Feb.19, 2010

Attorneys for a Columbus, Ga., defense lawyer acquitted last November of federal money-laundering charges have accused federal prosecutors of relying on false testimony and a "rogue agent" with the Drug Enforcement Administration to help them make their case.

The allegations are found in a court pleading filed on behalf of Columbus attorney J. Mark Shelnutt, who is suing the federal government to reimburse him for more than $225,000 in legal fees he spent defending himself against the charges.

Shelnutt's Savannah counsel, Thomas A. Withers of Atlanta's Gillen Withers & Lake, made those allegations in reply to a brief filed by federal prosecutors who, in defending their prosecution of Shelnutt, claimed it was undertaken "in good faith, rested on probable cause and had merit."

"This whole case was about what [Shelnutt] said and did with regard to the $250,000 cash that he obtained from Torrance Hill's drug organization ... and [Shelnutt's] attempts to cover up those actions," prosecutors wrote in response to Shelnutt's petition for legal fees. "The government had good reason to believe that [Shelnutt] could be convicted based on the substantial evidence against him."

Last May, a federal grand jury handed down a 40-count indictment charging Shelnutt with conspiring to launder money, 31 counts of money laundering, aiding and abetting a drug conspiracy, lying to federal agents, intimidating a grand jury witness, failing to report cash transactions over $10,000 and the attempted bribery of a federal prosecutor.

The case against Shelnutt stemmed from his longtime representation of Columbus drug kingpin Torrance "Bookie" Hill and Shelnutt's acceptance of legal fees that prosecutors claimed were derived from illegal drug sales by Hill or his network.

It is not a federal crime to accept legal fees that may have been generated by illegal drug sales as long as they are used to pay for a criminal defense. Last October, just two weeks before Shelnutt's trial opened, the 11th U.S. Circuit Court of Appeals affirmed the legality of the practice.

In December, a jury in Columbus acquitted Shelnutt of all charges. He then sued the federal government for his legal fees under the Hyde Amendment to the U.S. Equal Access to Justice Act.

Under that provision, Shelnutt is entitled to have his legal fees reimbursed by the government if he can prove that the charges on which he was tried lacked any legal or factual basis and that federal prosecutors pursued the case despite clear, unequivocal evidence that would exonerate him of any wrongdoing. In Hyde Amendment cases, the burden rests on the former criminal defendant to prove that the prosecution was groundless, carried out in bad faith or constituted a form of harassment. It is rare but not unprecedented for the federal courts to order the payment of legal fees to a criminal defendant following acquittal because judges are traditionally reluctant to find that a prosecution was undertaken in bad faith.

U.S. District Judge Clay D. Land -- who presided over Shelnutt's trial and later excoriated federal prosecutors for making "sweetheart" deals with drug dealers in their "relentless pursuit" of the attorney -- will also rule on Shelnutt's Hyde Amendment petition.

In an e-mail written in response to questions from the Fulton County Daily Report on Tuesday, Shelnutt described allegations contained in the federal prosecutors' Hyde Amendment response as "really shocking."

"We have shown that this prosecution was born from maliciousness and bad faith; was built on polluted, unreliable and even fabricated evidence; and, both at the grand jury and the trial, the government either ignored or refused to acknowledge overwhelming credible evidence that showed I was innocent," Shelnutt said. "I am satisfied that we have painted a compelling picture of the conduct and the law that supports our position."

Withers declined to comment on the pleadings.

A Jan. 22 brief signed by U.S. Attorney Edward J. Tarver of Georgia's Southern District, seven members of his staff (including the acting U.S. Attorney when Shelnutt was tried and the two prosecutors who tried him), and three attorneys with the Justice Department in Washington defended the Shelnutt prosecution, calling it "well-founded" and "taken in good faith."

"Indeed, the government presented substantial evidence to convict [Shelnutt] in this money-laundering case under the law as set forth by the Eleventh Circuit," the pleading stated.

Assistant U.S. Attorney Carlton R. "Charlie" Bourne, one of two Assistant U.S. Attorneys who prosecuted Shelnutt, could not be reached for comment. First Assistant U.S. Attorney James Durham, one of the signators of the federal pleading, said the office would have no comment.

In their brief, prosecutors largely restated the case they had made unsuccessfully to the jury that acquitted Shelnutt, resting the legitimacy of the Shelnutt investigation, in part, on the testimony of five key witnesses -- Hill, his ex-wife, his girlfriend, his cousin and his lieutenant in the drug trafficking ring. All faced drug trafficking charges and significant prison time if convicted.

Those witnesses testified that they had delivered drug money totaling $250,000 to Shelnutt to pay for Hill's legal defense. In return for their testimony against Shelnutt, the government dismissed charges against three of those defendants (including Hill's girlfriend, who was facing more than 10 years in prison) and substantially reduced the requested sentence of a fourth in a plea that Land eventually rejected as a "sweetheart deal."

Prosecutors also claimed that Hill's ex-wife, Tamika Hill, had given them ample grounds to investigate Shelnutt, telling federal agents that Shelnutt had instructed her to collect drug money owed to Hill and to bring it to him as payment for his legal services.

"When Tamika Hill expressed concern about that request, [Shelnutt] told her that she would not get into trouble for collecting drug proceeds for him," the federal brief stated. "Tamika Hill also told the agents that, to aid her in that task, [Shelnutt] showed her a list of people that owed drug money to Torrance Hill."

Prosecutors relied heavily on a secretly videotaped meeting between Shelnutt and Tamika Hill in which Hill mentioned a list the lawyer allegedly had given to her of drug dealers who owed her husband money and from whom she was supposed to collect to pay his legal bills.

Federal prosecutors also argued in their brief that 14 grand jury witnesses, including a secretary at Shelnutt's firm and an Internal Revenue Service agent, had bolstered their case against Shelnutt. The IRS agent, they said, "was unable to find any explanation, besides that given by the grand jury witnesses, for the large amount of cash that flowed through accounts connected to the defendant ... ."

The federal brief alluded to a grand jury witness, "J.N.," who did not testify at Shelnutt's trial but had contacted the FBI "and provided evidence which underlies part of the money laundering conspiracy ... ."

"J.N.'s testimony at trial would have laid the foundation for the admission of bank account and safe deposit box records from 2008 for [Shelnutt] and another person connected to [Shelnutt]," prosecutors argued. "This witness, however, was unable to testify at trial because of her medical condition."

Federal prosecutors also attempted to downplay the significance of the 11th Circuit ruling last October in United States v. Velez, 586 F.3d 875, that affirmed the legality of accepting legal fees for a criminal defense if the funds were derived from criminal proceeds, claiming they had checked with attorneys at the Justice Department who told them that Velez "had no application" to the Shelnutt case.

Federal prosecutors also supported their decision to prosecute Shelnutt by citing a local television report that quoted a juror in the Shelnutt trial as saying Shelnutt's acquittal did not mean she thought Shelnutt was innocent.

"It really came down to the way that the law was written," the brief quoted the juror as saying. "It's the language of the law, the way each law is interpreted is what we based our decision on.'"

Shelnutt's attorneys fired back in a reply filed Monday, calling Tamika Hill's testimony false. The transcript of the poorly recorded meeting on which prosecutors relied misrepresented one of Shelnutt's statements so that it appeared he was referring to a list of drug dealers who owed Hill money when he was actually talking about something else entirely, according to Shelnutt's lawyers. "[T]he government manipulated the evidence to conjure up an illusory reference by Mr. Shelnutt to the non-existent Torrance Hill list."

It was, Shelnutt's attorneys asserted, "a measure of the government's bad faith ... because it establishes the government's willingness to take 'facts' and twist them to fit their 'theory.'"

Shelnutt's lawyers criticized as "fiction" the Middle District's recusal from the Shelnutt investigation after determining to charge Shelnutt with attempting to bribe Assistant U.S. Attorney Melvin E. Hyde with the offer to sell him a pair of University of Georgia football tickets at face value. The brief also described DEA agent Stephen T. Ribolla, who had launched the Shelnutt probe in 2006, as "a rogue DEA agent ... who did not testify at trial" but "controlled the conduct of the investigation and the case."

Despite the Middle District's recusal, one of its prosecutors, working closely with Ribolla, "retained exclusive control of the destiny of the witnesses against Mr. Shelnutt," including the dismissal of the cases against Torrance Hill's girlfriend and Hill's cousin, the Shelnutt brief stated.

Shelnutt's lawyers also took issue with the IRS agent whose testimony was intended to bolster the money-laundering charges. That agent had failed to obtain financial records from Shelnutt or his law firm that would have undercut her testimony, testified inaccurately before the grand jury as to the law concerning money laundering and "scrupulously avoided creating a grand jury record concerning the fact that the law firm of Berry, Shelnutt, Day & Hoffman, P.C. had frequent meetings where the partners distributed cash to one another," Shelnutt's brief stated. "The latter point is particularly disturbing because the government carefully avoided treading into the truth as those cash distributions would, of course, account for cash deposits into Mr. Shelnutt's wife's accounts, and therefore, undercut the government's contention that all cash of Mr. Shelnutt must have come from Torrance Hill. In truth, the government never traced any monies from Torrance Hill into any cash deposits anywhere."

Shelnutt's lawyers challenged federal prosecutors' reference to testimony by the witness "J.N."

"In truth, this witness had no first-hand knowledge of anything related to Mr. Shelnutt, had an unfortunate history of psychiatric illness and would have testified favorably to Mr. Shelnutt," they argued. "That the government would chase this rabbit demonstrates how far the government was willing to reach to have this poor woman testify before the grand jury."

Shelnutt's lawyers also challenged federal prosecutors' reliance on the television interview with a juror, who, according to the reporter, "did not want to give the impression that the not guilty verdicts meant she thought Shelnutt was innocent." Shelnutt's acquittal, according to the juror, "really came down to the way that the law was written."

"What the government implicitly suggests in its response is that Mr. Shelnutt was acquitted, not because he was innocent, but rather because of a jury instruction given by this Court. ... Of course this is not evidence, nor it is proper."