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UNITED STATES v. BUZZI

August 8, 1984

UNITED STATES OF AMERICA
v.
STEPHEN R. BUZZI, Defendant.



The opinion of the court was delivered by: POLLACK

MEMORANDUM

MILTON POLLACK, Senior District Judge

 Defendant was convicted of seven counts of mail fraud and wire fraud, in violation of 18 U.S.C. §§ 1341 and 1343. He now moves for a new trial, pursuant to Fed.R.Crim.P. 33, on the ground that the government withheld from him exculpatory evidence in its possession, or, in the alternative, that the undisclosed matter is newly-discovered evidence. For the reasons to be set forth below, defendant's motion will be denied in all respects.

 Defendant, in May and June of 1979, was a salesman for International Metals Exchange, Ltd. (IME), a commodities "boiler room." As an IME salesman, defendant placed telephone calls to people throughout the United States, inducing them to purchase "deferred delivery contracts" for gold and silver. Actually, what he was selling was no more than an option to buy gold and silver. The defendant employed high pressure sales techniques and patent misrepresentations, in order to induce unsophisticated investors to purchase these options. Virtually all the investors lost all the money which they invested in these options.

 Government witnesses testified at defendant's trial that defendant made bold and brazen misrepresentations of fact to make the sales to the unsophisticated and gullible purchasers on a wide variety of subjects. The customers induced to buy these contracts were crassly characterized by the personnel in the boiler room as "jerks," "suckers," or "peasants." According to the testimony, defendant misrepresented the age and reputation of IME, the nature of IME's business, the extent of IME's links with organized commodities exchanges and the character of IME's usual clients to potential investors. Defendant also misrepresented to potential purchasers the nature of their investment, the refundability of funds paid to IME to purchase the paper and the riskiness and likely profitability of this sort of investment.

 At trial, defendant offered testimony tending to show that IME purchased gold and silver futures or options from commodity wholesalers whenever IME sold a precious metal option to an individual investor. Defendant argued at trial that this testimony established that IME was a bona fide commodity options dealer, in that IME was prepared to "cover" any delivery obligation that might arise upon exercise of a commodity option by an indivudual investor. However, the issue was not whether the so-called "deferred delivery contract" was covered by a metals contract or commitment, but was the nature of the instrument being sold and the identity of IME, its usual clients, and actual business.

 The evidence forming the basis of the application for a new trial does not relate to the fraudulent statements of Buzzi to his purchasers, but consists of a batch of papers indicating IME's attempts to purchase commodity option contracts from precious metal wholesalers. Moreover, the documents relate to periods prior to the time defendant was employed by IME and do not mention Buzzi. The Government contends that some of these documents were not in the possession of the Government at the time of the defendant's trial, and that the Assistant United States Attorney who prosecuted the defendant, Jeffrey Livingston, never saw the documents in question. The defendant, on the other hand, contends that his trial counsel had requested production of such documents, and that Mr. Livingston informed trial counsel that those documents had been inadvertently destroyed by one Shoher, who had purchased IME in 1979 and who was both cooperating with the Government, and at the same time being investigated by the Government for other crimes than here involved.

 The application before the Court presents a designed confusion to mask the immateriality and irrelevancy of the batch of papers relied on to the instant prosecution of Stephen Buzzi and the basis of his conviction. The papers turned up in another case following a grand jury subpoena and other efforts of the prosecutor in that case which was tried subsequent to Buzzi's case.

 A defendant seeking a new trial either on the ground that the prosecution failed to produce exculpatory material, *fn1" or on the basis of newly discovered evidence, must demonstrate that the documents not supplied to the defendant on trial were material to and might have affected the outcome of the trial. The materiality standard, of course, is lower when the basis of the new trial motion is failure to disclose specifically requested exculpatory material than it is when a new trial is sought on new evidence grounds. When a defendant makes a specific request for production of information in the government's possession which is not disclosed to the defendant, he is entitled to a new trial if there is any reasonable likelihood that the evidence could have affected the outcome of the trial. United States v. Agurs, 427 U.S. 97, 103-04, 49 L. Ed. 2d 342, 96 S. Ct. 2392 (1976); Ostrer v. United States, 477 F.2d 782, 786 (2d Cir. 1978), cert. denied, 439 U.S. 1115, 59 L. Ed. 2d 73, 99 S. Ct. 1018 (1979). In contrast, a new trial may be granted on the basis of newly discovered evidence only if that evidence is material, is not cumulative, and would probably have led to an acquittal had it been admitted at trial. United States v. Alessi, 638 F.2d 466 (2d Cir. 1980). Specifically requested exculpatory data insufficiently "material" to serve as a basis for a new trial under Brady v. Maryland, 373 U.S. 83, 10 L. Ed. 2d 215, 83 S. Ct. 1194 (1963), therefore, cannot warrant a new trial as "newly discovered evidence."

 The data which defendant claims the Government failed to produce despite his counsel's specific request for its production is insufficiently "material" to serve as a basis for a new trial under Brady v. Maryland 373 U.S. 83, 10 L. Ed. 2d 215, 83 S. Ct. 1194 (1963), let alone as "newly discovered evidence." That data tends to demonstrate the IME did not sell "naked" options (options which could not be exercised by purchasers due to the seller's lack of ownership of the underlying commodity) to its investors. The defendant, however, was never charged with selling "naked" options; the indictment merely charged him (and his co-defendant) with falsely representing to potential investors that IME was in actual possession of the gold and silver backing the "deferred delivery contracts" offered for sale. The data in question thus serves only to demonstrate the falsity of this representation.

 Far from leaving the jury with any claim or impression that the defendant sold "naked" options to IME investors, the prosecutor acknowledged in his closing argument that IME had placed "covering" orders with commodity wholesalers whenever "deferred delivery contracts" were purchased. (Transcript, 1156). Elsewhere in that summation the prosecutor stated that the placement of such "covering orders" provided no basis for defendant's representation to make the sales of the paper that IME bought gold at a discount (Transcript, p. 1153) and merely noted that a government witness testified to a co-defendant's statement that the commodity wholesalers with whom IME placed covering orders were "part of the same paper operation" as IME.(Transcript, p. 1150).

 The Government's theory of this case never was that the defendant sold "naked" options to unsuspecting investors, but that the defendant employed misrepresentations in inducing the purchase of commodity options. The indictment stated that among the false and misleading representations, pretenses and promises were the following:

 a. Statements and pretenses that IME was controlled by the federal government;

 b. Statements and pretenses that the contracts sold by IME were traded on and purchased through the ...


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