United States v. CannistraroUnited States v. Cannistraro
Riсhard S. Cannistraro (“Cannistraro”) has filed this motion pursuant to
BACKGROUND
The First Indictment, which was filed on 28 May 1987, charged Cannistraro with nine substantive criminal offenses: conspiracy to commit securities fraud (count one), creation and use of false nominee accounts in connection with the purchase and sale of securities (counts two-five) and creation and distribution of false and misleading research report in violation of section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934,
The First Indictment charged that Cannistraro manipulated the price of securities of Liquidation Control, Inc. (“LCI”) and Toxic Waste Containment, Inc. (“TWC”), in concert with Bynum Vickory (“Vickory”), portfolio manager of the Bullock Fund, and William Fritz (“Fritz”), portfolio manager of the M & I Fund (collectively the “Funds”). 2 Cannistraro agreed with Vickory and Fritz that they would direct the Funds to purchase large amounts of stock in LCI and TWC. As an inducement for the cooperation of Vickory and Fritz, Cannistraro promised to use his influence with principals of LCI and TWC to have stock issued to Vickory and Fritz.
Cannistraro set up false nominee accounts at Monarch Funding, Inc. (“Monarch”) in the names of his father, his aunt and two other people for the purpose of concealing the interests of Vickory and Fritz in LCI and TWC. In addition, Cannistraro was a partial beneficial owner of stock in those companies in the nominee accounts and knew he would personally benefit from the purchase of those companies by the Funds. In furtherance of this conspiracy, Cannistraro drafted a false and misleading research report favorably evaluating TWC for Wood Gundy, Inc. (“Wood Gundy”), where he was a securities analyst. Cannistraro also bribed a grand jury witness, Carl Alan Key (“Key”), to lie under oath about Cannistraro’s involvement with the nominee stock accounts.
Cannistraro was arrested on 15 May 1987 and released after posting $125,000 in cash and a bond. He retained David W. O’Con-nor (“O’Connor”) and Marvin Gersten (“Gersten”) (collectively “trial counsel”) to represent him in his defense. Trial counsel entered an appearance at Cannistraro’s arraignment on 12 June 1987, when he pleaded not guilty to all counts of the First Indictment. Also on that date, an order was filed directing for discovery and setting the return date for pretrial motions and the trial date. See Order for Discovery and Inspection, filed 12 June 1987. Cannistraro was not detained pending trial. See Order Setting Conditions of Release, filed 16 June 1987.
On 18 June 1987, trial counsel filed motions for disclosure of witness lists and discovery pursuant to
After the pretrial motion practice, 3 on or about 16 September 1987 Cannistraro’s trial counsel advised the court of Cannistraro’s intention to plead guilty to all nine counts of the First Indictment. Soon thereafter, the Government submitted a letter to the cоurt setting forth the legal and factual bases necessary to establish Cannistraro’s guilt on each count of the First Indictment. See Letter of Robert P. Warren, A.U.S.A., dated 18 September 1987 (“18 September 1987 Letter”). 4
On 21 September 1987, Cannistraro pleaded guilty to counts one through nine of the First Indictment without the benefit
At the
Cannistraro testified under oath at the
Cannistraro stated he knew that by entering the plea of guilty to all counts of the First Indictment he was exposing himself to a maximum term of fifty years in prison. Id. at 20. He also acknowledged he could be fined up to $76,000 as provided by statute or alternatively fined up to $250,000 or twice the gain to him or loss to his victims. Id.
Regarding the factual basis for his guilty plea, Cannistraro read the following statement which he prepared in collaboration with trial counsel in advance of the
I am pleading guilty to the counts in this indictment.
As to count number one, I agreed with Bynum Vickory and Bill Fritz that they would commit their respective funds to purchase Liquidation Control and that the M & I Fund and the Bullock Funds would likely be purchased [sic] of Toxic Waste Inc. in the open market.
As an inducement for the purchase of Liquidation Control, they or their nominees would each be allocated stock in Toxic Waste on the initial public offer of Toxic Waste.
I aided and abetted them in setting up the nominee accounts at Monarch Funding and helped them get their nominee [sic] allocated shares of Toxic Waste in the initial public offer. I knew that it was likely that the purchase of Liquidation Control by a fund would have the likely affect of increasing the value of the shares of Liquidation in the open market and that as a beneficial owner of outstanding shares of Liquidation, that I would likely benefit from the funds purchases of Liquidation.
As to count number two, I assisted in the opening of a nominee account in the name of Mary Godano in which account I had a partial beneficial interest.
I used this account to purchase Liquidation Control Incorporated stock on the initial public offer. I was able to get allocations of the initial offer in Liquidation due to my prominent role in the company and my personal business relationship with the president of Monarch, Leo [Eijsenberg [sic]. Even though I was an insider, I failed to disclose this in the prospectus on Liquidation Control’s initial public offer.
As to count number three, with my assistance Edward Cannistraro, my father, set up an account at Monarch in which I had a partial beneficial interest at Monarch. I was instrumental in getting an allocation of Liquidation Control stock at the public offer. I failed to disclose this in the prospectus on Liquidation Control’s initial public offer.
As to count number four, I set up a nominee account for myself at Monarch Funding in the name of Donna Lee Clarambeau. In this account, Toxic Waste stock was purchased by me under the initial public offer. Since I had a personal business relationship with the president of Monarch, Leo [Ei]senberg [sic], I was able to obtain an allocation in the initial offer of Toxic Waste. I did not. disclose this nominee account to the public and, specifically, I did not disclose the nominee account in my research report.
As to count number five, I set up a nominee account for myself at Monarch Funding in the name of Carl Alan Key. In this account also Toxic Waste stock was purchased by me under the initial public offer. I did not disclose this fact to the public and, specifically, I didn’t disclose this nominee account in my research report.
As to count number six, I sent the Wood Gundy research report on Toxic Waste to Ground Floor, hoping it would be used in Ground Floor’s publication.
I failed to advise them [sic] that I had not disclosed a certain nominees [sic] of mine purchased stock in Toxic Waste on the initial public offer. Moreover, I did not disclose my position at Liquidation Control Company, many whom [sic] officers were officers of Toxic Waste, nor did I disclose the arrangement with Bill Fritz and Bynum Vickory.
As to count number seven, I aided and abetted Bynum Vickory in opening up an account at Monarch for his nominee. I was aware of the fact that as part of the conspiracy in count number one, there would never be a transfer of money to the account, Vickory’s nominee at the time of a sale by Vickory’s nominee of Toxic Waste stock and that this transfer would likely be made using interstate commerce.
As to count number eight, when M & I Bank purchased the stock as part of the conspiracy in count number one, I knew that Continental Transfer Company was the transfer agent for Liquidation Control Incorporated and Toxic Waste and, therefore, there would likely be communication using the mails between Continental Transfer and the M & I Bank.
As to count number nine, I paid Carl Alan Key’s legal fees by giving him cash payments so he could pay those fees. This was agreed upon, since I believed it unfair for him to pay such legal fees, since he was my nominee and his fees arose because of that fact.
Although Carl Alan Key told me he received a subpoena and he was going to talk to Government officials, I do not know if, in fact, he actually went before the Grand Jury. Carl Alan Key, a close friend since college and I sat down to discuss the events leading up to his purchase of the Toxic Waste stock. In establishing the scenario, we put my role in the best possible light which was not accurate, in fact.
Id. at 25-29. Cannistraro testified he had reviewed the statement with his attorney and it was an accurate, true and correct account of his conduct. Id. at 24-25.
Following the reading of Cannistraro’s statement, the Assistant United States Attorney further inquired into the factual basis for the guilty plea by questioning Cannistraro regarding his alleged criminal conduct on each element of each count of the First Indictment. Warren read from a list of eighty-nine questions prepared by the
At the end of the
Now, based upon the testimony that I’ve heard today, based upon the answers to the questions and the statements that you gave without questions, it’s my determination that yоu were competent to enter the plea; that you were adequately represented by counsel and that you were aware of the charges in the indictment. You understood each of the elements of the charges in the indictment; that there was no plea [agreement], there was no promise, no inducement, no threat in order to have you come here and enter the plea. You did so on your own accord.
That you understand your constitutional rights and you knowingly and voluntarily waived your constitutional rights understanding the penalties, monetary and imprisonment type penalties which could attach.
You gave an adequate factual basis.
Accordingly, I’ll accept the plea and adjudge you guilty of each count of the indictment.
Id. at 56-57.
On 24 September 1987, a detention hearing was held and Cannistraro was allowed to remain free on bail pending sentence, but the amount of his bail was increased by $450,000 to $575,000. Cannistraro posted municipal bonds and certificates of deposit amounting to approximately $450,000 in satisfaction of bail.
United States v. Cannistraro,
At a 2 November 1987 sentencing hearing, facing a maximum sentence of fifty years in prison, Cannistraro was sentenced to a total of eight years in prison and five years of probation. In addition, he was fined $330,000 and was ordered to pay $394,947
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in restitution to his victims.
Cannistraro,
Following the sentencing, Cannistraro filed motions for reduction of his sentence pursuant to
After the denial of Cannistraro’s
The matter was remanded for a determination of whether the statistics were relied on in sentencing Cannistraro and for resentencing in light of the supplemented record. Significantly, the Third Circuit stated the identical sentence of imprisonment could be reimposed if the list of average sentences was not relied on in formulating the sentence of imprisonment. Id. at 1217. At a hearing on 5 May 1989 regarding the Third Circuit’s opinion, I stated that I did not rely on the table of average sentences contained in the presentence report in imposing the eight year term of incarceration on Cannistraro. See Transcript of Proceedings, 5 May 1989, (“5/5/89 Tr.”) at 3.
Approximately two weeks after the Third Circuit remanded the case for resentencing — and one and one-half years after the
In support of the
The Government and Cannistraro submitted briefs with respect to the claim that Cannistraro did not establish an adequate factual basis at the
Significantly, after having had an opportunity to hear the testimony of O’Connor and Gersten, Cannistraro decided not to testify in support of the serious allegations he made against them in his affidavit. Cannistraro thus did not subject himself to cross-examination regarding those allegations. Instead, he merely offered his affidavit as evidence of his complaints of ineffective assistance of counsel. At the evidentiary hearing, Cannistraro affirmatively acknowledged that he had considered the circumstances and concluded he should not
The Government and present counsel were requested to brief the issues of whether the affidavit should be considered in the absence of supporting testimony and whether the
After raising the question whether the
Present counsel did in fact make a request to reopen the
After a delay due to problems with scheduling the witnesses, the
The evidentiary hearings were continued on 8 February 1990. On that date, the Government called O’Connor for cross-examination and present counsel conducted redirect examination of O’Connor. The Government offered into evidence fifty exhibits and Cannistraro offered four. Both Cannistraro and the Government rested their cases. Again, Cannistraro did not testify. See Transcript of Proceedings, dated 8 February 1990 (“2/8/90 Tr.”).
At the conclusion of the 8 February 1990 hearing, the court directed that the Government and present counsel submit proposed findings of fact and conclusions of law regarding the ineffective assistance of counsel claim. These submissions were received in mid-March 1990. 13
DISCUSSION
As noted previously, Cannistraro’s motion to withdraw his guilty plea is based on
A. The “Fair and Just” Standard
A defendant who has pleaded guilty to a crime in federal court may not withdraw the plea as a matter of right.
Government of Virgin Islands v. Berry,
A defendant moving to withdraw his guilty plea prior to sentencing has the burden of coming forth with a “fair and just reason” why his plea should not stand.
Cannistraro argues, although he was sentenced once already, the instant motion must be considered under the pre-sentencing standard of
Cannistraro’s argument, however, is not entirely persuasive. The circumstances of this case suggest Cannistraro should be held to a higher standard than that provided by
Second, this case does not involve a situation in which the sentence was vacated in its entirety on appeal. The Circuit affirmed the restitution ordered in conjunction with the sentence of imprisonment. The imposition of fines was not a subject of the appeal. Thus, only one part of the three part sentence was vacated; the other two portions of the sentence were not affected by the Circuit’s decision. Simply put, Cannistraro is not in the same position as he was before imposition of sentence.
Cf. Allen,
Finally, resentencing in this case will not involve further substantive fact findings. An additional presentencing report and sentencing hearing will not be necessary. Under the instructions of the Third Circuit, the resentencing of Cannistraro will involve only the factual determination of whether the statistical list of average sentences was relied upon in imposing the original sentence nearly two years ago.
Cannistraro,
In the
Allen
case, the district court accepted a guilty plea and imposed a sentence of imprisonment which was vacated on appeal.
17
Allen,
Allen argued his motion should be decided under the less stringent standard of
Although there are serious doubts as to the applicability of the
The Third Circuit considers three factors in evaluating whether to permit a defendant to withdraw a plea prior to sentencing: (1) whether the defendant asserts his innocence, (2) whether withdrawal will prejudice the Government, and (3) the strength of the defendant’s reasons to withdraw the plea.
Huff,
1. Assertion of Innocence
The first factor to which a court must look under the Third Circuit’s test for
In this case, Cannistraro has made no credible assertion of innocence. Cannistraro’s affidavit, which was the original basis of this motion, never employs the words “innocent” or “not guilty” in relation to his conduct. Instead, Cannistraro’s affidavit merely asserts trial counsel did not effectively research the crimes with which Cannistraro was charged:
8. Trial counsel advised me to plead guilty to several Counts of the First Indictment, despite my belief [ 19 ] that my actions may not have violated the law. In fact, the sentencing memorandum submitted by trial counsel stated for several counts that, although a guilty plea was entered, it was possible that no violation of law occurred.
9. Trial counsel did not thoroughly investigate the factual underpinnings necessary to result in a conviction under each count. My own subsequent research has shown that I pleaded guilty to conduct that was either not criminal under the charges contained in the instant indictment or has never been made criminal by federal statute.
Cannistraro Aff. at ¶¶ 8-9 (emphasis added). Cannistraro nevertheless argues these statements are an assertion of innocence. In support of this argument, he notes that Assistant United States Attorney John Fietkiewicz (“Fietkiewicz”) stated at the
Cannistraro’s argument is implausible. Cannistraro did not submit a credible affidavit to establish his innocence; he failed to testify at any of the evidentiary hearings regarding this motion. Negative inferences may be drawn from Cannistraro’s failure to testify in support of his affidavit.
See United States v. Martinez,
The delay of one and one-half years between the entry of the plea and the filing of the
A swift change of heart is itself a strong indication that the plea was entered in haste and confusion____ By contrast, if the defendant has long delayed his withdrawal motion, and has had the full benefit of competent counsel at all times, the reasons given to support withdrawal must have considerably more force.
United States v. Barker,
Significantly, Cannistraro refrains from asserting his innocence even at this stage. As noted, his affidavit never affirmatively states he did not commit the crimes with he is charged. There is a substantial difference between the statement “I am innocent” or “I am not guilty” and the equivocal statement that: “Trial counsel advised me to plead guilty to several Counts of the First Indictment, despite my belief that my actions may not have violated the law.” Cannistraro Aff. at ¶ 9. Cannistraro was free to state the former, but merely advances the latter. This type of hedging cannot be taken as a credible assertion of innocence, esрecially in the absence of supporting testimony. Cannistraro merely contends that the plea allocution did not establish an adequate factual basis. That is not an assertion of innocence.
Fietkiewicz’s comments did not concede this point. After suggesting that Cannistraro’s affidavit may arguably contain an implied assertion of innocence, Fietkiewicz stated that the question of whether Cannistraro pleaded guilty to charges that were not criminal was “another issue” relating to “whether the plea allocution is sufficient.” 20 2/8/90 Tr. at 295. These statements establish that Fietkiewicz, far from interpreting the Cannistraro affidavit as an assertion of innocence, agreed with the distinction drawn above between an assertion of innocence and a legal argument that there was not an adequate factual basis for the guilty plea.
There is nothing to support present counsel’s claim that “defendant never admitted,
The sentencing memorandum, however, does not assert Cannistraro’s innocence as to any count of the First Indictment. In fact, it states “he knows what he did was illegal and wrong.” Id. at 2. In light of Cannistraro’s failure tо testify and the absence of any assertion of innocence in his affidavit, the sentencing memorandum does not contain a credible assertion of innocence. Indeed the comment is not an assertion by Cannistraro at all — much more an assertion of innocence.
Cannistraro’s testimony at the
2. Prejudice to the Government
There is no burden on the Government to come forth with a showing of prejudice, absent the production by the defendant of a fair and just reason to withdraw his guilty plea.
Berry,
It is, however, almost three years after Cannistraro’s First Indictment. The distance in time from the occurrences of the acts and conduct to which Cannistraro pleaded guilty is great. As noted, Cannistraro never asserted ineffective assistance of counsel or claimed the absence of an adequate factual basis for his plea until after his sentence of imprisonment was vacated on appeal. The clear inference to be drawn is that neither claim has factual support and both are meritless.
3. Reasons to Withdraw his Guilty Plea
Cannistraro has offered three alternative challenges to his guilty plea. He argues that, as to counts one through eight of the First Indictment, his guilty pleas involved conduct which was not criminal under federal law.
21
He also claims he would not have pleaded guilty but for the ineffective assistance of trial counsel in preparing for trial and in persuading him to enter a plea of guilty. Cannistraro finally argues pro se that his guilty pleas should be set aside because the
a. Adequate Factual Basis
“An otherwise valid guilty plea may be properly accepted
even if the defendant during the colloquy denies factual guilt,
so long as a factual basis is adequately provided by other sources.”
Trott,
At the
Cannistraro cannot dispute that his plea was entered voluntarily. Following the questioning at the
Cannistraro is a highly educated individual,
22
who demonstrated at the
There is no factual basis for the attack on the prior finding at the
In short, there is no need to rehash the factual basis of Cannistraro’s guilty plea merely because he decided, after what amounts to a loss on appeal,
23
he did not like the sentence imposed.
Cf. Huff,
The statement read by Cannistraro admitted that he conspired with Vickory and Fritz to have the Funds purchase LCI and TWC. In exchange for their promises, Cannistraro would set up false nominee accounts for the benefit of Vickory and Fritz. Further questioning by the Government revealed Cannistraro aided Fritz in purchasing and selling TWC stock through a nominee account for a profit of $50,000,
In addition, Cannistraro’s testimony at the
Cannistraro’s involvement with setting up false nominee accounts was the subject of counts two through five of the First Indictment. Specifically, counts two through five involved the use of the names of Mary Godano, Edward Cannistraro, Donna Lee Clarambeau and Key, respectively, to set up nominee accounts at Monarch.
In his statement at the
In count six of the First Indictment, Cannistraro was charged with violations of section 10(b) and Rule 10b-5 through the creation of false and misleading TWC research reports through Wood Gundy. Cannistraro admitted he failed to disclose in his reports the use of nominee accounts to conceal his interest in TWC and his bribery scheme with Vickory and Fritz.
Cannistraro’s testimony at the
Finally as to the mail fraud charge in count eight of the First Indictment, Cannistraro admitted he knew that the Continental Transfer Company (“Continental”) was the transfer agent for LCI and TWC and that there would be mail communications between Continental and the Marshall & Ilsley Bank (“M & I Bank”).
Id.
at 53. The bribery scheme and the transfer of TWC and LCI securities to the M & I Bаnk could not have occurred without these communications, as Cannistraro admitted.
Id.
These communications were in furtherance of the conspiracy to defraud and therefore were in violation of
For the foregoing reasons, Cannistraro’s testimony at the
b. Assistance of Counsel
The record is devoid of credible evidence in support of Cannistraro’s claim that he was denied effective assistance of counsel at the
Cannistraro was given an opportunity to substantiate these accusations at the
When a defendant who has pleaded guilty challenges the validity of the plea on a claim of ineffective assistance of counsel, the burden rests with him to prove both elements of the test approved in
Hill v. Lockhart,
A court must be “highly deferential” to counsel’s decisions in scrutinizing counsel’s performance against the objective standard of reasonableness.
Strickland,
Before examining the record to determine whether he has adduced evidence to meet his burden under the Hill test, it must be noted that Cannistraro’s failure to testify in support of the allegations contained in his affidavit renders it incredible. Indeed, Cannistraro’s counsel admits “[t]he fact that the Government cannot cross examine the defendant’s sworn affidavit may diminish his credibility in the court’s mind____” Cannistraro Viability Brief at 3.
Cannistraro’s allegations of ineffective assistance of counsel may be addressed under two broad rubrics: the trial strategy of O’Connor and Gersten up to the time Cannistraro pleaded guilty and the advice of trial counsel with regard to the decision to plead guilty itself. In considering each of these areas, the two-part Hill test must be observed. The ultimate issue is whether trial counsel’s conduct fell below an objective standard of reasonableness and, if so, whether Cannistraro would not have entered his guilty plea but for the ineffective assistance of trial counsel.
i. Trial Strategy
The evidence which is most relevant and which carries the most weight in this determination is, of course the testimony of Gersten and O’Connor which was presented at the evidentiary hearings at the
The trial strategy of O’Connor required that trial counsel locate witnesses who had a role in TWC. 2/8/90 Tr. at 249. However, trial counsel did not want to present the testimony of witnesses who also had a role in LCI because O’Connor feared that company was never actually viable. Id. at 181-82. After discussing the matter with Cannistraro, trial counsel concluded this strategy would be harmed by calling Blake and Waldron, who had both worked for LCI and TWC. Id. at 181-82, 249. Instead, trial counsel intended to focus on the testimony of Peter Blake III, Congressman Robert Roe and Cannistraro himself.
Cannistraro nevertheless contends trial counsel did not adequately prepare for trial because they did not hire expert witnesses, did not interview pоtential Government witnesses and did not review all the documentary evidence. Cannistraro argues the failure to hire an accountant particularly disadvantaged him because the Government’s case relied on the records of Monarch, the brokerage firm where Cannistraro opened the nominee accounts to conceal his, Vickory’s and Fritz’s interests in LCI and TWC. Cannistraro Proposed Findings at 11-12. Cannistraro argues trial counsel misunderstood the relevance of the documentary evidence to the case. Id. at 13.
To the contrary, the testimony at the
For example, when O’Connor saw the wire that Wood Gundy sent indicating it would issue a research report on TWC, he realized it contained much of the information that was in the final research report. This substantially undermined the defense that the nominees of Cannistraro had sold their interests in TWC prior to issuance of Cannistraro’s report favorably reviewing TWC. O’Connor knew the Wood Gundy wire could be used by the Government to establish the price of TWC rose as a result of the wire itself and that the subsequent report written by Cannistraro was not the only factor involved in the manipulation of TWC stock prices. In addition, O’Connor did not pursue the fact that the First Indictment contained an incorrect date for the issuance of Cannistraro’s report because certain of the nominees holding TWC securities sold them following the issuance of the wire. 7/24/89 Tr. at 65; 2/8/90 Tr. at 229-30.
Gersten testified that after reviewing the trading records of Vickory and Fritz it became apparent that the Funds did not usually purchase speculative stocks such as LCI. The records indicated some of the stock sold from Cannistraro nominee accounts ended up in the Funds. 7/24/89 Tr. at 129-130. Gersten and O’Connor testified that Cannistraro became upset when he learned some of the transfers from the nominees were clearly linked to Fund transactions. Id. at 90, 129-30.
In addition, Gersten and O’Connor found it difficult to find witnesses to testify on Cannistraro’s behalf. Leo Eisenberg, the president of Monarch, and Richard Bertoli, co-defendants with Cannistraro in a securities case by the Securities Exchange Commission (“SEC”) involving TWC and LCI, were unavailable. Peter Blake III,
30
a witness who knew of TWC but not LCI, was
O’Connor also determined Blake and Waldron should not be called as character witnesses for the defense because they had knowledge about the facts of the case and could be effectively cross-examined by the Government regarding their involvement in the case. 2/8/90 Tr. at 221, 297-98. Blake, who was president of TWC during its initial public offering, testified at the 1 February 1990 hearing. He testified that he believed TWC was a viable company and that, in his opinion, Cannistraro’s report of TWC was accurate. 31 2/1/90 Tr. at 124-131. However, O’Connor testified he had discussed the strategy of not calling Blake as a character witness with Cannistraro аnd he agreed that this was proper. 2/8/90 Tr. at 249.
Waldron asserted his fifth amendment privilege at the 1 February 1990 hearing. His proffer, which was offered by present counsel and made part of the record, indicated he would be a character witness, but was not contacted by trial counsel. 2/1/90 Tr. at 87. However, this was part of the decision by O’Connor not to call character witnesses who had knowledge about the facts of the First Indictment. O’Connor stated that in his judgment a character witness who takes the fifth is not a strong witness. 2/8/90 Tr. at 224. In addition, O’Connor knew Cannistraro’s relatives would be testifying against him. Id. at 223-24. In sum, O’Connor testified there were no character witnesses who would testify on behalf of Cannistraro. 7/24/89 Tr. at 82.
The only material witness who testified at the hearings was Wolff, who testified at the 1 February. 1990 hearing on behalf of Cannistraro. Wolff stated he would have been available to provide trial counsel with information regarding TWC and LCI. Wolff was the attorney who wrote and filed the registration statements of the companies and represented TWC in negotiations with Thatcher Engineering, Inc. (“Thatcher”), an Indiana company which had devised a unique method of containing toxic waste but lacked government funding.
To establish the viability of TWC, O’Con-nor’s trial strategy was to bring out that TWC and Thatcher signed a contract under which TWC was to find government funding for Thatcher. 2/8/90 Tr. at 263-64. O’Connor testified he spoke to William Barton (“Barton”), the attorney for TWC after the company went public and Barton indicated the existence of the contract was in dispute. Id. at 186-87. O’Connor stated this seriously undermined the defense strategy of making TWC appear to be a viable company because the contract with Thatcher was the one fact O’Connor needed to press the argument that TWC was more than merely a shell. Id. At the 1 February 1990 hearing, Wolff testified he thought the contract between Thatcher and TWC was valid. 2/1/90 Tr. at 114-115. Cannistraro claims O’Connor failed to contact Wolff and thereby gave up the defense without adequately investigating it.
O’Connor did not merely give up the defense, as Cannistraro claims. Barton made clear to O’Connor that the dispute over the Thatcher contract involved the claim by a third company, J.E. Brenneman Company (“Brenneman”), which had a joint venture with Thatcher and another compa
O’Connor reviewed two letters from Thatcher’s attorney to Wolff which appeared to indicate the contract with TWC would not be effective until the Brenneman agreement was canceled. Id. at 255-56. O’Connor also interviewed an officer of Thatcher who confirmed the existence of the dispute over the TWC contract. Id. at 189. Gersten suggested to Cannistraro that trial counsel attempt to contact Wolff, but Cannistraro rejected that suggestion. Id. at 221-22. Based on this investigation, O’Connor determined that the viability of TWC was not a feasible defense. 32 Following the meeting with Barton, O’Connor told Cannistraro he had virtually no defense to the First Indictment. Id. at 189-90.
The testimony of the witnesses at the
Cannistraro also argues the pretrial motion practice of trial counsel was ineffective because they did not file a motion for a bill of particulars and did not move to change venue on count nine of the First Indictment. Cannistraro argues that trial counsel’s failure to make a motion for a bill of particulars severely hampered the ability of Cannistraro to prepare his defense. However, O’Connor testified he never moved for a bill of particulars because the names of the most relevant unindicted co-conspirators, Vickory and Fritz, were contained in the First Indictment. 7/24/89 Tr. at 30-31.
In addition, Cannistraro has not demonstrated trial counsel was unaware of the existence of material witnesses or evidence which may have aided Cannistraro in his defense. Indeed, as noted above, trial counsel attempted to contact many witnesses and decided not to contact others after considering the trial strategy. Even assuming this court would have granted a motion for a bill of particulars, 33 there is no evidence that the failure of trial counsel to make such a motion impacted Cannistraro’s decision to plead guilty. Cannistraro was and is familiar with all of the people involved in his transactions and was capable of appraising trial counsel оf their names. No new names have surfaced nor is there a suggestion such other people are available but were not discovered by trial counsel. Accordingly, the argument is irrelevant to the Hill test of ineffective assistance of counsel.
It appears there is a split in authority concerning this issue.
See United States v. Reed,
In fact, O’Connor testified he did not bring a motion to change venue because the First Indictment included allegations that established connections of the other offenses with New Jersey. 7/24/89 Tr. at 104. Giving deference to trial counsel’s judgment at the time the instant offense was pending and minimizing the benefit of hindsight, it is not plausible to conclude that trial counsel’s conduct fell below an objective standard of reasonableness merely because they did not recognize that one district court opinion supported a minority view that venue may not have been proper. 35 Trial counsel’s conduct was not unreasonable.
Trial counsel also acted according to responsible professional standards by withdrawing its request for witness lists and by advising Cannistraro to plead guilty to the First Indictment prior to receiving exculpatory and impeachment evidence from the Government. O’Connor testified that the decision to withdraw the witness list motion was a tactical decision because the court had indicated it was not inclined to grant the motion and O’Connor withdrew the motion in an effort to strengthen his motions for disclosure of 404(b) evidence. 7/24/90 Tr. at 46-47. In addition, he testified that the decision to plead his client prior to reviewing impeachment material was an effort to convince the court at sentencing that Cannistraro was entitled to some leniency for accepting responsibility without being “forced into a corner” to do so. Id. at 109. Cannistraro has not demonstrated that these decisions were unreasonable or that his decision to plead would have been different had trial counsel not taken this approach.
ii. Decision to Enter the Guilty Plea
Cannistraro also claims that trial counsel’s advice to plead guilty to all counts of the First Indictment was erroneous and that he would not have entered the guilty plea but for this erroneous advice. At the outset, it must be noted that a number of serious charges by Cannistraro which are contained in the Cannistraro affidavit are not credited in this discussion. Specifically, I find there is no evidence to support the following claims which are contained in the Cannistraro affidavit: trial counsel did not tell Cannistraro that his probable sentence would be at most a short stay at a
Turning to the other allegations, it also appears that trial counsel’s conduct did not violate objective standards of reasonableness. The testimony at the
Prior to Cannistraro’s decision to plead guilty, Gersten contacted Warren, the prosecutor, to determine his position on a plea agreement. Warren informed Gersten that if Cannistraro did not cooperate with the Government, he must go to trial or plead to the entire First Indictment. Gersten related this information to Cannistraro and strongly urged him to cooperate. 7/24/89 Tr. at 75, 133. O’Connor believed Cannistraro should have cooperated with the Government and pleaded guilty. Id. at 80. O’Connor also believed the Government would not enter into a plea agreement without the cooperation of Cannistraro and would object to the entry of a nolo contendere plea. Id. at 75-77. Accordingly, O’Connor did not inquire of Warren as to the possibility that the Gоvernment would agree to take no position at sentencing and did not believe this court would accept a nolo contendere plea over the objections of the Government. Id. at 76-77, 112, 283.
O’Connor suggested to Cannistraro that he plead guilty to the entire First Indictment based upon a carefully worded plea allocution which minimized the involvement of Cannistraro in the manipulation of TWC and LCI stock. O’Connor believed he could minimize the impact of Cannistraro's past fraudulent activities at sentencing. 2/8/90 Tr. at 197, 231. However, trial counsel indicated Cannistraro would probably receive a sentence of incarceration based on research of prior securities sentences of this court and discussions with former United States Attorneys. 7/24/90 Tr. at 78. O’Connor also predicted the court would require Cannistraro to make full restitution. Id. at 112.
In point of fact, shortly before sentencing, O’Connor predicted Cannistraro would receive eight years imprisonment. Id. at 79, 134; 2/8/90 Tr. at 232. Gersten and O’Connor told Cannistraro that a sentence of eight years would make him eligible for parole in three and one-half years and that parole would depend on the amount of money the court found to be involved in the fraud. 7/24/89 Tr. at 134. O’Connor advised Cannistraro that if he plead guilty, his admissions could be used against him by the SEC and in subsequent civil, criminal or tax matters. Id. at 110-12. O’Con-nor also told Cannistraro that if he did not plead guilty and was convicted after trial, he would face a much longer sentence. 2/8/90 Tr. at 280.
O’Connor took a full week to draft the statement that Cannistraro read at the
The foregoing discussion demonstrates that trial counsel’s representation of Cannistraro met an objective standard of reasonable conduct and that trial counsel did not make erroneous or misleading representations to Cannistraro which lead him to plead guilty against his best interests or desires.
The Cannistraro affidavit contributes nothing but baseless allegations in support of the motion to withdraw his guilty plea. Accordingly, the
4.
Deviations from
The Third Circuit requires strict compliance with the standards of
Although
Nevertheless, as stated by the Advisory Committee:
[Subdivision (h) should not be read as supporting extreme or speculative harmless error claims or as, in effect, nullifying importantRule 11 safeguards. There would not be harmless error under subdivision (h) where, for example, as in McCarthy, there had been absolutely no inquiry by the judge into defendant’s understanding of the nature of the charge and the harmless error claim of the government rests upon nothing more than the assertion that it may be “assumed” defendant possessed such understanding merely because he expressed a desire to plead guilty.
Notes of the Advisory Committed on Rules, 1983 Amendment to
Likewise, it would not be harmless error if the trial judge totally abdicated to the prosecutor the responsibility for giving to the defendant the variousRule 11 warnings, as this “results in the creation of an atmosphere of subtle coercion that clearly contravenes the policy behindRule 11 .”
Id.
(quoting
United States v. Crook,
Relying on
McCarthy
and cases decided prior to the 1983 amendment of
Horsley v. United States, supra, (“Horsley I”
) demonstrates that Cannistraro’s arguments draw on an unreasonably narrow reading of the requirements of
On a collateral attack to the sentence under
In view of the clear prescription ... that the court personally inform the defendant of the nature of the charges and the acts which would render him guilty, we must hold that the district court’s reliance on the [defendant’s] private reading of the indictment and discussions of it with his attorney constitutes error. ____ [P]rior decisions of this court preclude us from permitting the district court to abdicate to the [defendant] and his attorney responsibility for minimal compliance withRule 11 .
Id. at 672. The Horsley I court noted that simply reading the indictment to the defendant would have satisfied this requirement. Id. The trial judge did not read the indictment or explain the elements of the charge to the defendant. The Horsley I court therefore remanded the case to permit the plea to be withdrawn and the defendant plead anew.
Soon after the
Horsley I
decision, the Supreme Court decided the case of
United States v. Timmreck,
Subsequent to the
Timmreck
decision (but prior to the amendment of
Relying on the holding of
Timmreck,
the Third Circuit held Horsley was not entitled to
Under
There has been absolutely no showing that Cannistraro would not have decided to plead guilty if the court, rather than the United States attorney, had posed the questions to establish the factual foundation for the guilty рlea or if the First Indictment had been read at the
At the
Additionally, Cannistraro was asked whether he had received a copy of the 18
After being informed of the penalties associated with each count of the First Indictment, Cannistraro was asked a series of questions relating to the elements of count one. Cannistraro responded “Yes” to each of these questions:
Q With regard to count one, do you understand that you’re being charged with a conspiracy to commit securities fraud?
Q And you have discussed that with your attorney, correct?
Q He explained to you the elements of conspiracy?
Q The fact that a conspiracy, an agreement was willfully formed and existed at or about the time alleged in the indictment and that you willfully became a member of that agreement or that conspiracy and that you or one of your co-conspirators knowingly committed at least one overt act in furtherance of the conspiracy, and although it’s not set forth in this letter, one of those overt acts must have occurred in this district, the District of New Jersey. Do yоu understand that?
Q You discussed that with your attorney. Has he explained that to you?
Q He explained to you what the substantive crime that your were alleged to have conspired to commit, that there is a violation of section 10(b) of the Securities Act. Do you understand that?
Q Did he go over Rule 10b-5 with you?
Q You read both of those in this letter [the 18 September 1987 Letter] on page two?
Q You talked about those with your attorney?
Q You understand all of that?
Id. at 14-15. Cannistraro was told the elements of a conspiracy and had a full understanding of the nature of the charges against him.
Cannistraro read, understood and reviewed with his attorney the contents of the 18 September 1987 Letter and the First Indictment. The 18 September 1987 Letter contains the text of Rule 10b-5 and section 10(b) of the 1934 Act. It also explains the substantive elements of the offenses under those statutes and the conduct Cannistraro was alleged to have committed in violation of those statutes, as well as the elements of the crimes charged in the other counts of the First Indictment.
Questions regarding counts two through nine of the First Indictment were also directed to Cannistraro. He indicated that he had read the 18 September 1987 Letter with respect to each of those counts, had understood and had discussed the elements and conduct of each of those crimes with his attorney. Cannistraro was frequently asked if he had any questions regarding the elements of those offenses and he responded negatively. Id. at 15-20. Following this questioning by the court, Cannistraro read his prepared statement in open court. Id. at 25-29.
The United States Attorney was then permitted to ask additional questions of
THE COURT: The fact of the matter is, I don’t know the circumstances of the case as intimately as [the defense attorney] or the United States knows them. I have followed this procedure, the procedure being requiring the United States Attorney to prepare a plea letter before a plea is entered. I’ve required the United States Attorney to list questions. He’s doing this at my direction.
MR. O’CONNOR: Fine. I thought that was probably true. I just didn’t know.
Id. at 3-4.
The
Cannistraro has not come close to establishing a substantial violation of his rights under
CONCLUSION
Cannistraro's assertion that he pleaded guilty to conduct that is not criminal is unfounded. In addition, the claims of ineffective assistance of counsel and violation of
The Government is to submit an appropriate form of order.
Notes
. Cannistraro was subsequently indicted, along with Leo Eisenberg and Richard Bertoli in United States v. Cannistraro, Crim. No. 89-218 (the "Superseding Indictment”).
. Vickory and Fritz were not charged with criminal conduct in the First Indictment or the Superseding Indictment.
. An number of other orders were entered relating to scheduling, administrative and discovery matters. They are not relevant for purposes of this discussion.
.The 18 September 1987 Letter is a single spaced, twelve page letter which covers the legal and factual bases for each of the nine counts of the First Indictment.
. O’Connor made particular mention of the fact that he had discussed the likelihood of conviction with his client:
Can I say for the record that in terms of count seven and eight, I’ve particularly advised Mr. Cannistraro that — let me check that. Counts six, seven and eight, that all three of those counts he could have been found guilty on Pinkerton theory, since they were acts as part of the conspiracy. And as you ask him particular questions, it will become clear as to interstate commerce or whatever, he doesn't know. All he knows is that it was a likely end result of this overall role in the conspiracy itself.
The 18 September 1987 Letter also discusses the elements of the crimes charged in each count, the penalties for each crime, including incarceration and fines, the appropriate mandatory assessments and restitution as well as a proposed series of questions for each count to establish the required factual basis for the plea.
. Defense counsel David W. O’Connor objected at the beginning of the
. The final questions and answers are recorded as follows:
BY THE COURT:
Q All of what you’ve given me hеre today is true and accurate?
A Yes.
Q And all of these facts that you’ve given me reflect a willful, knowing and intentional participation on your part as reflected in your testimony?
A Yes, your Honor.
THE COURT: Anything else?
MR. WARREN: No, your Honor.
Q Now, in light of all the questions I've asked you, in light of all the questions the Government has asked you, in light of the statements of your attorney, statements of the Government, did you still wish to enter a plea of guilty in this matter?
A Yes, your Honor.
Q And how do you plead, guilty or not guilty?
A I plead guilty.
.The original sentence fined Cannistraro $394,-847 but that figure was amended due to an arithmetic error.
. Cannistraro does hot challenge the effectiveness of his trial counsel in any way subsequent to the
.
See
Defendant’s Brief in Support of
.The hearings concerned only Cannistraro’s claim that he was denied effective assistance of counsel at the
. Cannistraro submitted Defendant's Memorandum of Law Concerning Whether his Affidavit Should be Considered and Whether his Motion to Withdraw his Guilty Pleas is Viable Without his Testimony at the On-Going Evidentiary Hearing, dated 6 August 1989 ("Cannistraro Viability Brief"). In opposition, the Government submitted a letter in lieu of a memorandum of law, dated 21 August 1989 ("21 August 1989 Letter").
. The Government submitted The Government's Proposed Findings of Fact and Conclusions of Law in Connection with Defendant’s
. For offenses committed prior to 1 November 1987, as is the case here,
If a motion for withdrawal of a plea of guilty or nolo contendere is made before sentence is imposed, imposition of sentence is suspended, or disposition is had under18 U.S.C. § 4205(c) , the court may permit withdrawal of the plea upon a showing by the defendant of any fair and just reason. At any later time, a plea may be set aside only on direct appeal or by motion under28 U.S.C. § 2255 .
. This statute provided for commitment of a defendant to the custody of the Attorney Gener
.
The amended version of
. The appellate court remanded the matter to determine whether the district court was subjectively satisfied there was a factual basis to accept the plea as to one count of the indictment. In a separate opinion, the district court stated it was satisfied with the factual basis for the plea and ordered that the defendant be returned for resentencing.
United States v. Allen,
. At the
. This personal belief of Cannistraro was never articulаted in open court or by way of affidavit.
. The relevant discussion is reprinted below with quoted passages emphasized:
THE COURT: ____ You show me in that affidavit where he says he asserts his innocence. Does he?
MR. KURZWEIL: I thought he did.
MR. FIETKIEWICZ: I would say you could argue he has made a sort of what I would say [sic] an implied assertion of innocence.
THE COURT: That’s not good enough.
MR. FIETKEIWICZ: That he didn’t plead guilty to charges that were criminal, but that’s another issue. That’s point two of everybody’s brief, whether the plea allocution is sufficient.
THE COURT: That's entirely different than asserting innocence or lack of guilt. Now, is there anything else either of you want to say for the record?
MR. KURZWEIL: Not at this point.
2/8/90 Tr. at 295 (emphasis added).
. Cannistraro does not contest the factual basis of his guilty plea as to count nine of the First Indictment. Cannistraro Initial Brief at 18.
. His testimony at the
Q. What is the extent of your education?
A. I have a bachelor's degree in economics from M.I.T., master’s degree in management from M.I.T. and a second graduate degree in accounting from Northwestern Graduate University.
Q. Is it fair to say that you have no difficulty in understanding the English language?
A. That’s true.
. I say “after what amounts to a loss on appeal" because the Third Circuit has stated: “If the district court determines that it did not rely upon the table contained in the presentence report ..., the original sentence may, in the district court’s discretion, be reinstated.’’
Cannistraro,
.Merrill, who was Cannistraro’s former counsel on this motion, virtually concedes that the plea allocution established an adequate factual basis and that Cannistraro’s arguments are an attempt to back off from his prior admissions. The Cannistraro Initial Brief, signed by Merrill, states:
Preliminarily, Defendant notes that a review of the plea transcript, in the first instance, appears not to readily support Defendant’s position herein, until it is read in light of the misapprehensions and misconceptions Defendant was operating under when he entered those pleas.
Id.
at 4 (emphasis added). To the contrary, Cannistraro’s admissions at the plea hearing
. Section 10(b) prohibits the use of any instrumentality of commerce or facility of any national securities exchange in connection with a securities transaction that employs "any manipulative or deceptive device or contrivance."
. Rule 10b-5 makes it unlawful to use an instrumentality of commerce or facility of a national securities exchange in connection with the utilization of any device, scheme or artifice to defraud, the assertion of any untrue statement or omission of material fact and the participation in any act which would operate as a fraud or deceit upon any person in connection with the sale of a security. 17 C.F.R. 240.10b-5(a)-(c).
.Cannistraro’s reliance on
Chiarella v. United States,
. Present counsel indicated he requested the hearing only with regard to the ineffective as
. The O'Connor and Gersten affidavits were appended as Exhibits B and C to the Govern-merit’s Memorandum in Support of Motion to Disqualify Bruce M. Merrill, Esq., dated 12 May 1989. Apparently, the O’Connor and Gersten Affidavits were not filed in the Office of the Clerk of the Court.
. Peter Blake III is apparently the son of Blake, who was president of TWC and who testified at the
. Based upon my observations of Blake’s demeanor and testimony while on the stand, I find him to be an incredible witness. He admitted conduct involving stock transactions which suggest he would be a poor, if not dаmaging, character witness at trial. To the extent his testimony was relevant at all to the ineffective assistance of counsel issue in this case, it was incredible and of no weight.
. A central issue to the defense was whether Wolff sent a signed or unsigned contract to Thatcher in January 1983. O’Connor testified that after reviewing documents provided by Barton, he concluded Wolff did not send a signed contract to Thatcher until February under a cover letter which indicated the contract was not effective until the arrangement with Brenneman was canceled. 2/8/90 Tr. at 255-56. Based on the exhibits submitted by the Government and my observation of the witnesses who testified, to the extent Wolff’s testimony contradicts O’Connor’s testimony, I find it to be incredible. Succinctly stated, Wolff is not a believable witness. There is virtually no possibility Wolff could have been of assistance to Cannistraro in defending against the First Indictment.
. This argument is far from certain. See United States v. Zolp, 659 F.Supp. 692, 706-07 (D.N.J.1987).
. By not bringing the motion to dismiss for improper venue, Cannistraro waived objection to venue in this district.
United States v. Turcotte,
. In addition, it is noted Cannistraro has not challenged the adequacy of the factual basis for count nine. Thus, even if counsel’s conduct was unreasonable, Cannistraro waived objection to venue in New Jersey and pleaded guilty to the conduct here. Cannistraro cannot now argue his guilty plea should be withdrawn on this count of the First Indictment.
. In addition, I find that trial counsel did not advise Cannistraro to plead merely because his retainer had run out. Cannistraro knew his retainer was only an advance against hourly rates and that a portion of the retainer was to pay for work already completed on the SEC matter. Trial counsel notified Cannistraro that his retainer had been exhausted prior to the commencement of the trial date. Trial counsel never demanded a specific amount of money from Cannistraro in order to continue working on the case. I also find that there were no conflicts of interest between in trial counsel's representation of Cannistraro.
. Besides the requirement that a defendant be informed of the nature of the charge,
. Rule 52(a) provides for the application of the harmless error standard to the provisions of the Federal Rules of Criminal Procedure as a whole; it states: "Any error, defect, irregularity or variance which does not affect substantial rights shall be disregarded."
. This discussion is recorded as follows:
Q Now, have you reviewed the indictment, have you read it?
A Yes, your Honor.
Q Have you discussed the indictment with your attorney?
A Yes, your Honor.
Q Are you satisfied with the representation of your attorney?
A Yes.
Q Has he explained to you the elements the Government must prove beyond a reasonable doubt?
A Yes.
Q Has he explained to you the fines and imprisonment for which you may be subjecting yourself if the pleas are accepted?
A Yes.
Q Has he done that for each count?
A Yes.
Id. at 8-9.
. As previously noted, the 18 September 1987 Letter is a twelve page, single spaced letter which explains in detail, on a count-by-count basis, the elements of and penalties for each crime charged in the First Indictment. See supra note 4. Questioning by the court elicited the following responses from Cannistraro:
Q Before I go through each of these counts, did you review a copy of a letter dated September 18, 1987, which is addressed to me, which was copied to your attorneys, Mr. O’Connor and Mr. Gersten?
A I was able to review it yesterday afternoon.
Q Did you discuss it with your attorney?
A Yes.
Q Did your attorney explain it to you?
A Yes, your Honor.
Q Did he explain what the elements are as set forth for each count?
A Yes.
Id. at 9-10. The court then informed Cannistraro in detail of the penalties associated with each of the counts of the First Indictment. Id. at 11-13. As mentioned, the 18 September 1987 Letter sets forth in detail the elements of each crime and each count of the First Indictment and the penalties associated with them.