Fed’l public defender bows out of Hilo scam case


A hearing was supposed to have been held Tuesday to decide whether bail would be set for a 32-year-old Hilo man accused of scamming investors of more than $1 million in an “advance fee” scheme.

Instead, the Federal Public Defender’s Office has bowed out of the case of Justin Wade Smith, citing the effects of federal budget cuts on the office that provides legal counsel to many of the criminal defendants in U.S. District Court.

“The Office of the Federal Public Defender is undergoing budget constraints due to sequestration. As a result, this office now has only three line attorneys and cannot devote the resources to defend this type of large discovery, time-consuming case,” First Assistant Federal Defender Alexander Silvert wrote in his motion filed Monday.

Silvert said Tuesday afternoon that Smith’s case is the first the Federal Public Defender’s Office in Honolulu has turned down because of sequestration cuts.

“We’ve notified the court that we’ll potentially be refusing to take certain cases. This, in fact, is the type of case that we’ve outlined as the type of case we wouldn’t take,” Silvert said.

Silvert said that U.S. Magistrate Judge Richard Puglisi granted the motion to withdraw and that Smith’s detention hearing has been rescheduled for Friday. Puglisi will appoint a private attorney for Smith, who is scheduled for trial on 39 counts of wire fraud Oct. 29 before U.S. District Judge J. Michael Seabright. Taxpayers will pick up the tab to defend Smith, who remains in custody without bail at the Federal Detention Center in Honolulu.

“I don’t know very much about the case. I just know that in a white-collar fraud case, be it a Ponzi scheme or a tax fraud case, there’s usually a ton of paperwork,” Silvert said. “In addition to the paperwork, there is also forensic accountants that we would probably have to hire to help us go through it and follow the money trail. There are also a lot of witnesses that we would have to track down, investors or people who claim they were scammed. … There’s airfare for multiple trips for our investigators to go. And when you put that all together … we just can’t do this type of case at this point.”

Silvert added, “We’ve had to lay off a number of attorneys, a number of staff. … We’ve reduced our staff dramatically and the effects are that the attorneys who are left, our caseload has gone up tremendously. Given that, sequestration hasn’t seemed to have any effect on the prosecution side of the equation. They’re fully staffed and they keep bringing more cases. It’s a tragedy and it’s a travesty of justice and, quite frankly, the politicians are at fault for this.”

Smith was indicted Aug. 21 by a federal grand jury and was arrested by FBI agents and local police the following day in Hilo.

According to the indictment, Smith falsely claimed to be an heir to a sizable trust fund but needed money from others to access his inheritance. He allegedly promised sizable investment returns to those who helped him by providing money for purported fees.

The document further alleges that Smith falsely claimed to represent a federal law enforcement agency seeking money from investors to fund law enforcement operations. He allegedly promised investors sizable returns that would be derived from law enforcement seizures.

The indictment states that Smith was neither a trust fund heir nor a representative of any law enforcement agency, and none of the money given to him by purported investors was used in the manner Smith allegedly told victims it would be.

The indictment states that funds Smith allegedly bilked from victims were received “in cash, through the loading of Smith’s Green Dot prepaid debit card, or via Western Union or Moneygram wire transfers.”

For each of the 39 wire fraud counts, Smith faces a maximum period of imprisonment of 20 years and a fine of up to $250,000, if convicted.

Email John Burnett at jburnett@hawaiitribune-herald.com.