsel's advocacy

[00:18:40] Speaker 00:
was great in a lot of other ways.

[00:18:42] Speaker 00:
Because we were denied an evidentiary hearing, we were never allowed to contradict those.

[00:18:46] Speaker 00:
And Mr. Badawi had claims that trial counsel failed to bring other critical arguments, like the double jeopardy argument below, and they failed to present mitigation that was obviously available.

[00:18:58] Speaker 00:
And today is the first hearing Mr. Badawi has had in his case since his original direct appeal.

[00:19:03] Speaker 00:
It's the first time his family have been able to come to a courtroom.

[00:19:05] Speaker 00:
That's not the way Section 2255 says these petitions are supposed to work.

[00:19:10] Speaker 02:
Nothing further.

[00:19:11] Speaker 02:
All right, thank you.

[00:19:14] Speaker 02:
I'll give you a minute afterwards.

[00:19:16] Speaker 02:
Thank you.

[00:19:21] Speaker 02:
Morning council.

[00:19:22] Speaker 04:
Good morning.

[00:19:23] Speaker 04:
May it please the court.

[00:19:24] Speaker 04:
Carly Palmer on behalf of the United States.

[00:19:27] Speaker 04:
This court should decline the defendant's invitation to create a circuit split with the first, fifth, and second circuits sentencing law, and to further find that his counsel was constitutionally ineffective for putting forth that outlier claim at sentencing.

[00:19:44] Speaker 03:
Could we go to conversion first?

[00:19:45] Speaker 04:
Yes, Your Honor, happily.

[00:19:47] Speaker 03:
I'm not, the district judge

[00:19:51] Speaker 03:
when he gave the instructions, said misapplies means misapplies in its common, ordinary meaning.

[00:20:00] Speaker 03:
Why is the government conceding conversion as an element?

[00:20:05] Speaker 04:
So the government conceded conversion as an element in the Bates case, and we are staying consistent with that position.

[00:20:12] Speaker 04:
But our definition of conversion is very different from defendants.

[00:20:15] Speaker 03:
I know it's different.

[00:20:20] Speaker 03:
Are we compelled by Bates to find that conversion is an element?

[00:20:25] Speaker 04:
Not by Bates, but I think Morissette is helpful here.

[00:20:28] Speaker 04:
And Morissette defines criminal conversion as being incredibly broad.

[00:20:32] Speaker 04:
It talks about conversion being the thing that sort of fills in the gaps when you look at .

[00:20:36] Speaker 01:
.

[00:20:37] Speaker 01:
.

[00:20:37] Speaker 01:
But that's not what Judge Bolton's asking.

[00:20:38] Speaker 01:
She's asking .

[00:20:39] Speaker 01:
.

[00:20:41] Speaker 01:
.

[00:20:41] Speaker 01:
I think she's asking if we're not bound by Bates.

[00:20:47] Speaker 01:
you nonetheless appear to be conceding that conversion in some sense is an element rather than the plain meaning of misapplied.

[00:20:55] Speaker 01:
It seems that here what we know is that there were conditions as to what he was allowed to spend this money on and he spent it on other things.

[00:21:04] Speaker 01:
That sounds like misapplied by any ordinary language.

[00:21:10] Speaker 01:
Nonetheless, the government agrees that this requires conversion in some sense.

[00:21:18] Speaker 01:
And certainly, conversion usually, at least in most cases, seems to, and traditionally under the common law, does mean converting somebody else's property to your own use.

[00:21:39] Speaker 04:
I don't think that's how Morissette describes criminal conversion.

[00:21:44] Speaker 04:
It talks about knowing conversion adds significantly to the range of protection of government property without interpreting it to punish unwitting conversions.

[00:21:54] Speaker 04:
And it talks about how conversion helps to fill in the gaps between all these different kinds of fraud crimes that Congress was trying to prosecute.

[00:22:02] Speaker 04:
And they wanted to make sure fraudsters couldn't fall through what they called gaps and crevices.

[00:22:09] Speaker 03:
We just say misapplies means misapplies, and it's common and ordinary meaning, and not go down this conversion path.

[00:22:18] Speaker 03:
Yes, Your Honor.

[00:22:19] Speaker 04:
And I think the- But that's not what you've conceded.

[00:22:22] Speaker 04:
It's not what we conceded in our briefs.

[00:22:24] Speaker 04:
Obviously, this Court gets to do what it wants.

[00:22:27] Speaker 04:
I think that either way, the government wins.

[00:22:30] Speaker 01:
I do believe- There's a reason why I was curious as to where this whole idea came from.

[00:22:35] Speaker 01:
that misapplied means conversion.

[00:22:37] Speaker 01:
And it goes back to the 19th century case, which was very uncomfortable with the word misapplied because it had no common law meaning.

[00:22:44] Speaker 01:
And it would seem, in the particular case, it seemed to apply to a maladministration of the money.

[00:22:51] Speaker 01:
And they said that we don't want to, so we're essentially going to read, it was like something like a vagueness decision in the bank.

[00:23:01] Speaker 01:
misapplication context.

[00:23:03] Speaker 01:
And in that context, it makes some sense.

[00:23:06] Speaker 01:
So it was really just quiet with the lack of any legal background for this language.

[00:23:14] Speaker 01:
So why isn't that a good reason right there?

[00:23:17] Speaker 04:
It may well be.

[00:23:18] Speaker 04:
And I do think it is straightforward.

[00:23:19] Speaker 04:
The Black's law definition is straightforward.

[00:23:21] Speaker 04:
The jury instruction here was straightforward.

[00:23:23] Speaker 04:
And the facts here were straightforward.

[00:23:24] Speaker 04:
Defendant was given a federal grant to pay towards educational costs and attendant living costs.

[00:23:30] Speaker 04:
He used it to buy a plane ticket for someone else to go fly to fight for ISIS against US-led coalitions.

[00:23:36] Speaker 04:
That's clearly a misapplication, regardless of whether there's conversion or not.

[00:23:41] Speaker 02:
Shouldn't that have gone to a jury?

[00:23:44] Speaker 02:
Shouldn't there have been a jury instruction?

[00:23:46] Speaker 02:
It's the same question I asked your friend here on the other side.

[00:23:50] Speaker 02:
Shouldn't there have been a jury question that goes to them, that they then make a determination on this critical element?

[00:23:58] Speaker 04:
No, Your Honor, and that's because conversion is this broad definition that includes common sense misapplication.

[00:24:06] Speaker 02:
Well, that's the government's proposed definition, but which definition are we going to take?

[00:24:11] Speaker 04:
I believe it should be take the Supreme Court's definition in Morissette.

[00:24:14] Speaker 04:
You know, we disagree that the Supreme Court adopted this much narrower Seventh Circuit interpretation and Bates talks about the Seventh Circuit's construction, which it wouldn't have needed to do if it was adopting that definition.

[00:24:24] Speaker 04:
And even the Seventh Circuit cases cited by the defense, Bates and Christofich, describe Morissette as a seminal case when it comes to describing this.

[00:24:35] Speaker 02:
And the government's definition, there's no control element then in the government's definition, correct?

[00:24:41] Speaker 02:
No.

[00:24:41] Speaker 02:
If that's the case, though, can't the government's own definition then lead to these crazy results where someone's going to be prosecuted for using some of their money for Netflix?

[00:24:52] Speaker 04:
No, Your Honor.

[00:24:53] Speaker 04:
And that's because of mens rea.

[00:24:54] Speaker 04:
Mens rea is the primary protection for defendants against government overreach.

[00:24:59] Speaker 04:
That's discussed by Morissette when they talk about how you would have to have the right mens rea to be prosecuted for this.

[00:25:06] Speaker 04:
And it's clearly embraced by the jury instructions here.

[00:25:08] Speaker 04:
The jury was told you have to find that he did this knowingly and willfully, that he knew he was breaking the law when he did this.

[00:25:14] Speaker 04:
That was very clear in the jury instructions.

[00:25:16] Speaker 04:
It was argued that way by the prosecutor.

[00:25:18] Speaker 04:
There was a five-minute closing argument just on this count where the prosecutor walked through all four elements and talked about all the evidence that defendants' misuse of this money wasn't inadvertent, wasn't innocent, that it was purposeful.

[00:25:31] Speaker 04:
You know, buying food to support your living costs when you're in school, that's something that's covered by a Pell Grant.

[00:25:38] Speaker 04:
You know, buying something for somebody else certainly isn't.

[00:25:42] Speaker 04:
And you can tell

[00:25:45] Speaker 04:
that there is this, even if you were to buy the defendant's argument about conversion, we would still win because there is a regulatory scheme here that extends all the way to the student.

[00:25:58] Speaker 04:
So if you look at the record at pages 235 and 237, there's an agreement, a direct agreement between the government and the student.

[00:26:07] Speaker 04:
This is what these funds are going to be used for.

[00:26:09] Speaker 04:
You only get to use these funds for education and the things that support that education, things like your living costs, things like food.

[00:26:16] Speaker 04:
And we're going to put these funds in a separate account with a card

[00:26:20] Speaker 04:
that you can use.

[00:26:20] Speaker 04:
And that's going to help us track things.

[00:26:22] Speaker 04:
And there's a comprehensive regulatory scheme that reaches the college, that reaches the third-party distributor, and reaches the student.

[00:26:30] Speaker 04:
So the student can be held responsible.

[00:26:32] Speaker 01:
But he had taken all the money out of that account and put it in his own bank account and paid his tuition from that?

[00:26:39] Speaker 04:
He could have, Your Honor, yes.

[00:26:41] Speaker 01:
That would have been

[00:26:42] Speaker 04:
It would have been okay because you would still be using it as an authorized use.

[00:26:45] Speaker 01:
I understand that, but I'm trying to focus on the character of the account.

[00:26:49] Speaker 01:
It's not that you have to pay the expenses out of the account.

[00:26:53] Speaker 04:
You don't have to pay them directly out of the account.

[00:26:55] Speaker 04:
You can certainly pull out cash to pay them otherwise.

[00:26:57] Speaker 01:
I have two other questions.

[00:27:01] Speaker 01:
With regard to Morissette, what other cases or situations have used the Morissette definition?

[00:27:10] Speaker 04:
In Drean, this court's decision found that conversion encompasses the use of property placed in one's custody for a limited purpose in an unauthorized manner or to an authorized extent.

[00:27:22] Speaker 04:
And in Thorderson, this court found that conversion was even broader than stealing because it could be accomplished without a wrongful taking.

[00:27:30] Speaker 04:
And in Azita, this court talked about the statute's broad purpose to provide broad protection for Title IV financial aid funds

[00:27:39] Speaker 04:
entrusted to private educational institutions.

[00:27:41] Speaker 04:
So that's similar to the broad legislative purposes discussed in, more is that what we're talking about, wanting to make sure that we're capturing all of these different fraudulent crimes.

[00:27:50] Speaker 01:
I mean, to go back to Britain, which was the 19th century case which generated this to begin with, what they were concerned about is that there was, there were a lot of bank regulations that said you have to use, you know, you can't do this and you can't do that and so on.

[00:28:08] Speaker 01:
On that definition, would a violation by a bank of bank regulations become conversion?

[00:28:16] Speaker 01:
No, Your Honor.

[00:28:17] Speaker 04:
And that's because of the mens rea requirement, which Morissette discussed.

[00:28:20] Speaker 04:
It has to be new.

[00:28:20] Speaker 01:
I'm sorry.

[00:28:21] Speaker 01:
Well, how does the mens rea requirement help that if they were in fact using the funds knowingly in violation of federal banking regulations?

[00:28:35] Speaker 01:
although not for their own benefit necessarily, or even for their own benefit, but not in any way that, I guess not for their own benefit.

[00:28:47] Speaker 01:
Does it have to be for their own benefit?

[00:28:49] Speaker 04:
It has to be knowingly and willfully unauthorized.

[00:28:53] Speaker 04:
It doesn't have to be for their own benefit.

[00:28:55] Speaker 04:
I don't believe so, Your Honor, but I'd be happy to look into that further.

[00:28:58] Speaker 01:
Doesn't banks, not banks,

[00:29:09] Speaker 01:
Bates doesn't say, doesn't Bates at least say it has to be for their own benefit?

[00:29:13] Speaker 01:
Or for the benefit of another?

[00:29:16] Speaker 04:
The Supreme Court's decision in Bates or the Seventh Circuit's?

[00:29:18] Speaker 01:
No, the Supreme Court case.

[00:29:21] Speaker 01:
The sentence I read before, it catches only the transgressor

[00:29:26] Speaker 01:
And that is the Seventh Circuit's definition, but it's the one they quote.

[00:29:30] Speaker 01:
It catches only the transgressor who intentionally exercises unauthorized dominion over federally insured student loan funds for his own benefit, for the benefit of a third party.

[00:29:40] Speaker 01:
I mean, that, I think, does cover this situation, right?

[00:29:49] Speaker 01:
It was for his own benefit, and it was unauthorized.

[00:29:52] Speaker 04:
I agree, and I also feel that that was within the- But it doesn't depend on ownership.

[00:29:56] Speaker 04:
It doesn't.

[00:29:57] Speaker 04:
And that's also within the caveat of the Seventh Circuit's construction.

[00:30:01] Speaker 04:
And looking at the Seventh Circuit cases, in Christovitch, I want to point out the distinction that Christovitch makes with another Second Circuit case, which involves a grant.

[00:30:10] Speaker 04:
And that's the Croft case.

[00:30:11] Speaker 04:
And there they said that they did find conversion in a case where an EPA grant was used to pay a research assistant.

[00:30:18] Speaker 04:
And a professor then had that research assistant convert her employment, her time, her labor to his own personal commercial uses.

[00:30:26] Speaker 04:
So even in the Seventh Circuit, there are situations involving grants that are considered conversions.

[00:30:32] Speaker 04:
And in the Ninth Circuit, I think the Aubrey case is the best example of even if you were to take the defendant's definition, here you would still have conversion.

[00:30:40] Speaker 01:
But then we're still left with Judge Mendoza's problem, which is this did not go to the jury on that definition either.

[00:30:47] Speaker 04:
So again, I would go back to the broad definition under Morissette and under this court's interpretation.

[00:30:53] Speaker 01:
But it's a harmless argument that you're making.

[00:30:56] Speaker 01:
I don't think it's a harmless.

[00:30:57] Speaker 01:
One couldn't get out of misapplication any of this.

[00:31:02] Speaker 01:
If you're not doing what Judge Bolton suggests and simply saying misapplied means misapplied, it's one form of non-obvious definition or another form of non-obvious definition.

[00:31:14] Speaker 01:
And why shouldn't it go to the jury?

[00:31:17] Speaker 04:
I think any definition that would have gone to the jury would have incorporated this common sense black law dictionary.

[00:31:23] Speaker 04:
But it's not so common sense.

[00:31:26] Speaker 04:
Of misapplication.

[00:31:27] Speaker 02:
I mean, here, clearly, I don't think there was any issue.

[00:31:29] Speaker 02:
Definitely spent 30 minutes talking about the definitions.

[00:31:32] Speaker 04:
Yes, I disagree that I don't think this is a comparatively easy case.

[00:31:35] Speaker 04:
I'd agree with that.

[00:31:36] Speaker 04:
But I don't think there was any confusion on the law given to the jury and the facts given to them that in this particular case, where the defendant was using funds he agreed

[00:31:45] Speaker 04:
would only be used for educational costs and related living costs when he used them to buy something for someone else to go fly to the Middle East, fight for ISIS.

[00:31:53] Speaker 04:
I don't think there was any confusion there about whether or not that's a misapplication or a misuse of funds.

[00:31:59] Speaker 04:
It's certainly beyond what he was authorized.

[00:32:01] Speaker 04:
And again, there's a direct agreement between the government and the student about what those funds are.

[00:32:06] Speaker 04:
He took out four FAFSA loans, so four times he certified, I'm only going to use these funds to go to school.

[00:32:13] Speaker 04:
There's also an implication in the record that perhaps the reason that he used these funds to buy the ticket was to cover up who was buying the ticket to kind of help defer government prosecution.

[00:32:25] Speaker 04:
That adds to the evidence of willfulness.

[00:32:28] Speaker 04:
There's a lot of protection here for a defendant from overreach by that mens rea.

[00:32:32] Speaker 04:
And I think that also distinguishes other cases that are cited by the defense, like the Middle District of Florida case and the 11th Circuit cases.

[00:32:40] Speaker 04:
In both of those cases, one of the concerns looked at by the court was insufficient evidence of an intent.

[00:32:47] Speaker 04:
And so that wasn't an issue here.

[00:32:50] Speaker 04:
And that's why I believe this case falls far to the other side.

[00:32:53] Speaker 04:
Are there any other questions about the conversion matter?

[00:32:56] Speaker 04:
And if not, may I briefly address the sentencing issue?

[00:32:59] Speaker 01:
Yes, the double jeopardy question in particular.

[00:33:03] Speaker 04:
So I framed as the guidelines challenge here.

[00:33:07] Speaker 04:
So this court should decline the defense's imitation to grade a circuit split with well-settled first, second, and fifth circuit law about this guidelines directive.

[00:33:18] Speaker 04:
And certainly, it shouldn't find that it was ineffective of counsel at sentencing to decide not to put forth this outlier argument

[00:33:26] Speaker 04:
that has never been endorsed by this court, was outright rejected by those other courts, and has only been discussed in DICTA by the Third Circuit 20 years ago.

[00:33:36] Speaker 04:
There's a very in-depth conversation of the reasons to do that in CAPEF.

[00:33:41] Speaker 04:
It's also outlined in the First Circuit decision, Sacacia.

[00:33:46] Speaker 01:
as well as... That's a statutory argument, right?

[00:33:49] Speaker 01:
There's also a direct double jeopardy argument, as I understand it.

[00:33:53] Speaker 01:
I'm sorry, Your Honor, could you please repeat that?

[00:33:54] Speaker 01:
There's also a direct double jeopardy argument.

[00:33:57] Speaker 01:
In addition to the statutory argument that says, essentially, you can't have consecutive sentences for conspiracy and the underlying

[00:34:12] Speaker 04:
I think any direct double jeopardy argument would fly in the face of the discretion given under 3583 to judges to issue these consecutive sentences.

[00:34:22] Speaker 04:
And so I don't view that as an issue here.

[00:34:27] Speaker 04:
I mean, there is direct legislative history showing that there is a ban on having consecutive sentences for an attempt and the object of the attempt.

[00:34:35] Speaker 04:
Congress thought about doing that for conspiracy and decided not to.

[00:34:38] Speaker 04:
Instead of doing that, they gave this general inappropriateness directive

[00:34:42] Speaker 04:
to the guidelines, which overwhelmingly addresses that in the grouping concerns.

[00:34:48] Speaker 04:
And only in these kind of rare and unusual cases, cases like Mr. Badawi's, are you seeing this issue where the guidelines are higher than the stat max.

[00:34:56] Speaker 04:
And that is by congressional directive.

[00:34:59] Speaker 04:
The reason that Mr. Badawi's guidelines were so high in this case is because of the application of 3A1.4.

[00:35:05] Speaker 04:
That was enacted as part of EDPA.

[00:35:07] Speaker 04:
It was in response to terrorist attacks.

[00:35:10] Speaker 04:
And it specifically directed

[00:35:12] Speaker 04:
the Sentencing Commission, we want to see a sentencing enhancement for anything that's providing support to foreign terrorists here, ISIS.

[00:35:20] Speaker 04:
So that is the reason that the guidelines range was so high.

[00:35:22] Speaker 04:
So there's nothing about his sentence that is opposed to congressional intent.

[00:35:29] Speaker 04:
And here on this record, too, I agree that in the vast majority of cases where the guidelines are found to be different than what the district court found, you would want to remand.

[00:35:38] Speaker 04:
But in Melina Martinez, the Supreme Court said there are cases where we wouldn't have to remand based on the facts of the case, based on the specific record.

[00:35:46] Speaker 04:
And that's here.

[00:35:47] Speaker 02:
This is a case where the- Thank you, counsel.

[00:35:50] Speaker 02:
Any additional questions?

[00:35:52] Speaker 04:
No.

[00:35:53] Speaker 02:
All right.

[00:35:53] Speaker 02:
Thank you.

[00:36:01] Speaker 00:
To Judge Berzon's point about the double jeopardy claim, I think part of why my opponent is not ready to answer the court's question is because no court has yet certified that issue, unfortunately.

[00:36:10] Speaker 00:
Because the district court, even though it said there is a double jeopardy violation, said it wasn't unprofessional or inadequate for counsel not to find it.

[00:36:17] Speaker 00:
But to the government's answer to Judge Berzon's other question about Morissette and this court's cases interpreting Morissette, the government points to Andrean and Thoderson.

[00:36:29] Speaker 00:
But in both of those cases, somebody else owned the funds.

[00:36:35] Speaker 00:
Ownership of the funds was baked in, that they had converted funds that were owned by somebody else.

[00:36:41] Speaker 00:
So for this court to now say that Morissette means something broader would be uncharted territory that this court has never said before.

[00:36:50] Speaker 00:
And to Your Honor's point, Judge Mendoza,

[00:36:52] Speaker 00:
If the jury had been instructed that they needed to analyze whether or not it fit the government's broader misapplication or conversion definition, I suppose in a sense it would have actually lent credibility to the defense that the

[00:37:09] Speaker 00:
the defense attorney actually presented at trial, which was that he still retained the funds in cash.

[00:37:15] Speaker 00:
But the problem was that the government flatly rejected that as irrelevant, said the crime was completed as soon as the debit card number was put in, and the jury, because they were not instructed on what conversion means,

[00:37:29] Speaker 00:
would never have even been in a position to consider whether retaining the cash meant that it hadn't been sent to an improper purpose.

[00:37:37] Speaker 00:
Because he gave that cash to his mother, and there was testimony that he did.

[00:37:40] Speaker 02:
All right.

[00:37:41] Speaker 02:
Thank you, counsel.

[00:37:46] Speaker 02:
The matter of USA versus Badawi will stand submitted.