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UNITED STATES v. ALUZZO

September 30, 1996

UNITED STATES OF AMERICA, Plaintiff, against FRANCESCO ALUZZO, also known as "Frank Aluzzo," Defendant.


The opinion of the court was delivered by: JOHNSON

 INTRODUCTION

 Pending before this court is defendant Francesco Aluzzo's motion to dismiss an indictment for two counts of felony tax evasion for 1990 and 1991. Some of Aluzzo's unreported taxable income came from payments by a man named Asaro for construction and repairs. Further IRS investigation of Aluzzo's records revealed that in addition to payments for work done, by Aluzzo, Asaro was issuing checks from Asaro's company to Aluzzo, which Aluzzo, never received. Asaro had forged Aluzzo's name and cashed these fraudulent checks.

 Aluzzo agreed to cooperate with the government in the investigation of Asaro. On December 17, 1993, Aluzzo signed an agreement to waive indictment and plead guilty to misdemeanor tax evasion, and agreed to give information on Asaro's forgery and fraud. Aluzzo also agreed to give complete, truthful information, and to not commit any further crimes. The government agreed to make a 5K motion at sentencing, describing his cooperation and allowing the court to impose a sentence below that mandated in the sentencing guidelines. Aluzzo's failure to cooperate would release the government from this obligation, and would allow the government to oppose any downward adjustment recommended by the Probation Department. The agreement states that should Aluzzo violate of any of its provisions he "will not be released from his plea of guilty" and "will also be subject to prosecution for any federal criminal violation of which the Office has knowledge, including, but not limited to, the criminal activity described in paragraph 4, above." Agreement, paragraph 6 (includes a 1990 misdemeanor tax evasion, charge). Following this agreement, Aluzzo provided information about his relationship with Asaro and about other criminal activities. He was not contacted by the government to take the plea described in the agreement.

 Then in April 1996, the government confiscated electronic poker machines--allegedly used for illegal gambling-- in the back room of a coffee shop owned by Aluzzo's daughter. This court has reviewed substantial evidence that these machines belong to Aluzzo and that he has thus violated the terms of the cooperation agreement. In June 1996, the government brought an indictment for felony tax evasion for the years 1990 and 1991.

 Aluzzo moves to dismiss the indictment, claiming that the remedies for a breach of the plea agreement are limited to those specified. The defendant also claims that his period of cooperation ended with his giving information on Asaro, so that he should not be further bound by the agreement. In the alternative, Aluzzo claims that this Court should provide an evidentiary hearing to determine if he, in fact, breached the agreement by committing a subsequent crime. The government says that the agreement is still in effect because the defendant has yet to actually take the plea provided for in the agreement.

 INTENT OF THE PARTIES

 A cooperation agreement is governed by contract principles. United States v. Rexach, 896 F.2d 710 (2d Cir. 1990). The court must determine what the parties reasonably understood to be its terms, including intended remedies in the event of a breach. Id.

 In some cooperation agreements, the sole benefit to the defendant is that the government will not oppose downward departure and will make a 5K motion describing the defendant's cooperation. See, e.g., United States v. Resto, 74 F.3d 22 (2d Cir. 1996). This cannot, however, be said to be the primary benefit bargained for in this particular cooperation agreement. The benefit gained by the defendant was a reduction of the offense from a felony to a misdemeanor. The plea agreement does not have to explicitly state that the government could have charged the defendant with a felony, but in exchange for the defendant's cooperation, is allowing the defendant to plead guilty to a misdemeanor. This court must read the cooperation agreement for its consideration and make a determination as to what these parties bargained for. See United States v. Castelbuono, 643 F. Supp. 965, 970 (E.D.N.Y. 1986).

 Ambiguities in a cooperation agreement are resolved in favor of the defendant. Innes v. Dalsheim, 864 F.2d 974, 978 (2d Cir. 1988). This agreement is not, however, ambiguous under the basic principles of contract law. The defendant's interpretation, and claim of "ambiguity," renders the agreement meaningless. The claim of limited remedies available to the government in the event of a breach leaves this agreement with practically no obligations on the part of the defendant. The agreement would be void of consideration, and Aluzzo would have little incentive to cooperate.

 The government agreed to charge the defendant with a misdemeanor instead of a felony, but only on the condition that he not commit further crimes. According to the defendant, he could refuse to cooperate and still expect to receive the primary benefit of the agreement. His only loss should he breach is that the government would not have to make a motion for reduction of his sentence. This could not have reasonably been the intent or expectation of the parties. The court will not endorse an interpretation that leads to "absurd results." See United States v. Castelbuono, 643 F. Supp. 965, 970 (E.D.N.Y. 1986).

 Aluzzo's failure to abide by the terms of the agreement warrants a remedy that deprives him of its primary benefit. The two specific remedies listed were merely supplemental to the agreement, corresponding to the additional benefits offered for the defendant's cooperation. The government's remedy for breach is limited only when it is clear from the agreement that this was the parties' intent. United States v. Pelletier, 898 F.2d 297, 299 (2d Cir. 1990) (Oral cooperation agreement explicitly limited government's remedy to prosection for perjury); United States v. Macchia, 861 F. Supp. 182 (E.D.N.Y. 1994).

 Aluzzo's agreement provides that should he commit further crimes he "will also be subject to prosecution for any federal criminal violation of which the office has knowledge ..." (emphasis added). This agreement clearly does not evidence any intent of the government to limit its remedies in the event of ...


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