State of Maryland, Office of the Attorney General v. Universal Elections, Inc. et al
Filing
79
MEMORANDUM. Signed by Judge Catherine C. Blake on 5/29/12. (jnls, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
STATE OF MARYLAND,
OFFICE OF THE ATTORNEY GENERAL
v.
UNIVERSAL ELECTIONS, INC., ET AL.
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Civil No. CCB-10-3183
MEMORANDUM
The State of Maryland brought this civil enforcement action against Universal Elections,
Inc., Julius Henson, and Rhonda Russell, alleging violations of the Telephone Consumer Protection
Act (“TCPA”), 47 U.S.C. § 227, et seq., in connection with 112,000 anonymous prerecorded
telephone calls made to Maryland residents on Election Day, November 2, 2010. On May 25, 2011,
this court denied defendants’ motion to dismiss, finding that political robocalls are not exempt from
TCPA disclosure requirements and that the TCPA, as applied in this case, does not violate the First
Amendment.
On May 11, 2011, defendants filed a motion with this court to stay proceedings pending
resolution of the partially parallel criminal charges brought by the Maryland State Prosecutor against
defendant Henson. Defendants argued that Henson’s Fifth Amendment privilege in the state court
criminal proceedings would be threatened by discovery in this civil case. Concluding that legitimate
Fifth Amendment concerns could be dealt with appropriately as they arose, the court denied the
motion to stay on July 7, 2011. Discovery proceeded.
Now pending is the State of Maryland’s unopposed motion for summary judgment. The
State requests a finding that defendants knowingly violated the TCPA and are therefore liable for
1
treble damages. The motion requests a reduced damages award of $10,424,550. Upon review of the
pleadings and the applicable case law, the court determines that no oral argument is necessary. See
Local Rule 105.6. For the following reasons, summary judgment will be granted and damages will
be awarded in the reduced amount of $1,000,000 as to Henson and Universal Elections and $10,000
as to Rhonda Russell.
BACKGROUND
Universal Elections is a Maryland limited liability corporation that offers various services to
candidates for political office, including broadcasting prerecorded voice messages known as
“Robocalls.” (Universal Elections Website (“Website”), ECF No. 74-2; Russell Dep. 67, ECF No.
74-3.) Julius Henson is an owner and officer of the company, and Rhonda Russell is an employee
who was in charge of business development and campaign operations. (Russell Dep. 6–7, 9–13, 15.)
The Universal Elections website claims that the company’s employees have “over 100 years of
experience in the campaign business.” (Website 1.)
Defendants do not dispute the basic facts in this case.1 In short, the campaign of candidate
Robert L. Ehrlich, Jr. hired the defendants as political consultants in the months prior to the 2010
Maryland gubernatorial election.
(Politics Today, Inc., and Universal Elections Invoices
(“Invoices”), ECF No. 74-11.) As part of their work for the Ehrlich Campaign, Henson and Russell
wrote, recorded, and delivered the robocall message that is the subject of this lawsuit. (Russell Dep.
162–70, 192–201.) The message was sent to more than 112,000 Democratic voters on Election Day
2010. (Id. at 171–85, 203.) The message stated, in its entirety:
1
The facts of this case, as alleged by the State of Maryland, were reported in this court’s decision denying defendants’
motion to dismiss. They are repeated in part here.
2
Hello. I’m calling to let everyone know that Governor O’Malley and President
Obama have been successful. Our goals have been met. The polls were correct and
we took it back. We’re okay. Relax. Everything is fine. The only thing left is to
watch it on TV tonight. Congratulations and thank you.
(Id. at 30.) The evidence now in the record, including documentary evidence and deposition
testimony from Russell and from members of the Ehrlich Campaign, confirms that the purpose of the
message was to suppress the votes of the largely African-American and Democratic populations in
Baltimore City and Prince George’s County. (See Pl.’s Mot. Summ. J. 3–7, ECF No. 74-1; “Politics
Today Memo,” ECF No. 74-8; Marczyk Dep. 43, 60–64, 82–89, ECF No. 74-7; Russell Dep. 136–
45, 155–57; Russell Notes, ECF No. 74-9; Ehrlich Campaign Email, ECF No. 74-10.)2
Defendants delivered the message through the account Universal Elections maintained with
Robodial.org, LLC (“Robodial”), a Pennsylvania-based company whose automated call services
defendants used frequently. (Hampton Aff. ¶ 8, ECF No. 74-4.) Defendant Henson dictated the
contents of the message to defendant Russell. (Russell Dep. 165–67.) During that conversation,
Russell asked Henson about the authority line she knew to be required under Maryland state law.3
(Id. at 166, 191–94.) Henson told Russell not to include an authority line, ostensibly because the
Ehrlich Campaign did not want one included. (Id.) Russell then recorded the message, uploaded
two large lists of phone numbers of Democratic voters, sent test messages to Henson and to Ehrlich
Campaign staffers, and commenced the automated calls. (Id. at 91–100, 170, 186–87.) The
2
Defendants have claimed that the goal of the message was to spark last-minute Ehrlich voters to go to the polls, but this
explanation can hardly be credited, given the extensive documentary and deposition evidence of the strategy’s purpose,
as well as the fact that the message was sent only to lists of Democratic primary voters.
3
Md. Code Ann., Elec. Law § 13-401 requires campaign advertisements to contain an “authority line” providing
information identifying the campaign.
3
message, as delivered, did not include any information identifying the name or address of the caller
or the source of funding. (Id. at 191–92.)4
Robodial’s autodialing software showed that a total of 69,497 call recipients received the
entire recorded message and 16,976 recipients received only part of the message. (Hampton Aff. ¶¶
13–14.) The remaining persons who were called never answered their phone or the call otherwise
failed. (Id.) Over the course of the campaign, defendants submitted invoices to the Ehrlich
Campaign for $104,150. (Russell Dep. 158–60; Invoices, ECF No. 74-11.) Of that total, $22,000
was specifically invoiced for the robocall. (Invoices 7–8.)5
The first paragraph of Robodial’s Terms and Conditions states, among other things:
“Customer is responsible for compliance with the Telephone Consumer Protection Act of 1991 (the
‘TCPA’).” (Hampton Aff. ¶ 6; ECF No. 74-4, at 8.) And defendant Russell admits that she knew
about the TCPA restrictions prior to drafting and executing the automated calls. (Russell Interrog.
No. 12, ECF Nos. 74-12 & 74-13; Russell Dep. 46–51.) Defendant Henson has refused to answer
any questions regarding his knowledge of the TCPA or the legal requirements for campaign
advertising. Instead he has invoked his Fifth Amendment privilege against self-incrimination
individually and as the designee for Universal Elections.6
4
The State of Maryland alleges that Henson “repeatedly prepared and distributed campaign advertisements, including
radio ads, handouts and flyers that contained authority lines” for the Ehrlich Campaign during the 2010 cycle. The
message at issue in this case was “the only campaign communication that Henson prepared on behalf of the Ehrlich
Campaign of which [the State of Maryland] is aware that did not include language identifying the Ehrlich Campaign.”
(Pl.’s Mot. Summ. J. 10, ECF No. 74-1.)
5
Defendants were paid for their consulting work earlier in the campaign through another company, Politics Today,
Inc. (Invoices 1–6, ECF No. 74-11; Russell Dep. 15.) There is no dispute, however, that the robocall was produced
and delivered through Universal Elections. (Invoices 7–8; Russell Dep. 13.) Both companies appear to be owned by
Henson, and Russell worked for both companies as part of her employment with Henson. (Id. at 6.)
6
On June 17, 2011, Henson was indicted on four counts of election law violations. Russell was given immunity in the
state criminal case. On May 11, 2012, Henson was acquitted of one count of election fraud and two counts of conspiracy
to violate Maryland state election laws. He was found guilty, however, on the charge of conspiracy to distribute
campaign material without the authority line required by Maryland state law.
4
On March 15, 2012, the State of Maryland filed a motion for summary judgment in this case.
The motion is supported by documentary evidence and deposition testimony from defendant Russell
and from Ehrlich Campaign staff. The State argues that defendants violated the TCPA disclosure
provision and that the violation was knowing and therefore eligible for treble damages of $1500 per
violation. The State calculates that at least 69,497 full-length phone calls were received by voters
and thus that the treble damages award would exceed one hundred million dollars. The motion
suggests that the court apply the treble damages figure but award only one-tenth of that amount—
$10,424,550. (Pl.’s Mot. Summ. J. 21.)
STANDARD OF REVIEW
Federal Rule of Civil Procedure 56(c) provides that summary judgment “should be rendered
if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is
no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56(c)(2). The Supreme Court has clarified that this does not mean that any
factual dispute will defeat the motion. “By its very terms, this standard provides that the mere
existence of some alleged factual dispute between the parties will not defeat an otherwise properly
supported motion for summary judgment; the requirement is that there be no genuine issue of
material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (emphasis in original).
Whether a fact is material depends upon the substantive law. See id.
“Although the failure of a party to respond to a summary judgment motion may leave
uncontroverted those facts established by the motion, the moving party must still show that the
uncontroverted facts entitle the party to ‘a judgment as a matter of law.’” Custer v. Pan Am. Life
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Ins. Co., 12 F.3d 410, 416 (4th Cir. 1993); see Johnson v. United States, 683 F. Supp. 2d 379, 381
(D. Md. 2010). “Thus, the court, in considering a motion for summary judgment, must review the
motion, even if unopposed, and determine from what it has before it whether the moving party is
entitled to summary judgment as a matter of law.” Custer, 12 F.3d at 416.
DISCUSSION
The TCPA makes it unlawful for any person to “make any telephone call using any
automatic telephone dialing system . . . that does not comply with the technical and procedural
standards prescribed under this subsection, or to use any . . . automatic telephone dialing system in a
manner that does not comply with such standards.” 47 U.S.C. § 227(d)(1). Among the “technical and
procedural standards” provided by the Act are the following:
[A]ll artificial or prerecorded telephone messages (i) shall, at the beginning of the
message, state clearly the identity of the business, individual, or other entity
initiating the call, and (ii) shall, during or after the message, state clearly the
telephone number or address of such business, other entity, or individual[.]
Id. § 227(d)(3)(A). The Act authorizes state attorneys general to bring actions to enforce certain
sections of the TCPA, including the § 227(d) identification disclosure requirements. Id. § 227(g)(1).
When a State brings a claim, it may recover “actual monetary loss or receive $500 in damages for
each violation.” Id. “If the court finds the defendant willfully or knowingly violated such
regulations, the court may, in its discretion, increase the amount of the award to an amount equal to
not more than 3 times the amount available under the preceding sentence.” Id.
This court’s memorandum opinion denying defendants’ motion to dismiss addressed a series
of legal questions related to the applicability of the above TCPA requirements to the defendants in
this case. The court there determined, inter alia, that (1) political robocalls are not exempt from the
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TCPA disclosure requirements; (2) persons who retain the services of outside companies like
Robodial may be liable under the TCPA, even if the offending calls are transmitted through the
outside service; (3) corporations and individual corporate officers may separately be held liable
under the TCPA; and (4) the TCPA as applied in this case does not violate the First Amendment.
Maryland v. Universal Elections, 787 F. Supp. 2d 408, 412 (D. Md. 2011).
In this summary judgment motion, the focus now shifts to the sufficiency of the undisputed
evidence in the record. A lengthy discussion is unnecessary, as the record is unambiguous.
Universal Elections, by and through both Russell and Henson, drafted and sent a message that failed
to include the disclosure information required by § 227(d)(3)(A). As Russell’s testimony makes
clear, both she and Henson were directly and personally involved in the creation of the offending
message. Accordingly, they both “actually committed the conduct that violated the TCPA.”
Baltimore-Washington Tel. Co. v. Hot Leads Co., 584 F. Supp. 2d 736, 745 (D. Md. 2008) (quoting
Texas v. Am. Blast Fax, Inc., 164 F. Supp. 2d 892, 897–98 (W.D. Tex 2001)). While Henson refused
to answer any questions about his conduct, the documentary evidence in the record and the
deposition testimony of Russell and the Ehrlich staffers establish without any doubt that Henson
discussed plans to suppress the votes of African-American Democrats, recorded the plan in the
strategy memo sent to the Ehrlich campaign, and ultimately dictated and authorized the offending
message. Thus, both Henson and Russell, in addition to Universal Elections, may be held jointly
and severally liable for any damages this court may award under the TCPA. See BaltimoreWashington Tel. Co., 584 F. Supp. 2d at 745.
The State of Maryland also argues persuasively that Henson and Russell, and therefore
Universal Elections, knowingly violated the statute. “The Federal Communications Commission has
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interpreted ‘willful or knowing’ under the Telecommunications Act (of which the TCPA is a part),
as not requiring bad faith, but only that the person have reason to know, or should have known, that
his conduct would violate the statute.” Am. Blastfax, 164 F. Supp. 2d at 899 (citing Intercambio,
Inc., 3 FCC Rcd. 7247 (1988), 1988 WL 486783). Applying that standard here,7 there is no question
that both Russell and Henson knowingly violated the TCPA disclosure requirements. Russell admits
that she was aware of the relevant TCPA requirement months, if not years, before the relevant
decisions in this case. And she acknowledges that she and Henson actively decided not to include
the required identifying information in the message.
During his deposition as the corporate designee of Universal Elections, Henson refused to
answer any questions about his knowledge of the statute. Nonetheless, the court may infer from his
actions that he acted knowingly. To begin with, in Henson’s role as owner and officer of Universal
Elections, he undeniably had reason to know of and should have known about the TCPA disclosure
requirements. The company’s website advertises its extensive experience in the campaign business
and the core service of providing automated phone calls. The Universal Elections website offers
seven different service packages directly to candidate campaigns, (Website 23), and two additional
packages for independent expenditure campaigns. (Id. at 25–29.) Every one of the nine different
packages offers automated calls like the ones Universal Elections provided to the Ehrlich Campaign.
An individual who owns and actively runs a small business with a focus on a heavily regulated
industry such as election services must be presumed to have knowledge of the basic federal statutes
7
The Fourth Circuit has not specifically analyzed the “willfully or knowingly” language in the TCPA. In BaltimoreWashington Tel. Co. v. Hot Leads Co., another judge in this district noted that a separate provision of the United States
code defines “willful” as “conscious and deliberate.” 584 F. Supp. 2d 736, 745 (D. Md. 2008) (quoting 47 U.S.C. §
312(f)(1)). No judge within this district appears to have considered the definition of “knowing” in this context. In any
case, the evidence in the record is sufficient to meet the “willful” standard in Baltimore-Washington Tel. Co. as well as
the “knowing” standard in American Blast Fax.
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and regulations governing those services.8
Furthermore, the State of Maryland is entitled to an adverse evidentiary inference from
Henson’s invocation of his Fifth Amendment privilege against self-incrimination. Henson refused to
respond personally to any interrogatories or document requests, or to the request for a deposition.
And, as the corporate designee for Universal Elections, he refused to answer all of the questions
relevant to his knowledge of the TCPA and other regulatory requirements. In a criminal case, no
inference can be drawn from a defendant’s refusal to testify. But the “prevailing view” is that “the
Fifth Amendment does not forbid adverse inferences against parties to civil actions when they refuse
to testify in response to probative evidence offered against them.” Baxter v. Palmigiano, 425 U.S.
308, 318 (1976).
Here, Henson’s refusal to answer basic questions about his knowledge
corroborates the reasonable inference that he had knowledge of the relevant TCPA regulations
through his extensive campaign experience.9 Combined with the other evidence, including Russell’s
deposition testimony, this leaves no genuine dispute that Henson knowingly and willfully violated
the statute.10
The State of Maryland does not attempt to demonstrate actual damages in this case. Rather,
the State urges the court to apply the statutory damages of $500 per violation, trebled to $1500 per
violation because the actions met the knowing and willful standard. Because the plain language of
the statute states that it is unlawful to “make any telephone call . . . that does not comply” with the
8
Indeed, the Universal Elections website contains references to other statutes and regulations, such as 11 C.F.R.
100.16(a), which defines “independent expenditure.” (Website 25.)
9
The court observes from media coverage that Henson did testify at his criminal trial, where he apparently claimed
that a member of the Ehrlich Campaign instructed him not to include an authority line. See Ben Mook, Same Facts,
Different Outcome, The Daily Record, May 14, 2012, at 7B.
10
The court also notes that a finding of scienter is not necessary to the final damage award in this case, which is
discussed below. Even if the court determined that no evidence existed to support the claim that Henson knowingly
violated the statute, the base calculation of damages in this case (approximately $34 million) would exceed the amount
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disclosure requirements, each phone call made should be considered a separate violation under the
Act. Robodial’s phone system shows that phone calls were made to and received in full by at least
69,497 voters. Thus, the base damages award would be more than $34,000,000. If trebled because
the violations were knowing, the award would exceed one hundred million dollars. Here, instead of
requesting the maximum allowable damages, the State of Maryland requests only one tenth of this
amount, or $10,424,550, which is less than a third of the amount the statute would authorize even if
the violation were not willful or knowing.
Unlike the Fair Debt Collection Practices Act, the TCPA contains no upper limit on damage
awards. See 15 U.S.C. § 1692k(a)(2)(B) (limiting class damages to the lesser of 1% of net worth or
$500,000). At some point, however, statutory damage awards may violate the Fifth Amendment
guarantee of due process or the Eighth Amendment’s prohibition of cruel and unusual punishment.
The Supreme Court has held that statutory penalties violate due process “only where the penalty
prescribed is so severe and oppressive as to be wholly disproportioned to the offense and obviously
unreasonable.” St. Louis, I.M. & S. Ry. Co. v. Williams, 251 U.S. 63, 66–67 (1919). After analyzing
the “numerous public harms addressed by the TCPA,” another judge in this district recently held that
“the statutory penalties under the TCPA are not ‘obviously unreasonable’ and are not ‘so severe and
oppressive’ as to violate due process.” Pasco v. Protus IP Solutions, Inc., 826 F. Supp. 2d 825, 2011
WL 5965834, at *10 (D. Md. 2011) (quoting Williams, 251 U.S. at 67)); see also Kenro, Inc. v. Fax
Daily, Inc., 962 F. Supp. 1162, 1167 (S.D. Ind. 1997) (finding that Ҥ 227(b)(3)(B), which provides
for a minimum penalty of $500 for each violation of the TCPA, does not violate the Due Process
clause of the Fifth Amendment”). This court agrees.
requested by the State of Maryland.
10
While the TCPA’s damages provisions appear constitutional on their face, damages may
become unconstitutional as applied in an individual case. In such situations, a damages award may
violate due process or constitute an “excessive fine” under the Eighth Amendment. See Pasco, 2011
WL 5965834, at *10 (citing Browning–Ferris Indus. of Vt., Inc. v. Kelco Disposal, Inc., 492 U.S.
257, 264–65 (1989)); see also Korangy v. U.S. F.D.A., 498 F.3d 272, 277 (4th Cir. 2007) (noting
that the Eighth Amendment, though traditionally applied to criminal penalties, may also apply to
certain civil penalties).11 For example, in Texas v. Am. Blastfax, Inc., the court found that an award
of approximately $ 2.34 billion “would be inequitable and unreasonable.” 164 F. Supp. 2d at 900.
To remedy the problem, the court in that case interpreted the damages provision as providing for “up
to” $500 per violation and adjusted the award based on the actual cost of an unsolicited fax, which
resulted in a final award of $459,375 plus attorney’s fees. Id. at 901; see also Centerline Equip.
Corp. v. Banner Pers. Serv., Inc., 545 F. Supp. 2d 768, 778 (N.D. Ill. 2008) (noting that if the
defendant “were able to show that the statutory damages are in fact so excessive as to be improper,
the appropriate remedy would be a reduction of the aggregate damage award, not a dismissal”).
An award of the magnitude requested by the State of Maryland is not without precedent. See
Yuri R. Linetsky, Protection of "Innocent Lawbreakers": Striking the Right Balance in the Private
Enforcement of the Anti "Junk Fax" Provisions of the Telephone Consumer Protection Act, 90 Neb.
L. Rev. 70, 93 (2011) (citing cases). For example, in 2001, a Georgia state court entered a judgment
11
In Korangy v. U.S. F.D.A., the FDA sought a total of $1,058,000 in monetary sanctions from a physician and his office
for violations of the Mammography Quality Standards Act. 498 F.3d 272, 275 (4th Cir. 2007). While the Act authorized
a statutory maximum of $10,000 per violation, the FDA reduced its request to only $3,000 per violation out of concern
for the defendants’ ability to pay. Id. The court noted that “[i]f a civil penalty is punitive and thus subject to the Eighth
Amendment, it will be found constitutionally excessive only if it is ‘grossly disproportional to the gravity of [the]
offense.’” Id. at 277 (quoting United States v. Bajakajian, 524 U.S. 321, 334 (1998)). After considering the health risks
associated with the defendants’ violations, the court concluded the reduced penalty did not violate the Eighth
Amendment.
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of nearly $11.9 million against Hooters of Augusta, Inc. for willful violation of the TCPA. Id. at 95.
In 2002, the FCC fined Fax.com $5.3 million for TCPA violations. Id. at 93 (citing Fax.com, Inc.,
17 FCC Rcd 15927, 15927 (2002)). And, in 2001, the Dallas Cowboys settled a TCPA suit for
$1.73 million for having sent 125,000 unsolicited faxes offering to sell tickets to football games. See
Paul J. Batista, The Perils of Telemarketing under the Telephone Consumer Protection Act: Sending
Unsolicited Faxes Costs Dallas Cowboys $1.73 Million, Leaves Dallas Mavericks under Full Court
Pressure, 25 Hastings Comm. & Ent. L.J. 231, 258 (2003).
Nonetheless, without suggesting that a $10 million award would necessarily be
unconstitutional, the court in the exercise of its discretion will not hold the defendants jointly and
severally liable for the full amount requested by the State of Maryland. To begin with, it would be
inequitable and unreasonable to hold Henson and Russell equally liable for the TCPA violations that
Henson, an owner and officer, ordered Russell, an employee, to carry out. The court will therefore
reduce Russell’s liability to $10,000.12 And, while Henson and Universal Elections should bear a
heavier burden, a $10 million penalty is disproportionate to the size of the company and the
defendants’ presumptive ability to pay. See Am. Blast Fax, 164 F. Supp. 2d at 900 (finding the
proposed award inequitable as against “two individuals and a fifteen-employee company”).
Accordingly, the court will hold Henson and Universal Elections jointly and severally liable for a
damage award reduced to approximately one-tenth of the State’s request—$1,000,000.
12
The record shows that Henson planned the robocall with the Ehrlich Campaign staff and called Russell with
instructions. There is no indication that Russell did anything more than execute orders from Henson.
12
This sum is higher than the damages ultimately awarded in American Blast Fax, but the
difference is justified. The court in American Blast Fax entered its judgment over a decade ago.
Further, it relied on a specific and uncontested figure for the cost of each unsolicited fax. The
Universal Elections defendants have provided no similar figure on which the court can rely, nor
would such a figure necessarily be appropriate here. The public costs of Universal Elections’s
violations, though not calculable, are significantly greater than the public costs in American Blast
Fax. See Williams, 251 U.S. at 66 (suggesting consideration of “public wrong” is particularly
appropriate when damages will accrue to the state). Cf. BMW of N. Am., Inc. v. Gore, 517 U.S. 559,
582 (1996) (noting higher punitive damage awards “may . . . be justified in cases in which . . . the
monetary value of noneconomic harm might have been difficult to determine”). In American Blast
Fax, the defendants’ offending conduct consisted of unsolicited fax advertisements for products and
services. 164 F. Supp. 2d at 896 (discussing, for example, fax advertisements for the Dallas
Mavericks basketball team). Here, through Universal Elections, Henson knowingly violated the
TCPA with the express purpose of suppressing the votes of a minority group in a contested statewide
gubernatorial election. While Henson’s efforts on behalf of the Ehrlich Campaign were ultimately
unsuccessful, his actions nonetheless damaged public faith in the democratic process that is at the
core of our system of government.
A separate order follows.
May 29, 2012
Date
/s/
Catherine C. Blake
United States District Judge
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