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March 5, 1985


The opinion of the court was delivered by: SOFAER



The government has moved to disqualify Gerald L. Shargel, Esq., from representing defendant Richard Mastrangelo at the trial of this criminal action. The government argues that Shargel must be disqualified for three reasons. First, Shargel invoked his fifth amendment privilege against self-incrimination before a grand jury with respect to his relationships with several of the twenty-four defendants named in the indictment, including Mastrangelo. The government claims that this creates a conflict of interest between Shargel and Mastrangelo, since Shargel might seek to limit his own potential criminal exposure at the expense of zealously representing Mastrangelo. Second, the government claims that Mr. Shargel "should be a witness at the trial." Government Memorandum at 4. It was unclear from the discussion in the affidavits and memorandum filed by the government who exactly was going to call Mr. Shargel, but at a conference on December 19, 1984 (at which defense counsel other than Shargel were present), the government represented that it intended to call Mr. Shargel as a hostile witness. Third, the government argues that the A.B.A.'s Canons of Ethics require Shargel's disqualification, seemingly because Shargel's participation as Mastrangelo's counsel at trial might adversely affect the interests of some of his former clients, and that those clients who are defendants in this case are not in a position to give effective waivers.

 The Supreme Court's recent decision in Flanagan v. United States, 465 U.S. 259, 104 S. Ct. 1051, 1054-57, 79 L. Ed. 2d 288 (1984), which held that orders disqualifying trial counsel are not immediately appealable under 28 U.S.C. ยง 1291 (1982), forces courts to walk a fine line. On the one hand, if counsel is not disqualified, the client may nevertheless later "establish that an actual conflict of interest adversely affected his lawyer's performance," Cuyler v. Sullivan, 446 U.S. 335, 350, 64 L. Ed. 2d 333, 100 S. Ct. 1708 (1980), depriving him of his sixth amendment right to effective assistance of counsel. On the other hand, Flanagan forces a defendant whose lawyer is improperly disqualified to undergo trial without the counsel of his choice. A defendant convicted under such circumstances may claim that he too has been deprived of "a right of constitutional dimension" -- the ability to pick his own lawyer. United States v. Cunningham, 672 F.2d 1064, 1070 (2d Cir. 1982); see also, e.g., United States v. Bubar, 567 F.2d 192, 203 n.18 (2d Cir.) (recognizing defendant's "constitutional right to be represented by counsel of his own choice")(emphasis in original), cert. denied, 434 U.S. 872, 54 L. Ed. 2d 151, 98 S. Ct. 217 (1977); United States v. Armedo-Sarmiento, 524 F.2d 591, 592 (2d Cir. 1975)(per curiam)(defendant's sixth amendment rights are implicated by motion to disqualify retained counsel). The standard on appeal for claims involving wrongful deprivation of counsel has not yet been established. Nevertheless, the weighty public interest in the finality of any judgment, see Illinois v. Somerville, 410 U.S. 458, 463, 35 L. Ed. 2d 425, 93 S. Ct. 1066 (1973), particularly in a case which the government estimates will take many months to try, militates in favor of great caution in disqualifying Mr. Shargel. Before any such drastic step is taken, the government must show convincingly that no less intrusive measure can adequately protect the interests it has invoked.

 I. Factual Background.

 In March 1984, Shargel was served with a subpoena duces tecum requiring him to testify before a grand jury and to produce records of any money or property transferred to him by or on behalf of ten individuals, eight of whom are defendants in this case. Shargel moved to quash the subpoena on the ground that disclosure of the information requested would breach the attorney-client privilege. On April 26, 1984, Judge Lasker denied the motion to quash, and his decision was upheld by the Second Circuit. In re Shargel, 742 F.2d 61 (2d Cir. 1984).

 On week later, on August 20, 1984, Shargel appeared before the grand jury pursuant to the subpoena duces tecum. He declined, however, to produce the records or to answer any questions concerning the ten named individuals, and invoked his fifth amendment privilege against self-incrimination. The government challenged Shargel's assertion of the privilege, but Judge Keenan accepted the representation of Shargel's counsel, Edward M. Shaw, Esq., that a valid basis existed for its invocation. Therefore, upon the government's application, Judge Keenan ordered that, if Shargel subsequently invoked the privilege, he must be given immunity before being required to testify. On August 22, Shargel again appeared before the grand jury. When he asserted his fifth amendment privilege, the government activated the immunity order signed by Judge Keenan. The order was amended to grant Shargel retroactive immunity to cover his August 20 appearance. Shargel then testified and produced three documents which he claimed were the only records he possessed that were responsive to the subpoena. He appeared before the grand jury again on September 5, 1984. He later produced various other bank records.

 II. Mr. Shargel's Assertion of His Fifth Amendment Privilege.

 The government contends that Shargel's mere assertion of his privilege against self-incrimination before the grand jury creates a conflict of interest between him and his client Mastrangelo that requires his disqualification. It claims that "[b]y invoking the Fifth Amendment privilege, Shargel has admitted that he himself may be involved in some sort of wrongdoing involving his clients." Government Memorandum at 10. This potential criminal exposure, the government contends, may lead Shargel to hold back in his defense of Mastrangelo, minimizing his exposure at the expense of his client's interest in an effective defense.

 The government relies on the Second Circuit's decisions in United States v. Cancilla, 725 F.2d 867 (2d Cir. 1984), and Solina v. United States, 709 F.2d 160 (2d Cir. 1983), which, it argues, establish a "per se" disqualification requirement in cases where an attorney is implicated in criminal conduct. In Solina, the Court of Appeals held that a per se conflict of interest between a defendant and his attorney exists when the attorney was not admitted to the bar. Such an attorney, the Court found, "cannot be wholly free from fear of what might happen if a vigorous defense should lead the prosecutor or the trial judge to inquire into his background and discover his lack of credentials. Yet a criminal defendant is entitled to be represented by someone free from such constraints." 709 F.2d at 164. The Court concluded, "without enthusiasm," id. at 169, that when a defendant unknowingly was represented by a person not licensed to practice law harmless-error analysis is inapplicable and "a per se rule appears to us to be required," id. at 168. In Cancilla, the Court was asked to assume for purposes of the appeal that the defendant's trial counsel himself was "involved in criminal activity similar to the charges against Cancilla," in part due to his "prior and arguably continuing representation" of a person who would be implicated in criminal conduct if the co-defendant's defense were accepted. 725 F.2d at 868. Citing Solina, the Court in Cancilla "conclud[ed] with a similar lack of enthusiasm" that a per se rule was appropriate:

[I]t must have occurred to counsel that a vigorous defense might uncover evidence or prompt testimony revealing his own crimes, even more so than in Solina. . . . Moreover, representation of Cancilla in ways other than by a vigorous defense may have been affected. It is difficult to see how c counsel conflicted in this way could impartially have given Cancilla advice on whether or not to take a guilty plea, since counsel might have feared that acceptance of a plea would turn on Cancilla's cooperation, which might lead to discovery of the link to counsel's own activities. In such circumstances, proof of this type of conflict, which the government here asks the court to assume, constitutes under Solina a per se violation of the Sixth Amendment right to effective assistance of counsel.

 Id. at 870. The court then noted how Solina drew upon Cuyler v. Sullivan, 446 U.S. 335, 64 L. Ed. 2d 333, 100 S. Ct. 1708 (1980), which had held that "a defendant who raised no objection at trial must show that an actual conflict of interest adversely affected his lawyer's performance . . . . [T]he possibility of conflict is insufficient to impugn a criminal conviction." Id. at 348, 350. The Second Circuit explained:

The Court in Cuyler was concerned with the effect of multiple representation, a situation that invariably raises the possibility of harmful conflict that often does not exist in fact. Solina involved a different type of conflict for a lawyer, which is always real, not simply possible, and which, by its nature, is so threatening as to justify a presumption that the adequacy of representation was affected.

 725 F.2d at 870 (emphasis in original).

 This case, however, differs from both Solina and Cancilla. First, those cases provide no basis for the government's claim that Shargel's invocation of the privilege against self-incrimination before the grand jury indicates that he is "involved in some sort of wrongdoing." The law in fact provides no support for such an inference:

[N]o implication of guilt [can] be drawn from [a witness'] invocation of his Fifth Amendment privilege before the grand jury. Recent re-examination of the history and meaning of the Fifth Amendment has emphasized anew that one of the basic functions of the privilege is to protect innocent men. "Too many, even those who should be better advised, view this privilege as a shelter for wrongdoers. They too readily assume that those who invoke it are either guilty of crime or commit perjury in claiming the privilege." . . . "The privilege serves to protect the innocent who might otherwise be ensnared by ambiguous circumstances."

 Grunewald v. United States, 353 U.S. 391, 421, 1 L. Ed. 2d 931, 77 S. Ct. 963 (1957) (citations omitted). An assertion of the privilege is justifiable even though the testimony to be given before a grand jury could not as a matter of law support a criminal conviction; the proper test is whether the answers might "furnis[h] a link in the chain of evidence needed in a prosecution . . . ." Blau v. United States, 340 U.S. 159, 161, 95 L. Ed. 170, 71 S. Ct. 223 (1950); see In re Flanagan, 533 F. Supp. 957, 963 (E.D.N.Y.) (same), rev'd on other grounds, 691 F.2d 116 (2d Cir. 1982); see also Brink's, Inc. v. City of New York, 717 F.2d 700, 709 (2d Cir. 1983) ("the conditions of grand jury appearances . . . are particularly likely to lead innocent witnesses to invoke the privilege"); Russell v. United States, 306 F.2d 402, 411-12 (9th Cir. 1962)("The privilege may be claimed by one who is innocent but who reasonably could fear that disclosure of the information would result in criminal charges against which he would have to defend himself.").

 The government implicitly pressed this point in its December 28, 1984 letter to Judge Keenan, which intimated that Mr. Shargel has misused the privilege because his testimony after Judge Keenan's grant of immunity provided no incriminating information. But Shargel did not claim, and did not have to claim, that he was in fact guilty of any crime to obtain immunity. While L"a claimant of the privilege is not immunized from answering a question upon his mere declaration that it would tend to incriminate him -- 'his say-so does not of itself establish the hazard of incrimination'" -- a judge evaluating a claim of privilege may rely upon "his personal perceptions of the peculiarities of the case" as well as upon the evidence. Camelot Group, Ltd. v. W.A. Krueger Co., 486 F. Supp. 1221, 1224-25 (S.D.N.Y. 1980)(Weinfeld, J.)(quoting Hoffman v. United States, 341 U.S. 479, 486-87, 95 L. Ed. 1118, 71 S. Ct. 814 (1951)). See also United States v. Rodriguez, 706 F.2d 31, 37 (2d Cir. 1983) (requiring particularized showing of potential for incrimination); United States v. Zappola, 646 F.2d 48, 52-54 (2d Cir. 1981) (same), cert. denied, 459 U.S. 866, 103 S. Ct. 145, 74 L. Ed. 2d 122 (1982). Shargel's explanation for invoking his privilege against self-incrimination was, in substance, his "fear that an aggressive prosecutor with impaired judgment [might] view ambiguous conduct as criminal." Affidavit of Gerald L. Shargel P5 (Nov. 30, 1984). In this case, Shargel knew he had represented several people named as members of the same conspiracy and racketeering enterprise, and at least suspected that one of them had become a cooperating witness. Furthermore, as discussed below, he knew he had no records to support his version of any suspicious events or circumstances. This is a sufficient basis for his claim, and for the grant of immunity. The government's apparent failure to grasp the point lends credence to Shargel's wisdom in having relied upon it.

 The government states that Shargel might not provide Mastrangelo with impartial advice "if, by doing so, Shargel could be implicating himself in unknown criminal offenses or exposing himself to a perjury prosecution." Government Memorandum at 3. The mere possibility that Shargel may have committed some "unknown" criminal offense cannot justify depriving Mastrangelo of his right to the counsel of his choice. In Cancilla, the government, as a tactical matter on appeal, asked the court to assume the involvement of counsel in criminal activities, but argued that any such involvement was harmless error. 725 F.2d at 868-69. Here, however, the government cannot ask the court to assume the criminal activity of defense counsel, since that begs the central question. Furthermore, Shargel would have little to fear from any prosecution for "unknown" offenses, since he was granted immunity before the grand jury. The government will face the "heavy burden of proving that all of the evidence it proposes to use was derived from legitimate independent sources" if it seeks to prosecute him for any offense related to his grand jury testimony, other than perjury. Kastigar v. United States, 406 U.S. 441, 461-62, 32 L. Ed. 2d 212, 92 S. Ct. 1653 (1972); see Goldberg v. United States, 472 F.2d 513, 515-16 (2d Cir. 1973).

 II. The Possibility of Prosecution for Perjury or Obstruction of Justice

 The government also advances the more concrete claim that Shargel may be ineffective in assisting Mastrangelo because he may fear future prosecution for perjury stemming from his grand jury testimony, and possibly for obstruction of justice. The government points out, in ex parte affidavits and materials, certain apparent inconsistencies between Shargel's grand jury testimony and other evidence potentially available to the government.

 During his grand jury testimony, Shargel testified as to his lawyer-client relationships with various defendants and alleged co-conspirators in this case. Shargel also testified about the payments he received from each of his clients. The government claims that two anticipated witnesses ("A" and "B") will testify "that Mr. Shargel's fees and the amounts paid him were far in excess of the sums reported to the Grand Jury by Mr. Shargel." Ex parte Affidavit of Walter S. Mack, Jr. P3 (Nov. 23, 1984). These witnesses will also allegedly testify that Roy DeMeo several times "paid Shargel large sums of money on account of the legal difficulties of others in the DeMeo crew, in other words, a benefactor description of fee payments which Mr. Shargel has categorically denied to Judge Lasker, the Court of Appeals and to the Grand Jury." Id. In particular, the government refers to a transaction that occurred in about October 1981, when DeMeo gave Shargel some cash in a paper bag on a street corner in downtown Manhattan. Shargel confirmed that he did meet with DeMeo in October 1981, near Mulberry and Grand Streets on his way to another meeting. Shargel described the event as follows:

Q. And what did Mr. DeMeo do on that occasion?
A. Other than talk to me, he handed me a paper bag.
Q. Can you describe the paper bag?
A. No. Just an ordinary -- not a large one, not a shopping bag. There was a relatively small amount of money in it. The bag was wrapped. It wasn't a big open shopping bag.
Q. What was in the bag?
A. Money.
Q. How much money?
A. I think some $2000.
Q. $2000?
A. Yes.
Q. And, basically, in what type of bills?
A. Well, it struck me, and I seem to recall that there weren't hundred dollar bills, because they were in a paper bag. $2000 in hundred ...

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