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State v. Wong
Citations: 40 P.3d 914; 97 Haw. 512Docket: 22671, 23151
Court: Hawaii Supreme Court; February 22, 2002; Hawaii; State Supreme Court
The State of Hawai`i appeals the dismissal of indictments against Richard Sung Hong Wong, Mari Stone Wong, Henry Haalilio Peters, and Jeffrey R. Stone, originally ruled by Circuit Judge Michael R. Town. The Supreme Court affirms the dismissals but instructs the lower court to enter the dismissals with prejudice. The indictments stem from allegations involving business transactions where Wong, as a trustee of the Bishop Estate/Kamehameha Schools, is accused of manipulating estate resources to benefit his brother-in-law, Stone, in the Kalele Kai project. The charges against Wong include theft in the first degree, commercial bribery, perjury, hindering prosecution, and criminal conspiracy. Specifically, the indictment claims Wong arranged a deal that allowed Stone to acquire an apartment for $115,800 above its actual worth, representing theft from the Estate. The Kalele Kai project, involving the development of condominium units on estate land, faced financial issues leading to Stone's attempt to purchase the project while assuming the estate's fee purchase agreement, which was complicated by previous defaults on loans. Wong recused himself from trustee discussions on the Kalele Kai proposal, which OKP acquired following approval from the majority of trustees. In 1996, Stone's company, Pacific Northwest, Ltd., purchased a Kahala home in foreclosure, renovated it, and sold it to Richard and Mari Wong, who financed part of the purchase with a credit from their Wilder Avenue apartment. The State alleged that the Wilder Avenue apartment was worth only $498,000, leading to claims that the $115,800 difference was a payoff from Stone for the Kalele Kai deal and constituted theft by Wong from the Estate. To support the indictment, the State called Stone’s former tax lawyer, Richard Frunzi, before the grand jury without a court ruling regarding his testimony scope. Frunzi, who did not inform Stone of his testimony nor seek permission to disclose information about their professional relationship, testified regarding privileged communications under the crime-fraud exception. Wong, along with Mari Wong and Jeffrey Stone, moved to dismiss the indictment due to lack of probable cause and prosecutorial misconduct. The circuit court granted the motion, citing improper use of Frunzi's privileged testimony and the failure of the government to notify Stone or seek court oversight before his testimony. The court ruled that the crime-fraud exception did not apply, and the government's actions had prejudiced the Defendants. The State subsequently appealed this decision. Additionally, an indictment was secured against Henry Haalilio Peters and Jeffrey R. Stone for various charges related to the Kalele Kai transactions, including theft, commercial bribery, criminal conspiracy, and perjury. The indictment claims that Stone persuaded Peters to approve OKP's acquisition of the Kalele Kai project by arranging for someone to overpay for Peters' apartment, which Stone financed through OKP. OKP then accepted the apartment's deed instead of repayment, allowing Peters to use the excess value of $192,500 to buy a higher-floor apartment in the same building. The State argues that this amount rightfully belongs to the Estate and that Peters' retention constitutes theft. These allegations support charges of theft, commercial bribery, conspiracy, and accomplice to theft against Peters and Stone. Additionally, the State alleges that Stone misled a prior grand jury regarding his contact with Glenn Okada about an upper-floor unit. The State called witnesses, including Nathan Aipa, without court approval or notifying Peters, violating attorney-client privilege. Aipa's testimony was intended to clarify Peters' awareness of benefits needing to be returned to the trust. Testimony about the unrelated McKenzie Methane gas investment was also included. The State questioned Okada about the apartment purchase but did not allow him to clarify that he initiated contact with Peters. The State later moved to dismiss the criminal conspiracy charge, which was granted, and both Peters and Stone sought to dismiss other charges. The circuit court granted their motions without prejudice, stating that the Attorney General's misconduct—specifically, failing to seek court permission and violating attorney-client privilege—prejudiced the defendants' right to a fair grand jury proceeding. The court emphasized the importance of the attorney-client privilege and deemed its violation unacceptable. The Attorney General's office was aware of the procedure for seeking court permission to summon attorneys before the grand jury and acknowledged the court's oversight of the grand jury process. Neither Trustee Peters nor his counsel received prior notification of the grand jury subpoena from the Attorney General or Mr. Aipa. The circuit court dismissed the commercial bribery charge, citing the government's failure to allow potentially exculpatory evidence from Glenn Okada, which may have influenced the grand jury's perception of other charges. The court criticized the initiation of the criminal conspiracy case, stating it should not have been brought and could have biased the grand jury's decision. The circuit court denied a motion for reconsideration, leading to the State's appeal. The State argues that the circuit court erred in dismissing the indictments, and an appellate court reviews such dismissals for abuse of discretion. The trial court's abuse of discretion occurs when it exceeds reasonable bounds or disregards legal principles, with the burden of proof on the appellant to demonstrate this. Grand juries form part of the court system, and the circuit court holds supervisory authority to maintain the integrity of grand jury proceedings. Prosecutorial misconduct that affects the fairness of the grand jury process is presumed prejudicial. This principle reaffirms that a grand jury proceeding is not adversarial in nature. An indictment cannot be challenged based on the incompetency of evidence presented to a grand jury unless there is prosecutorial misconduct involved. The grand jury's role is to guard against unwarranted prosecution, but it is not required to assess the strength of the prosecution's case or verify the competency of the evidence. Indictments resulting from prosecutorial misconduct or circumstances that compromise the grand jury's impartiality can be contested. The document also addresses issues related to the attorney-client privilege and the "crime-fraud" exception, which permits the introduction of otherwise privileged communications if they pertain to future wrongdoing. The attorney-client privilege, recognized as a key protection for confidential communications, aims to facilitate open dialogue between clients and attorneys, thereby serving the public interest in justice. However, this privilege does not extend to communications intended to secure advice for committing a crime or fraud. The privilege, while essential for preserving individual liberty against governmental overreach, must be balanced against the need for accountability in cases involving wrongdoing. In Hawaii, the attorney-client privilege and its exceptions are codified under Rule 503 of the Hawaii Rules of Evidence. The attorney-client privilege rule is applicable at all stages of legal actions, including grand jury proceedings, as outlined in HRE Rules 1101(c) and 1101(d). This privilege is relevant in both civil and criminal cases, emphasizing that it serves broader purposes than merely protecting against self-incrimination. The State contends that the circuit court incorrectly dismissed the indictment against Stone and the Wongs, arguing it was not required to seek judicial review prior to presenting Frunzi's testimony to the grand jury. However, the court disagrees, stating that Rule 104 of the Hawai`i Rules of Evidence mandates judicial determination of privilege before such testimony is presented. The court highlights that the burden to establish the privilege lies with the party asserting it and that a preliminary judicial inquiry into the existence and validity of the privilege is essential. This ensures that claims regarding the attorney-client relationship are thoroughly examined, preventing unfounded assertions. Additionally, foreign case law reinforces that the privilege belongs to the client, with the burden to establish both the privilege and any exceptions resting on the respective parties. Various cited cases illustrate the importance of this judicial inquiry in contexts involving grand jury subpoenas and testimony. In re Sealed Case and several related cases involve appeals concerning the enforcement and challenge of grand jury subpoenas, the protection of attorney-client privilege, and the procedural requirements for presenting potentially privileged testimony. Key rulings highlight that any inquiry into attorney-client privilege must be adjudicated by a judge, whether in criminal or civil contexts. Specifically, when a prosecutor seeks testimony that may be protected, they must either notify the individual or their counsel to allow for judicial review on the privilege claim or, if counsel does not raise the issue, seek a court ruling on the privilege themselves. The court emphasized that failing to notify the privilege holder may lead to a reversal of allowed testimony. In the case at hand, the State improperly presented Richard Frunzi's testimony, which was deemed protected by attorney-client privilege. The State contested the trial court's ruling, asserting that the defendant, Stone, did not sufficiently prove that communications with Frunzi were confidential and related to legal services. The State characterized Stone's claim as an unwarranted blanket assertion of privilege, lacking the necessary evidentiary support. The State argues that the circuit court should have required a detailed account of which statements made by Frunzi were considered privileged. It contends that the crime-fraud exception to attorney-client privilege applied, that Frunzi's testimony was not improperly bolstered, and that the Wongs cannot invoke Stone's attorney-client privilege to prevent their indictment. The focus of the discussion is whether the State's actions prior to the indictment compromised the grand jury's ability to function fairly, in accordance with due process requirements. The central issue is whether prosecutorial misconduct warranted the dismissal of the indictment. The State's claim that Stone did not sufficiently establish the privilege during post-indictment proceedings is dismissed as unfounded. If either party had sought a preliminary judicial review of the privilege's validity, Stone would have been responsible for proving its applicability. Although normally, failing to assert the privilege could imply a waiver, the State did not provide Stone the chance to raise the privilege prior to the grand jury testimony. Frunzi did not assert the privilege on Stone's behalf, and the State presented Frunzi's testimony without notifying Stone, treating it as privileged under the crime-fraud exception. During Frunzi's testimony, the State emphasized the attorney's belief that crimes had been or would be committed, which interfered with the grand jury's role in assessing probable cause. This approach compromised the integrity of the grand jury process, infringing on Stone's right to an impartial grand jury. Consequently, the circuit court did not abuse its discretion in dismissing the indictment against the Wongs. Frunzi's testimony was presented without a judicial ruling on privilege, and the State improperly characterized it as privileged, invoking the crime-fraud exception. Consequently, the State cannot claim that Stone did not prove the existence of attorney-client privilege. The State also improperly presented Aipa's testimony to the grand jury, arguing that it did not infringe upon defendants' rights or touch on privileged matters. The State claimed that any privilege belonged to the Estate, not Peters, and that the Estate waived any privilege by disclosing communications. Furthermore, the State contended that preclearance for presenting attorney testimony to the grand jury was unnecessary and that the circuit court lacked authority to enforce such a requirement. However, the circuit court has supervisory authority over grand jury proceedings in Hawaii, which differs from federal grand juries. The court had previously directed the State that a judicial determination of privilege was needed before presenting attorney testimony. The State disregarded this directive by presenting Aipa's testimony without notice to Peters or a judicial review of the attorney-client privilege. The circuit court dismissed the indictment due to this violation, asserting that the State's actions warranted such dismissal without needing to find actual prejudice against Peters, although the record indicated clear prejudice. Aipa's testimony suggested that Peters' investment in McKenzie Methane constituted a breach of trust, despite evidence presented later indicating that the trustees, including Peters, acted in accordance with legal advice that permitted such investments. Aipa's incomplete grand jury testimony regarding McKenzie Methane suggested that Peters had breached his fiduciary duty, creating a misleading inference that compromised the fairness and integrity of the grand jury process, violating due process rights as established in *State v. Chong*. The State contested the circuit court's finding that it withheld exculpatory evidence from the grand jury, arguing that Glenn Okada's limited testimony was not clearly exculpatory. The perjury charge against Stone stemmed from his prior grand jury testimony about Okada’s contact regarding Peters and an upper-floor unit. During the grand jury questioning of Okada, he acknowledged learning of Peters' move to a new apartment and mentioned that he had briefly discussed the unit's condition with Peters, but did not pursue the matter further due to his semi-retirement. Okada confirmed his previous grand jury testimony and the nature of his responses to the prosecutor's questions. Okada recalls that he first learned about Henry Peters moving into apartment 1203 from Jeffrey Stone. Initially, he did not remember looking at the apartment until reminded by Brenda Bagano. During previous grand jury testimony, Okada asserted he had no involvement in informing Peters about the apartment, which he confirmed was truthful at the time. During a hearing on a motion to dismiss, Okada explained that he had been interrupted by the prosecutor while trying to provide additional details about his prior discussions with Stone. He intended to clarify that he had forgotten he looked at the unit and that he had lunch with Stone, where he mentioned Peters was seeking an upper-floor apartment. Okada stated he believed the unit would sell for significantly less than its market value due to unaddressed water damage. He ultimately confirmed under oath that he had indeed called Stone to suggest contacting Peters regarding unit 1203. The State contends that Okada's excluded testimony was not clearly exculpatory and thus not required to be presented to the grand jury, arguing that his statements were contradictory. The State disagrees with the circuit court's conclusion that Okada's testimony could have clearly exculpated him, asserting that such a finding amounts to speculation that disrupts the grand jury process. However, the court rejects the State's position, noting that it does not require prosecutors to present all potentially exculpatory evidence, but rather only evidence that would "clearly negate guilt" or undermine the grand jury's authority. In this instance, Okada was the sole witness capable of addressing whether Stone lied about Okada's alleged communication regarding the purchase of apartment 1203. Although Okada was questioned about related matters, he was not permitted to discuss his role in informing Stone and Peters about the apartment's availability. This omission of direct testimony was significant and could have clearly negated guilt. The court emphasizes that dismissal of an indictment should only occur in severe cases of grand jury overreach or deception. The State argues that the proper remedy for any prosecutorial misconduct would be to suppress evidence rather than dismiss the indictment. The court disagrees, stating that the combination of privileged testimony presented by the State and the exclusion of exculpatory evidence compromised the grand jury's ability to function impartially. Consequently, if improper testimony significantly swayed the grand jurors, a dismissal is warranted. The court ultimately concludes that a violation of the defendant's constitutional right to a fair grand jury proceeding justifies quashing the indictment. It references prior cases that support the dismissal of indictments with prejudice when justice requires it, reaffirming the necessity of maintaining the integrity of the judicial process while balancing the prosecutorial prerogative to pursue criminal cases. Society has a vested interest in maintaining the integrity of the judicial process and ensuring fairness for defendants. When these interests are compromised, prosecutorial discretion must be checked by the court's authority. The power of a judge to dismiss an indictment is limited and typically requires evidence of serious misconduct threatening judicial integrity, clear due process violations, or arbitrary governmental actions. Previous cases, such as State v. Moriwake and State v. Alvey, emphasize that while trial courts have inherent powers, they must balance the State's interest in prosecuting crimes with the defendant's rights to fundamental fairness, including an impartial grand jury. In this context, the State's actions have been deemed to undermine the judicial process, infringing on defendants' rights by disregarding attorney-client privilege and evidence rules. This conduct not only deprived defendants of the opportunity to raise privilege issues in a timely manner but also improperly influenced grand jury proceedings. The State's disregard for court instructions and the integrity of the judicial process warranted a dismissal with prejudice. The defendants have a history of facing serious charges, with prior indictments dismissed due to prosecutorial misconduct. The dangers of such misconduct have been highlighted in judicial discourse, reinforcing the critical need for accountability among prosecutors. The excerpt emphasizes the distinct role of a prosecutor, who acts not merely as a party in a legal dispute but as a representative of the state, with a duty to ensure justice is achieved rather than merely securing convictions. The prosecutor must pursue cases vigorously while avoiding any unethical practices that could lead to wrongful convictions or indictments. This duty is particularly critical when dealing with grand jury proceedings, where the absence of judicial oversight heightens the risk of prosecutorial misconduct. The potential for significant harm from improper indictments necessitates heightened ethical standards for prosecutors and a commitment from the judiciary to uphold fairness. The document concludes with a ruling affirming the circuit court's dismissal of certain cases, instructing that these dismissals should be made with prejudice, indicating finality. Additionally, it notes that both OKP and the Estate benefited substantially from a financial transaction, and it references the resignation of attorney Richard L. Frunzi from the legal profession in lieu of disciplinary action. The State issued subpoenas to attorneys James Stubenberg and Jonathan Durrett representing Stone, who invoked privilege issues on his behalf. Subsequently, a court ruling clarified the scope of their potential testimony. In the case State v. Joao, the court criticized the prosecutor's actions in introducing a grand jury witness as a "defendant charged with murder," determining that such conduct contradicted fundamental principles of justice, which led to the dismissal of the indictment. Rule 503 outlines the lawyer-client privilege, defining key terms such as "client," "representative of the client," "lawyer," and "representative of the lawyer." It establishes that a client can refuse to disclose confidential communications intended to facilitate legal services, which includes interactions among clients, their representatives, and lawyers. The privilege can be claimed by the client or their legal representatives, except in specific circumstances, including communications intended to further a crime or fraud, communications reflecting intent to commit a harmful act, and issues arising between parties claiming through a deceased client. Exceptions also cover breaches of duty between lawyers and clients and communications relating to documents attested by the lawyer. Communications relevant to a common interest among clients, when made to a shared lawyer, are generally protected under attorney-client privilege in legal actions involving those clients, as noted in the Hawai`i rules of professional conduct. The text emphasizes the abundance of legal authority regarding attorney-client privilege and the challenges in seeking exceptions to it. It acknowledges that while law enforcement may need to question witnesses confidentially, the determination of privilege must be evaluated case-by-case, ensuring due process. The prosecutor is required to seek a court ruling on privilege issues if the privilege holder is not present to assert their rights. The analysis of Frunzi's testimony indicates that it was largely privileged and not subject to the crime-fraud exception. Aipa's testimony, which involved legal advice related to the duties of the Estate trustees, was similarly deemed privileged, contradicting the State's claim that it did not qualify for privilege. The State's characterization of Aipa’s testimony as providing specific information for the grand jury was actually legal advice, reinforcing its privileged status. The discussion references Texas law to illustrate that trustees, like those in Hawai`i, are considered the real clients of the attorney consulted for trust administration, although the court chooses not to delve into the implications of this issue further. Ultimately, no judgment concerning probable cause is made in light of the appeal's outcome.