The opinion of the court was delivered by: HAIGHT
MEMORANDUM OPINION AND ORDER
HAIGHT, Senior District Judge :
Roy William Harris petitions this Court pursuant to 28 U.S.C. § 2255 for a writ of habeas corpus setting aside his prior conviction, and under Rule 33, Fed.R.Civ.P. for a new trial. The government resists Harris's applications in their entirety.
PART I. Procedural Background
On September 9, 1992, a grand jury sitting in this district returned a 24-count superseding indictment charging Roy William Harris with conspiracy to commit wire and bank fraud in violation of 18 U.S.C. § 371, wire fraud in violation of 18 U.S.C. § 1353, bank fraud in violation of 18 U.S.C. § 1344, money laundering in violation of 18 U.S.C. § 1956(a)(2), conducting a continuing financial crimes enterprise ("CFCE") in violation of 18 U.S.C. § 225, and making a false statement on a loan application in violation of 18 U.S.C. § 1014.
Prior to trial, Harris moved to dismiss certain counts of the indictment and also to sever Count 23, which charged him with making a false statement on a loan application. This Court granted Harris's motion to sever Count 23, but denied his motion to dismiss those counts charging him with wire fraud, bank fraud, and engaging in a continuing financial crimes enterprise. See United States v. Harris, 805 F. Supp. 166 (S.D.N.Y. 1992).
A jury was empaneled on November 9, 1992. On December 14, 1992, the jury found Harris guilty on all counts tried.
On March 26, 1993, Harris filed motions for a judgment of acquittal, pursuant to Rule 29, Fed.R.Crim.P., and for a new trial, pursuant to Rule 33. This Court denied Harris's motions in their entirety. See United States v. Harris, 1993 WL 300052 (S.D.N.Y.). Prior to sentencing, Harris moved for downward departures from the United States Sentencing Guidelines. This Court denied those applications after conducting an evidentiary hearing. See United States v. Harris, 1994 WL 683429 (S.D.N.Y.).
On December 22, 1994, this Court sentenced Harris to a 188-month term of imprisonment, a 5-year term of supervised release, and a direction that Harris pay $ 200 million in restitution.
In an opinion dated February 28, 1996, the Second Circuit upheld Harris's conviction and sentence, except for the restitution order, which the Court of Appeals remanded to this Court for further proceedings. See United States v. Harris, 79 F.3d 223 (2d Cir. 1996).
On October 7, 1996, the Supreme Court denied Harris's petition for a writ of certiorari. See Harris v. United States, 136 L. Ed. 2d 89, 117 S. Ct. 142 (1996).
On March 18, 1997, Harris filed this petition pursuant to 18 U.S.C. § 2255 and Rule 33, for habeas corpus setting aside his conviction and for a new trial.
PART II. Timeliness of the Petition
Against this procedural background, I must consider the timeliness of Harris's petition in light of the Anti-Terrorism and Effective Death Penalty Act of 1996 ("AEDPA"), effective April 24, 1996.
Because the timeliness of a habeas corpus petition is jurisdictional in nature, I raised the question sua sponte in an opinion dated February 13, 1998, familiarity with which is assumed, and directed the parties to address it. They have done so.
I am now satisfied that Harris's petition is timely. The Court's February 13, 1998 opinion incorrectly stated at slip op. 1 that Harris did not petition the United States Supreme Court for a writ of certiorari. As the preceding Part of this opinion notes, Harris did file such a petition, which the Supreme Court denied on October 7, 1996. I therefore conclude that Harris's judgment of conviction did not become final for purposes of the one-year period of limitation contained in 28 U.S.C. § 2255 until that date. By that time the AEDPA had become effective. Harris's petition, filed on March 18, 1997, was within the one-year statutory time limit.
Accordingly the Court will consider the petition on its merits.
PART III. Factual Background
The facts of this case are set forth in detail in the cited opinions of this Court and the Court of Appeals, familiarity with which is assumed. I recount the facts in this opinion to the extent necessary to explicate the grounds for decision.
At the pertinent times petitioner Roy William Harris was the president and chief executive officer of two corporations that I will on occasion collectively refer to as the "AroChem Companies" or "the Companies." One of these, AroChem International, Inc. ("International"), operated a petroleum and petrochemical refinery complex in Puerto Rico. The other, AroChem Corporation ("AroChem"), which maintained its principal offices in Greenwich, Connecticut, provided management services to International, including supervising the inventory and trading activities of International and marketing petrochemicals and petroleum products.
Harris was also the sole shareholder and managing director of a third entity, AroChem International, Ltd. ("Limited"), which engaged in trading and financing of crude oil and petroleum products.
In January of 1990 a consortium of banks, led by Chase Manhattan Bank, N.A. ("Chase"), and including Bank Brussels Lambert ("BBL"), Swiss Bank Corporation, Banque Indosuez ("BI"), and later, Skopbank (collectively "the Banks" or "the Chase Group of Banks"), entered into a revolving credit agreement ("the RCA") with the AroChem Companies. The RCA permitted the AroChem Companies to borrow up to $ 245 million as needed for their business operations. Loans made under the RCA were secured by the Companies' inventory of petroleum and petroleum products and by their receivables and cash. The initial credit agreement expired in January of 1991, and was extended thereafter six times through November 30, 1991. Ultimately the AroChem Companies defaulted on their obligations under the RCA. They owed the Banks about $ 200 million when, on February 14, 1992, the Banks filed a petition to force the Companies into bankruptcy.
The government conducted a criminal and grand jury investigation, using the resources of the Office of the United States Attorney for this district and the FBI. The grand jury's indictment was filed on May 27, 1992.
To support its charges of conspiracy and substantive violations, the government alleged in the indictment a three-part fraudulent scheme: "concealing the true financial condition of the AroChem Companies from the Chase group of banks and the AroChem Companies' independent auditors"; misappropriations by Harris of "monies belonging to the AroChem Companies for his own personal benefit"; and "concealing from the Chase group of banks excessively speculative trading practices prohibited by the [RCA]." Indictment, P 7.
According to the indictment, the first part of the fraudulent scheme consisted of creating false and fictitious contracts, invoices, receipts, wire transfers, and other documentation, including a series of "borrowing base reports" ("BBRs"), which were intended to identify the crude oil inventory and forward purchases of inventory by the AroChem Companies for refining at International's refinery in Puerto Rico.
The second part of the fraudulent scheme consisted of Harris engaging in petroleum product trading practices which repeatedly caused the AroChem Companies to hold net open positions far in excess of the one million barrel net trading position limitation imposed by the RCA, and concealing those trading practices from the Banks, with the result that Harris exposed the Companies and the Banks to excessive trading risk.
The third part of the scheme involved the diversion by Harris of assets belonging to the AroChem Companies to his personal accounts.
According to the government's theory of the case, Harris made use of Limited to perpetrate the scheme by utilizing Limited to finance oil cargoes in transit and other trading activities. Limited had accounts at Banque Paribas (Suisse) and Credit Lyonnais (Suisse) in Geneva, Switzerland (the "Swiss Banks"). The government alleged that, in order to conceal and disguise the nature, location, source and ownership of funds, Harris transferred approximately $ 7.5 million from the AroChem Companies' accounts at Chase through the Union Trust Company in Connecticut and into Limited's accounts at the Swiss Banks, for the purpose of concealing from the Chase Group of Banks the extent to which Harris was utilizing Limited to finance cargoes in transit and trading activities.
The Second Circuit's opinion affirming Harris's conviction described these three components of the fraudulent scheme as "The Companies' Fraudulent Practices," "Violations of Financial Covenant," and "Money Laundering," respectively. 79 F.3d at 226-28.
In addition to the government's indictment of Harris, the AroChem Companies' default on their obligations under the RCA also generated a welter of civil litigation. I need not recite all the details. It is sufficient for present purposes to say that virtually everyone involved is suing everyone else: banks are suing Harris; banks are suing Ernst & Young, the AroChem Companies' independent auditors at the relevant times; banks are suing other banks; the AroChem bankruptcy trustee is suing banks; and so forth. I may not have referred to all the litigation pairings, but it does not really matter. Most of this litigation is pending in this district, consolidated before District Judge McKenna and Magistrate Judge Ellis, although cases are also pending in other courts.
The relevance of all this civil litigation to the case at bar is that the civil actions have, not surprisingly, generated vast amounts of pre-trial discovery, consisting of depositions and production of documents. Habeas counsel for Harris, who did not represent him at the trial, in post-trial proceedings, or on appeal, fasten upon this discovery as the basis for Harris's habeas corpus petition. "The extensive discovery in those civil law suits has disclosed that Mr. Harris's conviction was the result of perjury, false and misleading evidence, and suppression of testimony and evidence which would have exonerated him." Initial affidavit of John B. Conway, Esq., sworn to on March 12, 1997, at P 2. Counsel attaches to his affidavit as exhibits voluminous excerpts from depositions given during the civil litigation and many documents produced as exhibits.
Harris expands upon that theme in his main brief at 5:
The facts upon which Harris was convicted, and the facts upon which his conviction was affirmed, are now provably false. As a result of massive discovery taken after Harris' trial in civil litigation brought by the RCA lenders, the real AroChem story has unfolded. Following the production of approximately four million pages of documents and the taking of depositions for approximately 400 days, the truth has come out. The truth is that Harris' conviction resulted from government misconduct which violated Harris' right under the fifth amendment to due process of law and a fair trial.
Since the petition at bar was filed, there have been a number of additional submissions of briefs and exhibits by counsel for Harris and for the government; a number of hearings before the Court at which counsel argued various points of law; the promulgation of written cross-interrogatories to an attorney formerly with the Harris defense trial team; an exchange of written requests to admit by counsel for Harris and the government's responses thereto; and the examination by the Court in camera of all the grand jury testimony in the case, as well as documents from the files of the government and the Milbank Tweed law firm, which represents Chase, counsel for Harris having sought to obtain discovery of such documentation in this proceeding. I have dealt with the issues arising out of that requested document discovery in opinions dated December 30, 1997, January 23, 1998, February 5, 1998, and March 6, 1998, familiarity with all of which is also assumed.
I now turn to a more detailed consideration of the various bases for relief that Harris urges in his petition.
PART IV. Harris's Present Contentions
Harris does not contend on this petition that the conduct of the AroChem Companies' business was entirely untainted by fraud. The principal contentions of habeas counsel are:
(1) The chief architect of any fraud perpetrated at AroChem was Vincent J. ("V.J.") Dispenza, the Companies' chief financial officer, aided and abetted primarily by Dean Seniff, the comptroller.
(2) (a) Harris did not participate in any fraud at AroChem, and was unaware of any fraudulent acts on the part of his fellow corporate officers, Dispenza and Seniff.
(b) To the extent that Dispenza or Seniff testified that Harris knew or should have known of or participated in fraud at AroChem, they committed perjury, and the government knew or should have known they were doing so.
(3) (a) Chase, and perhaps other members of the Chase Group of Banks, knew and approved of the AroChem Companies' practice of consistently holding a net unhedged position in oil greatly in excess of one million barrels, the covenanted limit in the RCA.
(b) To the extent that Bank witnesses at the trial testified that the one million barrel limit was vitally important to the Banks, and that the Banks did not know it was being exceeded, they committed perjury, and the government knew or should have known they were doing so.
(4) (a) Chase, and perhaps other members of the Chase Group of Banks, knew and approved of all oil trading activities engaged in by Limited with the financial assistance of the Swiss Banks.
(b) To the extent that Bank witnesses testified at trial that they were unaware of Limited's trading activities, and would have disapproved had they known, they committed perjury, and the government knew or should have known they were doing so.
(5) (a) Chase, and perhaps other members of the Chase Group of Banks, knew and approved of the full extent of Harris's speculative trading in oil futures.
(b) To the extent that Bank witnesses testified at trial that they were unaware of Harris's trading activities, and would have disapproved had they known, they committed perjury, and the government knew or should have known they were doing so.
(6) The trial testimony of the government's expert witness, Robert Lynch of the accounting firm of Arthur Andersen, with respect to the AroChem Companies' accounting records and the conclusions to be drawn from them, was perjurious, and the government knew or should have known that it was.
(7) The government violated its obligation under Brady v. Maryland, 373 U.S. 83, 10 L. Ed. 2d 215, 83 S. Ct. 1194 (1963), to advise Harris and his trial counsel of exculpatory material, and its obligation under Giglio v. United States, 405 U.S. 150, 31 L. Ed. 2d 104, 92 S. Ct. 763 (1972), to advise Harris and his trial counsel of impeachment material.
(8) The government intimidated potential defense witnesses for the improper purpose of preventing them from testifying.
Trial counsel for Harris based his defense primarily upon contentions (1) and (2)(a). Harris did not testify at trial and the defense called no other witnesses. Trial counsel attacked the credibility of Dispenza and Seniff, and challenged the conclusions drawn by Lynch. Trial counsel did not attempt to demonstrate at trial, as habeas counsel now contend, that the Banks knew all along about the Companies' exceeding the one million barrel net open position limit, or about the speculative oil trading activities of Limited and Harris.
With the issues thus posed, the Court directed counsel to address the question whether, in addition to the hearings previously conducted, the circumstances of this case required an evidentiary hearing to which witnesses would be called to testify.
Harris and the government both take the position that no evidentiary hearing is necessary, but for diametrically opposite reasons. Harris contends that the present record entitles him to habeas relief and a new trial. The government contends that the present record requires dismissal of the petition. Counsel have briefed these contentions and argued them at the most recent hearing. Thus the present procedural posture of the case is analogous to cross-motions for summary judgment.
PART V: The Requisite Showings to Establish that Evidence is "Newly Discovered"
It frequently occurs that petitions for habeas corpus under § 2255 and motions for a new trial under Rule 33 are based upon what the applicants characterize as "newly discovered evidence." Indeed, in the case at bar, that is a central theme stressed by habeas counsel for Harris, who contend, as noted, that the truth as they perceive it emerged only during the course of the civil litigation that followed the criminal trial.
The question therefore arises: what must be shown to qualify evidence as "newly discovered?" I address that question in this Part of the Opinion.
That question is often presented in the context of allegedly perjured trial testimony, and so I begin the analysis with such cases.
Harris contends that the government knowingly presented perjured testimony and false evidence going to material issues. Without that perjured testimony, Harris argues, he could not have been convicted on any component of the fraudulent scheme charged against him. In those circumstances, Harris concludes, he is entitled to relief on two grounds. First, this corruption of the fairness of the trial process violated his Fifth Amendment right to due process of law, a claim cognizable under the habeas statute, 28 U.S.C. § 2255, which covers cases where a federal sentence was imposed "in violation of the Constitution or laws of the United States." Second, perjured prosecution testimony is a recognized ground for a new trial under Rule 33, Fed. R. Civ. P.
There is authority that supports both grounds urged by Harris. As for the habeas statute, in Mooney v. Holohan, 294 U.S. 103, 112, 79 L. Ed. 791, 55 S. Ct. 340 (1935), upon which Harris places principal reliance, the Supreme Court made it clear that "if a state has contrived a conviction through the pretense of a trial which in truth is but used as a means of depriving a defendant of liberty through a deliberate deception of court and jury by the presentation of testimony known to be perjured," that conviction must be regarded as "inconsistent with the rudimentary demands of justice . . ."
Mooney construed the Due Process Clause of the Fourteenth Amendment to the United States Constitution. More recently the Court has said, in a case construing the Due Process Clause of the Fifth Amendment, which "will apply equally to the comparable clause in the Fourteenth Amendment applicable to state trials," that "a conviction obtained by the knowing use of perjured testimony is fundamentally unfair, and must be set aside if there is any reasonable likelihood that the false testimony could have effected the judgment of the jury. . ." United States v. Agurs, 427 U.S. 97, 103-04, 107, 49 L. Ed. 2d 342, 96 S. Ct. 2392 (1976).
In the Rule 33 context, the government's use of perjured testimony, knowing or unknowing, is a commonly urged basis for a new trial under the rule. Each case turns on its own circumstances. Sometimes the motion succeeds, as in United States v. Wallach, 935 F.2d 445 (2d Cir. 1991); sometimes it fails, as in United States v. Torres, 128 F.3d 38 (2d Cir. 1997).
In the most recent round of briefing, I directed counsel to address the question whether, to succeed on the basis of either statute or rule, Harris must show not only that the government obtained his conviction by the knowing use of perjured testimony, but also that he and his counsel were unaware of the facts demonstrating the perjury at the time of trial, and could not have discovered them by the exercise of due diligence. I now conclude that the question must be answered in the affirmative, in the contexts of both statute and rule.
Treating those contexts in inverse order, analysis of what must be shown to obtain a new trial begins with the wording of Rule 33. The rule provides in pertinent part:
A motion for a new trial based on the ground of newly discovered evidence may be made only before or within two years after final judgment, but if an appeal is pending the court may grant the motion only on remand of the case. A motion for a new trial based on any other grounds shall be made within 7 days after verdict or finding of guilty or within such further time as the court may fix during the 7-day period.
These time limits are jurisdictional. Given the chronology of the case, "the ground of newly discovered evidence" is the only Rule 33 ground available to Harris, and that is the ground he urges, purportedly based, as noted supra, upon post-trial revelations in the civil litigation.
"Newly discovered evidence," as that phrase is used in Rule 33, has a well-established meaning in the Second Circuit. A recent expression appears in United States v. Torres, 128 F.3d 38, 48-49 (2d Cir. 1997): "When a motion for a new trial rests on newly discovered evidence, the defendants must show: (1) that, with due diligence, they could not have discovered the evidence during trial; (2) that the evidence is material; and (3) that the evidence is non-cumulative" (citations omitted).
The defendants in Torres, as does Harris, based their Rule 33 claim upon perjury by a government trial witness. The Torres defendants had no difficulty satisfying the due diligence requirement, since it was not until their original motions for new trials were pending that "the government notified the court and [defendants] that one of its witnesses had committed perjury at trial. The government learned that this witness had withheld from the government about $ 80,000 in cash proceeds from his heroin business, in direct contradiction to his trial testimony that he had not hidden any money." 128 F.3d at 48. United States v. Moore, 54 F.3d 92, 99 (2d Cir. 1995), presents the same circumstance ("Moore learned of the alleged perjury only during a fortuitous post-trial conversation with Timothy Cyrus' counsel in a separate proceeding."). In both Torres and Moore, it was apparent that the Rule 33 movant claiming perjury by a government witness did not know, and could not have known, of the perjury at the time of trial.
However, contrary to Harris's contention, where at the time of trial a Rule 33 movant knew or by the exercise of due diligence could have discovered (and consequently demonstrated) a government witness's perjury, he cannot satisfy the first of the three requirements articulated in Torres, and the evidence of perjury is not "newly discovered" under the rule. In United States v. Helmsley, 985 F.2d 1202, 1206-08 (2d Cir. 1993), the Second Circuit explained:
Normally the requirement that a collateral attack must be supported by evidence not available by reasonable diligence at trial applies to claims of a prosecutor's knowing use of false testimony . . . . We have never permitted a successful collateral attack for a prosecutor's knowing use of false testimony based entirely on evidence of which the defendant was aware, or in the exercise of reasonable diligence should have been aware, at trial, and we have permitted such an attack to succeed, despite the existence at trial of some basis for the defendant to suspect the prosecutor's knowing use of false testimony, only where the prosecutor was directly involved in the falsity.
In United States v. White, 972 F.2d 16 (2d Cir. 1992 ), the Second Circuit said in the context of a motion for a new trial based on perjured testimony that "the motion will not be granted unless the 'newly discovered evidence' could not with due diligence have been discovered before or during trial." 972 F.2d at 20. While the court did not deny the motion on that ground, id. ("since it is not the use of the drugs but the alleged denial of use that would make this evidence material, it is difficult to evaluate whether defense counsel could have, or should have, developed this point prior to Smith's testimony"), White makes it clear that in this circuit, the due diligence requirement applies to Rule 33 motions for a new trial based upon the perjury of government witnesses.
I conclude that the same requirement applies to statutory habeas corpus petitions based upon trial perjury. In that context Harris places primary reliance upon Mooney v. Holohan, supra, but fails to quote in his briefs this passage from the Court's per curiam opinion:
[Petitioner] alleges that he could not by reasonable diligence have discovered prior to the denial of his motion for a new trial, and his appeal to the Supreme Court of the State, the evidence which was subsequently developed and which proved the testimony against him to have been perjured.
294 U.S. at 110. While as stated at footnote 2, supra, in Mooney the Supreme Court did not pass upon the merits of the petition, on the ground that it must first be presented to the state courts, there is no reason to suppose that the petitioner would have alleged his exercise of due diligence or the Court have explicitly referred to it, if due diligence was not an essential requirement for relief.
In United States v. Agurs, supra, which reached the merits and turned upon the Due Process clause of the Fifth Amendment, the parties litigated the due diligence issue. See 427 U.S. at 101 (the government, opposing relief, argued inter alia "that the evidence was readily discoverable in advance of trial and hence was not the kind of 'newly discovered' evidence justifying a new trial"); id. at 102 (the court of appeals "found no lack of diligence on the part of the defense"). While Agurs involved a claim of prosecutorial nondisclosure of exculpatory evidence, rather than use of perjured testimony, there is no principled reason to apply the due diligence requirement in one context but not in the other; and Agurs cites Mooney as one of three situations which "involves the discovery, after trial, of information which had been known to the prosecution but unknown to the defense." Id. at 103 (emphasis added).
In addition to Mooney v. Holohan, Harris cites United States v. Wong, 78 F.3d 73 (2d Cir. 1996), and United States v. Gambino, 59 F.3d 353 (2d Cir. 1995), to support the contention "the knowing use of false testimony compels the reversal of a conviction." Brief of Petitioner for Judgment Setting Aside his Conviction Based Upon the Evidence Before the Court at 32. That contention materially overstates the holdings of these cases, both of which assumed governmental use of perjured testimony but denied new trials. See Wong, 78 F.3d at 82 ("The circumstances do not suggest that the undisclosed evidence of Teixeria's perjury would have affected the result."); Gambino, 59 F.3d at 365 ("Even assuming Gravano perjured himself and assuming perjury in other trials would be relevant to Gravano's testimony in this trial, we do not believe the Conte letter material in the constitutional sense. Had defense counsel had access to the letter, we do not believe it would likely have affected the outcome of the trial . . ."). But more pertinent to the present discussion, it is apparent from both Wong and Gambino that the evidence relied upon to establish perjury was truly "newly discovered" by the defense. The perjury of the paid informant Teixeria in Wong arose out of inconsistent testimony about his tax returns, given in prior unrelated cases of which the prosecutor had knowledge but defense counsel had none. The "Conte letter" referred to in Gambino constituted Brady material which the Second Circuit said should have been made available to the defense. There is nothing in either of these cases, or indeed in any other, to suggest that the evidence used in a post-trial motion to demonstrate trial perjury need not be newly discovered.
The policy reason for that requirement is plain enough. A defendant must use available evidence to attack the credibility of government witnesses at trial. He cannot fail or omit to do so at trial and then, in the event of a conviction, use such evidence to mount a collateral attack upon it. Were the rule otherwise, the finality of judgments would be compromised and litigation could be endless.
United States v. Siddiqi, 959 F.2d 1167 (2d Cir. 1992), reflects the operation of that policy. This was a prosecution for Medicare fraud. The decisive question of fact was whether the defendant, a physician, prepared the fraudulent claims forms. Defendant said he could not have done so because he was out of the country at the times the forms underlying the counts of conviction were completed. Following his conviction by the jury, defendant moved under Rule 33 for a new trial, proffering as newly discovered evidence a hospital "physicians away list" which tended to show that defendant was indeed away from the hospital on the key dates. The district court denied defendant's Rule 33 motion. On direct appeal, the Second Circuit remanded the case for further proceedings with respect to this evidence. The court of appeals concluded that if the document in question had been before the jury, "the jury probably would have acquitted Siddiqi on the five counts which are the subject of his appeal." Id. at 1172. But the court of appeals did not order a new trial; rather, it remanded the case to the district court for further proceedings to determine whether the document qualified as "newly discovered" evidence, and was admissible.
The Second Circuit's instructions on remand are noteworthy:
On remand, the district court should determine (1) whether the document could have been discovered before or during trial with the exercise of due diligence, and (2) whether the document is admissible into evidence. If it could have been discovered, or if it is not admissible for lack of authenticity or other reasons, then the convictions shall stand, since we find Siddiqi's challenges to the jury charge meritless. However, if the document is both new and admissible, then in light of our conclusion that it probably would have led to an acquittal if presented to the jury, the district court shall order a new trial on counts 31, 33, 40, 42, and 43 of the indictment.
Siddiqi thus holds that even if a defendant proffers evidence on a Rule 33 motion that would probably have resulted in acquittal, it avails him nothing if "the evidence could have been discovered before or during trial with the exercise of due diligence."
For the reasons set forth above, I hold that, whether the procedural context be a petition under § 2255 or a motion under Rule 33, the perjury of a government witness cannot be a ground for successful collateral attack upon a conviction unless the defendant shows that the facts demonstrating that perjury were not known to the defense at trial, and could not have been discovered by the exercise of due diligence.
Habeas counsel for Harris also claim that documentary evidence exists which, if called to the attention of the jury, would have led to a different trial result.
I think it is plain that, even if such claims are not coupled with charges that government witnesses perjured themselves, they stand upon the same footing with respect to newly discovered evidence. That is to say, documents cannot be so characterized, and consequently cannot form the basis for habeas or Rule 33 relief, unless the applicant can show that the documents in question were not known to the defense at trial, and could not have been discovered by the exercise of due diligence.
I will now apply these holdings to certain of the claims Harris asserts in this proceeding.
PART VI: The One Million Barrel Covenant
In its opinion affirming Harris's conviction, 79 F.3d at 227, the Second Circuit summarized the evidence on this aspect of the fraudulent scheme the government charged against Harris:
The agreement between the AroChem Companies and the banks prohibited the Companies from holding a net unhedged position in oil of more than one million barrels. However, the Companies regularly violated this covenant. For instance, the Companies' net unhedged position was in excess of one million barrels approximately 80% to 85% of the time during the period January, 1990 through January, 1991. By November of 1990, the AroChem Companies were maintaining net unhedged positions of up to 10 million barrels of oil. The Companies never informed the banks that they were engaged in such highly speculative trading.
Habeas counsel for Harris correctly assert that witnesses employed by the Banks gave material evidence in support of these propositions. They were Suzanne Durney and Michiel van der Voort, employees of Chase, and Alexander "Sasha" Dinell, an employee of BBL. Of these, Durney was the most important witness, and is the witness against whom habeas counsel assert the most vehement accusations of perjury.
Durney testified that the net open position covenant was a very significant issue for Chase, intended to insure that AroChem was not entering into speculative positions, which the Banks wished to prevent lest the Companies' capital base be exposed to the volatility of the oil markets; that she relied upon the BBRs to make sure that the Companies were in compliance with the net open position covenant; and that she never knew that AroChem had net open positions exceeding one million barrels. Durney testified that Chase "relied very heavily" on the information in the BBRs, "to insure that the company had sufficient collateral to support the loans and to insure that the company was not violating its trading net open position." Trial Tr. 494. She testified further that Chase was never told that the Companies "had positions as much as 10 or 15 million barrels long or short"; and that "if we had known that the company was taking those kinds of positions, we never would have made the loan in the first place. If we had found out after we made the loan, we probably would have demanded payment and probably would have tried to foreclose on our collateral." Id. at 546-47.
Dinell and van der Voort gave consistent testimony with respect to the importance of the covenant, the use the Banks made of the BBRs, the reliance placed upon them, and the Banks' ignorance of the Companies' net unhedged open positions.
It is useful now to describe in more detail the RCA's one million barrel covenant and the information contained in the BBRs.
RCA § 8.22 provided that the AroChem Companies "would not permit their Net Open Position at any one time to exceed 1,000,000 barrels if their Net Open Position is a positive number, or less then a negative 1,000,000 barrels if their Net Open Position is a negative number." RCA § 1.01, captioned "Certain Defined Terms," defined "Net Open Position" as meaning "the number of barrels equal to (i) the sum of the volumes of: (a) Inventory [excluding certain substances] and (b) Inventory that the Obligors are obligated to purchase under Forward Contracts or Futures Contracts or that the Obligors have the right to purchase under Call Options," minus "(ii) the sum of the volumes of Inventory that the Obligors are obligated to sell" under such contracts or "have the right to sell under Put Options."
The BBRs which AroChem filed with Chase on a near-weekly basis purported to show the Company's current trading positions. Such a document was called a "Borrowing Base Certificate," to which a "Position Report" was attached. The parties' briefs telescope these captions, referring to the document as a "borrowing base report," and so will I; hence the abbreviation "BBR."
The BBRs do not contain the phrase "Net Open Position," which as noted appears in the RCA. Rather, the BBRs conclude with the notation "NET INV. POS.," which Durney testified in her analysis of a typical BBR, for May 26, 1991, GX 59, showed that "the Company on this particular date was long 598,000 barrels of inventory." Trial Tr. 492. In other words, on the government's trial theory the entry for "NET INV. POS." represented the net open position specified by the covenant in RCA § 8.22 and defined in RCA § 1.01.
The BBRs typically listed "forward purchases of inventory" which were marked "variable." Durney testified that such contracts "were not included in the long position of the company because they don't put the company at any price risks, since the prices on these barrels hadn't been set." Trial Tr. 485. If "variable" contracts were included in AroChem's long position, then every BBR would show a net open position greatly in excess of the one million barrel limitation.
The contention now put forward by Harris's habeas counsel (although not by his trial counsel) is that "variable" forward purchases of inventory should have been included in the long position and that Durney knew this. If the BBRs are read in that fashion, they consistently showed non-compliance with the covenant. Accordingly, the habeas argument proceeds, Durney's trial testimony on the point constituted perjury, as the government knew or should have known. The bottom-line contention for Harris in this proceeding is that Chase knew Harris and AroChem were speculating in oil futures, went along with it gladly, and then needed to set up Harris as a scapegoat when AroChem lost heavily and defaulted on the loans. In short, habeas counsel contend, the Banks were not defrauded with respect to the Company's non-compliance with the net open position covenant, as the government charged in the indictment.
Moreover, habeas counsel contend, the excessive net open positions should have been readily apparent to "anyone who knew how to read the borrowing base reports." Reply Brief at 30. That is because "this precise phenomenon appeared on every single borrowing base report given to the RCA lenders under the RCA; that is, on every single borrowing base report the number of barrels shown next to 'NET INV. POS.' did not include the barrels listed for contracts listed 'variable' but on which the price was fixed." Id. at 32.
While in this proceeding Harris charges the government with failing to produce or identify certain documents in violation of its Brady and Giglio, see Part X infra, there appears to be no doubt that the BBRs were furnished to the defense team prior to trial, and were in fact admitted as exhibits at trial. Thus as enclosures to a letter dated June 4, 1992, Assistant United States Attorney Howard M. Shapiro sent to lead counsel for Harris "the borrowing base certificates and attached position reports to the Chase Group of Banks by the AroChem Companies between April 1990 and December 1991." Shapiro Affidavit Ex. A. This occurred five months before the trial began, the jury having been empancled on November 9, 1992. Any lingering doubt on this point was dispelled during oral argument on the motions for summary disposition on February 2, 1998. Habeas counsel for Harris had just finished discussing what the BBRs show about net open positions, reiterating the claim that Dispenza and Durney had perjured themselves in their relevant testimony. See Tr. 127, 138. In order that I might fully understand the evidentiary basis for that contention, I put a question to counsel for Harris:
THE COURT: All right. I guess all I'm really getting at and the question I just put to you was whether we call it perjury or misrepresentation or artful dodging or misleading or whatever, the evidence which you now say brands this testimony as one or the other is evidence which, in order to make the argument, you must ...