Nov 28

First Circuit Confronts Perils of Non-Custodial Interrogation in Fraud Prosecution

Miranda warnings are one of those things most lawyers and non-lawyers alike know something about. Most know we enjoy a right under the Fifth Amendment and Miranda v. Arizona, 384 U.S. 436 (1966), to be told before being taken into custody that we need not make any self-incriminating statements to police, that if we do the Government may use those statements against us in court, and that we have a right to an attorney before speaking to police. What the unwitting faced with initially informal police questioning may not realize is that police need only give Miranda warnings to those who are legally considered to be “in custody.” This critical legal term of art was at the heart of last week’s First Circuit decision in United States v. Swan, in which the Court considered Swan’s appeal from convictions for Hobbs Act extortion, tax fraud, and making false statements to obtain federal worker’s compensation.

Swan was an elected selectperson in Chelsea, Maine. In 2011, she came under investigation for allegedly using her office to personally profit at the town’s expense. A local businessman reported to the county sheriff that Swan had directed him to overbill the town for contracting work his company was performing and to divert a $10,000 kickback to her. The sheriff set up a sting operation, through which the businessmen submitted the inflated bill to the town and Swan arranged for delivery of the payment for the bill to the businessmen. Sheriff’s deputies then gave the businessman a bag containing the $10,000, which he gave to Swan, thereby executing the alleged scheme.

Bag of cash in hand, Swan drove to a nearby laundromat, unknowingly followed by the deputies. One of the deputies confronted her in the laundromat parking lot, showed his badge, and told her, “Carole …. I want my money back.” After a brief conversation during which Swan surrendered the money, the deputies suggested that they discuss the issue at the sheriff’s office, to which Swan agreed. Swan thereafter drove – with one of the deputies in her car – to the sheriff’s office.

Pop quiz: Was Swan in custody at this point?

Answer: No. Miranda itself holds that “custodial interrogation [refers to] questioning initiated by law enforcement officers after a person has been taken into custody or otherwise deprived of his [or her] freedom of action in any significant way.” Miranda, 384 U.S. at 444. Subsequent Supreme Court decisions make clear that you are only in custody if “a reasonable person would have felt he or she was not at liberty to terminate the interrogation and leave.” Thompson v. Keohane, 516 U.S. 99, 112 (1995); see also Howes v. Fields, 132 S.Ct. 1181, 1189 (2012) (“‘[C]ustody’ is a term of art that specifies circumstances that are thought generally to present a serious danger of coercion.”). Deferring to the district court’s factual findings that the deputies merely suggested they talk at the sheriff’s office, and that Swan agreed to do so, the First Circuit found that she was not in custody during the initial confrontation in the laundromat parking lot.

As it turned out for Swan, nothing that happened at the sheriff’s office after this initial encounter would change the First Circuit’s mind. When they reached the sheriff’s office, the deputies informed Swan that she was free to leave “[a]t any point,” and that it was “fine” if she did not “want to have [a] conversation” with them. The Court held that the objective reasonable person in those circumstances would not have believed he or she was in custody, notwithstanding the initial parking lot encounter. The Court also found other evidence of custody lacking. It noted that Swan had at no point been physically restrained before or after the ninety-minute interview, and could have left the room at any time. It also rejected Swan’s argument that the interrogation was custodial because the deputies held her cell phone during the interview, since they (said they) did so only to prevent her from being distracted, had her permission to send a call to voicemail, and relinquished the phone to Swan when she asked to make a call.

And so, having held that Swan was at no point in custody (and separately that the statement had been voluntary), the Court held that Swan’s confession to having accepted $25,000 in kickbacks was properly admitted at trial and affirmed her convictions.

Swan once again illustrates the significant perils the unsuspecting face when dealing with government agents in the fraud context. Although cooperation may well be the appropriate way to handle such an investigation, doing so without the advice of counsel may leave the individual or company under investigation in the same position as Swan. Swan’s central teaching to those individual and corporate actors is a predictable one: even if you do not hear the Miranda warnings, remember that you have constitutional rights to counsel and to avoid self-incrimination. It can only help to exercise them both before it is too late.

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