The saga of the government’s ill-fated prosecution of Alex Latifi and his company Axion Corporation continues. The federal district court judge delivered yet another forceful gavel whack to the hands of the prosecutors and awarded the acquitted defendants legal fees, filing costs and expert witness fees and costs incurred in defending the prosecution. Latifi and Axion were accused of violating the Arms Export Control Act by emailing to a Chinese company technical drawings of a part used in the Black Hawk helicopter. The defense successfully argued that the drawing was available on the Internet and subject to the public domain exception under the International Traffic in Arms Regulations.

This is the first time, at least that I am aware of, where the U.S. government has been ordered to reimburse legal fees and costs incurred by defendant during an unsuccessful prosecution for export violations. Sources close to the case cited statements by prosecutors that they didn’t care whether the prosecution was successful and that their only goal was to put Latifi and Axion out of business.

There’s an interesting angle to the award aside from its uniqueness. We had previously noted that the defense team filed a motion under the Hyde Amendment (18 U.S.C. § 3006A Note) for recovery of attorneys’ fees, but in fact the court awarded the fees under the Civil Asset Forfeiture Reform Act (“CAFRA”) which provides for larger recoveries by acquitted defendants and a looser standard for recovery. Under the Hyde Amendment the acquitted defendant must prove that the prosecution was “vexatious, frivolous, or in bad faith.” Additionally, legal fees recovered under the Hyde Amendment are subject to the $125 per hour fee cap provided in 28 U.S.C. § 2412(d)(2)(A). CAFRA, on the other hand, imposes no such fee limit and provides for recovery in a forfeiture proceeding in which the defendant “substantially prevails.”

The reason that CAFRA was deemed applicable in this case was because the prosecutors included civil forfeiture counts in the indictment. This has been an increasing practice where prosecutors seek forfeiture of all profits related to the illegal exports. The decision of the district court in the Axion case to use the forfeiture claims as a basis for awarding all costs incurred by the defendant as a result of the forfeiture claim may cause prosecutors to rethink including such claims in the indictment.

(Full disclosure: I was interviewed and quoted in the linked article about the award of attorneys’ fees to the defendants in the Axion case)

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