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UNITED STATES v. HERMAN

December 13, 1977

UNITED STATES OF AMERICA
v.
HAROLD HERMAN, Defendant



The opinion of the court was delivered by: COOPER

IRVING BEN COOPER, D.J.

 Defendant has timely moved pursuant to Rule 32(d), Fed. R.Crim.Pro., to withdraw his plea of guilty to the Information charging him with selling unregistered stock (Title 15, U.S.C. ยงยง 77e and 77x). For the reasons set forth below, defendant's motion must be denied.

 The defendant, admitted to practice as an attorney and counsellor-at-law in the State of New York, confessed at the time he pleaded guilty to the crime of selling unregistered stock by being an active participant in a major and sophisticated stock swindle. *fn1" As an attorney, the defendant was retained by the chief actor in a swindle to prepare false corporate minutes. Later, he was requested and did prepare an attorney's opinion letter which opined that a reorganization of certain corporations was exempt from registration with the SEC. Defendant has admitted that at the time he prepared the opinion letter, he knew that the facts upon which it was based never occurred.

 As a direct consequence of defendant's acts, the chief actors of this swindle were able to offer to the public shares of stock in a worthless and nearly bankrupt company. Within short order, the price of the stock was manipulated up (from $1 to $7) and many thousands of shares owned by the swindlers were dumped upon the market. The loss inflicted on the public was estimated at over $1.5 million. (Affidavit of Assistant U.S. Attorney Jed Rakoff, pp. 1-11)

 Defendant now seeks by this instant application to withdraw his plea of guilty to the aforementioned Information. The reason defendant assigns is premised upon the majority opinion by the Court of Appeals of the State of New York on October 13, 1977, In the Matter of Chu, 42 N.Y.2d 490, 398 N.Y.S.2d 1001, 369 N.E.2d 1 (1977). Defendant and his present attorney have interpreted In the Matter of Chu as changing the law of New York so as "to mandate an automatic disbarment . . . upon conviction of the charges defendant pled guilty to." (Affidavit of Raphael Koenig, Esq., sworn to November 22, 1977, p.2)

 Until then, according to defendant, he had been advised by his former counsel that by pleading guilty to federal charges not involving or analogous to a felony or felonies under the laws of the State of New York, he would not be automatically disbarred, but might, if he cooperated fully with the Government, "only" be suspended. (Affidavit of David Levenson, Esq., sworn to November 18, 1977, p.2)

 On November 4, 1976 defendant with his attorney present appeared before us to withdraw his plea of not guilty and enter a plea of guilty to selling unregistered stock. At the time of taking defendant's plea, we emphatically stated to defendant (official transcript pp. 12, 13):

 
Now, I have been at it long enough, Mr. Herman, to speak very boldly with you and candidly. I don't believe in those surgeons who don't tell a person just what it looks like by way of suffering so that the person will know what he is in for.
 
I want you to know that from my experience this may automatically result in your disbarment. I have represented Bar Associations in my time and many a lawyer has been disbarred as a result of my activities.
 
And the likelihood is strong that may very well be one of the punishments -- form of punishment that may follow your plea just interposed, . . . beyond what I will do when the time comes to sentence. (emphasis added)

 After detailing that eventuality to the defendant, the official transcript (p. 14) reveals:

 
THE COURT: Is that all clear to you?
 
THE DEFENDANT: Yes, Sir.
 
THE COURT: Now, do you want to stand on your plea of guilty to each of these two counts or do you want me to have the record reinstate your not ...

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