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A federal money-laundering case against a Columbus, Ga., criminal defense lawyer is raising a host of legal ethics questions for both sides of the bar. A pretrial hearing last week explored how far federal prosecutors and agents in middle Georgia were willing to go to secure the 40-count indictment of Columbus attorney J. Mark Shelnutt. During two days of testimony, a federal prosecutor acknowledged that he had lied to Shelnutt, and federal agents testified that they enlisted at least one criminal defense attorney as an undercover informant in order to elicit evidence that might be used to prosecute Shelnutt. Looming over the defense is the question of how far a criminal defense lawyer can go to collect legal fees from defendants whose only known means of financial support are apparent illegal activities. In addition to allegations that he violated federal money-laundering statutes, Shelnutt has been accused of aiding and abetting a drug conspiracy, witness tampering, attempting to bribe an Assistant U.S. Attorney (by selling him University of Georgia football tickets at face value) and lying to an FBI agent about whether he gave a client a receipt in return for legal fees. The hearing didn’t resolve the ethics issues, which likely will figure heavily at trial. U.S. District Judge Clay D. Land found that the conduct of federal authorities investigating Shelnutt, “even if true, was not sufficient to support the drastic remedy of dismissing the indictment for outrageous conduct in this case.” But Land, who spent much of the hearing interrogating both witnesses and counsel from the bench, said he was troubled by Assistant U.S. Attorney Jason M. Ferguson’s admission that he had lied to Shelnutt as the two prepared for a meeting about one of Shelnutt’s federal defendants. Ferguson said he told Shelnutt that he did not intend to record the meeting when he secretly was doing so already. When Ferguson claimed that he had permission from his supervisor, the criminal chief of the U.S. Attorney’s Office in Macon, to lie to Shelnutt, Land responded, “I’m shocked. … There’s got to be some policy about when a U.S. Attorney can lie.” The judge was unsympathetic to defense attorneys’ claims that Shelnutt’s constitutional rights had been violated by prosecutors’ repeated refusal to acknowledge that he was a target of their investigation. But he expressed concern that the rights of the accused drug defendants Shelnutt was representing may have been violated because federal authorities repeatedly failed to notify them or Shelnutt that their attorney had a conflict in defending them. The two-day hearing on motions by Shelnutt’s defense attorneys to dismiss the indictment paved the way for Shelnutt’s Sept. 8 trial in U.S. District Court in Columbus. In securing Shelnutt’s indictment, authorities have linked the defense attorney to the same Columbus drug ring whose members Shelnutt has defended, foremost among them convicted ringleader Torrance “Bookie” Hill. Hill was arrested in May 2005 during a three-year joint investigation by federal, state and local authorities. Hill’s arrest, and a string of federal indictments of multiple defendants accused of participating in illegal drug sales under Hill’s direction, broke up the ring and culminated in the largest illegal drug seizures in Columbus’ history. ‘OUTRAGEOUS’ GOVERNMENT CONDUCT? The two motions that dominated the hearing concerned Shelnutt’s lawyers’ claims of “outrageous” governmental misconduct and a motion to suppress a four-hour conversation that Shelnutt had with Ferguson and FBI Agent Todd Kalish that later led to charges that Shelnutt had twice lied to the FBI. Five attorneys testified during the course of the hearing as Shelnutt’s lawyers sought to document the scope of the alleged misconduct. They were Columbus attorney Mark A. Casto and Atlanta attorney Derek M. Wright, who defended two of Shelnutt’s former clients; Atlanta attorney L. David Wolfe, who represented Shelnutt before his indictment; and Assistant U.S. Attorneys Ferguson and Melvin E. Hyde Jr. Shelnutt’s team said that federal prosecutors lied to or intentionally misled Shelnutt about the investigation, assumed the role of FBI informants by secretly recording conversations with him in violation of bar rules and invaded attorney-client privilege by recruiting one of Shelnutt’s clients to secretly videotape him as he discussed defense strategy concerning her husband, whom Shelnutt represented. Shelnutt’s defense team also claimed that federal authorities had deceived Shelnutt’s former client, Hill, into believing that Shelnutt had set him up for his 2005 arrest and then lied to him about a plea deal. Those actions, Shelnutt’s lawyers claimed, prompted Hill to issue death threats against Shelnutt and Hyde and then refused to provide Shelnutt with either complete information or afford him protection from Hill while the threats were investigated. ‘ADVOCATE TO … PARTICIPANT’ Federal prosecutors assert that Shelnutt “went from being an advocate to being an active participant in Torrance Hill’s drug organization” by directing the collection of drug proceeds owed by defendants in the case to Hill, who then channeled them to Shelnutt. Shelnutt, according to prosecutors, also ignored federal money-laundering laws requiring him to report to the U.S. government cash deposits of $10,000 or more. Nineteen separate cash deposits — all for $5,000 or less — that Shelnutt made to his wife’s bank account between May 13, 2005, and Aug. 22, 2006, while he was defending Hill, and mortgage payments Shelnutt subsequently made on a Florida home are the basis of the money-laundering counts. Shelnutt’s lawyers, Craig A. Gillen and Thomas Withers of Gillen, Withers & Lake, have contended that the charges in the indictment derive from legal fees paid to Shelnutt either on Hill’s behalf or on behalf of other drug ring members whom Shelnutt either advised, represented or for whom he had secured other attorneys as part of a consolidated defense. Shelnutt’s lawyers also argued at the hearing that the investigation leading to Shelnutt’s indictment intensified after Shelnutt authored a letter to then-Muscogee County District Attorney J. Gray Conger challenging the validity of search warrants issued by the Columbus Metro Narcotics Task Force, with which federal agents investigating Shelnutt were associated. Federal prosecutors Carlton R. Bourne Jr. and David M. Stewart of Georgia’s Southern District denied those contentions in court pleadings and at the hearing before Land. They said that federal agents first began investigating Shelnutt in January 2007. Shelnutt’s letter, which was cosigned by 11 other defense lawyers, was not written until Sept. 11, 2007. (Federal prosecutors from the U.S. District Court for the Southern District of Georgia are prosecuting Shelnutt because prosecutors from the Middle District recused from his case. Middle District prosecutors, in particular Ferguson, have continued to negotiate plea deals with defendants of the drug ring to which they are linking Shelnutt.) The federal investigation of Shelnutt may have begun as early as 2006, according to witnesses who testified at the hearing. Betty Lawrence, whose son and daughter were clients of Shelnutt’s, said that as early as May 2006, Stephen T. Ribolla, a U.S. Drug Enforcement Administration agent in Columbus, had told her that her son needed to hire another lawyer, “not Mr. Shelnutt because he was under investigation.” But for three years, even as Shelnutt heard from clients and members of the Columbus legal community that Ribolla was spreading word that he was under federal investigation, federal prosecutors remained coy when Shelnutt repeatedly attempted to confirm it, according to federal prosecutors’ testimony. Shelnutt’s argument that he needed to know if he were a target in order to alert his clients that he might have a conflict in representing them did not persuade federal prosecutors to notify either Shelnutt or his clients that he was under investigation. Witnesses testified that Hyde — the prosecutor who originally handled the investigation into Hill’s drug ring — told Shelnutt he would “call off the dogs” after Shelnutt countered an FBI informant’s bribery allegations with a recording that belied her statements. But Hyde testified that “certain things” Shelnutt was doing professionally “were starting to trouble me a bit.” Hyde suggested that Shelnutt’s offer of a pair of his firm’s UGA football tickets was improper and that he had reported it to his supervisors. Hyde also said that as Shelnutt’s inquiries about whether he was under investigation escalated, Shelnutt began asking for immunity for himself during discussions about securing his clients’ cooperation on other cases. “He was requesting a benefit for himself in order for his client to obtain a benefit, which was a disbarment offense,” Hyde said, while acknowledging that Shelnutt repeatedly asserted he had done nothing wrong. After DEA agent Ribolla and FBI agent Kalish took a statement from Hyde about the tickets, Hyde removed himself from the investigation, which was turned over to Ferguson in the Middle District’s Albany office. At the hearing, Shelnutt lawyer Gillen asked Ferguson if he had any obligation to notify Shelnutt that he was a target of the grand jury so that he could, in turn, notify his clients that they needed to hire other counsel. Ferguson said he believed Shelnutt already had conflicts of his own making because he and three other lawyers in Shelnutt’s firm represented multiple defendants in the Hill case. THE JUDGE IS UNMOVED Land was unimpressed by the scenario presented by Shelnutt’s lawyers. “The premise of your arguments is that the AUSA had a duty to tell Mr. Shelnutt he was a target of the investigation so Mr. Shelnutt could evaluate whether he had a conflict,” the judge said. “I’m not going to find that.” He continued: “What gave rise to an affirmative duty on behalf of Mr. Ferguson to tell Mr. Shelnutt he was or was not a target of the investigation? … What is the duty to affirmatively disclose to a defense attorney, ‘You may have a conflict?’ … The court finds that conduct, even if true, is not sufficient to support the drastic remedy of dismissing the indictment for outrageous conduct in this case.” The judge also expressed skepticism that federal agents’ and prosecutors’ attempts to turn Torrance Hill against his former lawyer after Hill was sentenced constituted outrageous conduct. He demanded to know why, once federal prosecutors became aware of a potential death threat against Shelnutt, they had any obligation to provide the attorney with some form of protection. According to witness testimony, federal agents and prosecutors from the Southern District met with Hill after Hill had been sentenced in a meeting that they did not record or document and at which Hill had no attorney present. During that meeting, snippets of the conversation that Ferguson had secretly recorded with Shelnutt were played for Hill. Said Gillen: “The government set up Mr. Shelnutt” by suggesting to Hill that Shelnutt had told him things “that were wrong and false,” including assertions that the plea agreement Hill thought Shelnutt had negotiated had never been accepted by federal prosecutors. Once federal authorities received word Hill had made a death threat against Shelnutt and Hyde, federal authorities assigned the same agents who were already investigating Shelnutt to look into the death threat. Those agents, Gillen argued, had a vested interest in finding that the death threat against Shelnutt was not credible because if Hill had threatened his former lawyer, Hill would no longer be eligible for a sentence reduction for cooperating with federal agents. Their actions in withholding protection for Shelnutt and, after interviewing Hill, deciding that the death threat was invalid was outrageous, Gillen said. But Land responded, “I don’t believe there is any authority to provide protection to a private citizen,” Land added. But the judge said the issue could be explored later, saying that the issues of threats and protection could be admissible at trial. THE LIE Land also took issue as to whether Shelnutt’s rights were violated during a meeting with Ferguson, which FBI agent Kalish attended, in February 2007. That was the meeting at which Ferguson initially lied when Shelnutt asked if he intended to record the meeting. Shelnutt had arranged that meeting after Ferguson notified one of Shelnutt’s drug clients that she had become the target of a federal investigation. When Shelnutt announced his intention to record the meeting, the federal prosecutor placed his tape recorder on the table. But when Shelnutt’s tape ran out he asked Ferguson to turn off his recorder. But Kalish, the FBI agent, acknowledged during the hearing that he left Ferguson’s recorder running but led Shelnutt to believe it was off. Statements that were subsequently recorded led to the charges of lying to an FBI agent against Shelnutt. But Land displayed no sympathy for the argument that Shelnutt’s comments were not voluntarily made because he had been deceived, calling Shelnutt an experienced criminal defense lawyer who knew he was meeting with a federal prosecutor and an FBI agent and that he might already be the subject of a federal investigation. “You’ve got to demonstrate if he had known the recorder was on, he would not have stayed at the meeting,” Land said. The judge also scoffed at defense attorneys’ assertions that Shelnutt had been told it was just “a lawyers’ meeting” and Kalish had suggested several times that the conversation “was just between us.” “Do you mean that whenever lawyers are in a room, they are no longer accountable for what they say?” he asked. Land also was troubled by the federal authorities’ behavior. “Why would it be that the FBI and a U.S. Attorney lied to Mr. Shelnutt?” he asked, and why would such a lie not diminish the voluntary nature of his statements, the judge asked federal prosecutors. “I wish some things hadn’t happened,” Assistant U.S. Attorney Bourne replied. “Mr. Ferguson shouldn’t have lied to him about the tape. He should have told him the truth. It’s not appropriate to lie.”

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