The opinion of the court was delivered by: Hurley, District Judge.
Pending before the Court is the application of Stephen J.
Sabbeth ("Sabbeth") for bail pending appeal. The controlling
statute, 18 U.S.C. § 3143, provides in pertinent part as follows:
(b) Release or detention pending appeal by the
defendant. — (1) . . . the judicial officer shall
order that a person who has been found guilty of an
offense and sentenced to a term of imprisonment, and
who has filed an appeal . . ., be detained, unless
the judicial officer finds —
(A) by clear and convincing evidence that the
person is not likely to flee or pose a danger to the
safety of any other person or the community if
released. . . .; and
(B) that the appeal is not for the purpose of delay
and raises a substantial question of law or fact
likely to result in —
(ii) an order for a new trial,
(iii) a sentence that does not include a term of
(iv) a reduced sentence to a term of imprisonment
less than the . . . expected duration of the appeal
Notwithstanding the language of § 3143 that seemingly
conditions the availability of bail pending appeal on a showing
that the conviction or sentence under attack is likely to be
disturbed on appeal, the Section has not been so interpreted.
See United States v. Hart, 906 F. Supp. 102, 106 (N.D.N Y
1995). Rather, as explained by the Second Circuit in United
States v. Randell, 761 F.2d 122 (2d Cir. 1985):
[The] appropriate interpretation . . . requires a
district court to determine first whether any
question raised on appeal is a "substantial" one. The
Miller court defined a substantial question as "one
which is either novel, which has not been decided by
controlling precedent, or which is fairly doubtful."
[United States v. Miller, 753 F.2d 19, 23 (3d Cir.
1985)]. Giancola held that a substantial question
"is one of more substance than would be necessary to
a finding that it was not frivolous. It is a `close'
question or one that very well could be decided
either way." [United States v. Giancola,
754 F.2d 898, 901 (11th Cir. 1985)]. Handy defined
substantial as "fairly debatable." [United States v.
Handy, 753 F.2d 1487, 1490, amended by
761 F.2d 1279 (9th Cir. 1985)]. We do not believe
that these definitions of "substantial" differ
significantly from each other, but if we were to
adopt only one, it would be the language of
Id. at 125 (footnote omitted).
If the presence of a substantial question is demonstrated, the
movant must then establish that the question is "`so integral to
the merits of the conviction on which defendant is to be
imprisoned that a contrary appellate holding is likely to require
reversal of the conviction or a new trial.'" Id. (quoting
Miller, 753 F.2d at 23).
Sabbeth neither represents a risk of flight nor a danger to
another or the community. Absent from the record is anything to
suggest that his appeal is for the purpose of delay. Accordingly,
the present application turns on whether the issue broached is
Sabbeth stands convicted, after a trial by jury, under each of
the six counts of Indictment 97-CR-421(S)(DRH).
On or about and between June 1, 1990 and April 1992,
[he] . . . acting individually and as an agent of
Sabbeth Industries, together with others, in
contemplation of the filing of a case under Title 11
of the United States Code by Sabbeth Industries, and
with intent to defeat the provisions of Title 11 of
the United States Code, did knowingly and
intentionally conspire to fraudulently transfer and
conceal property belonging to Sabbeth Industries, in
violation of Title 18, United States Code, Section
On or about and between June 1, 1990 and April 1992,
. . . [he] individually and as an agent of Sabbeth
Industries, together with others, in contemplation of
a case under Title 11 of the United States Code by
Sabbeth Industries, and with intent to defeat the
provisions of Title 11 of the United States Code, did
knowingly, intentionally and fraudulently transfer
and conceal property belonging to Sabbeth Industries.
Counts Three, Four, and Five each charged Sabbeth with having
committed perjury in a proceeding under Title 11 of the United
States Code. Under Count Six, he was accused of having engaged in
money laundering in violation of Title 18 U.S.C. § 1956 with
respect to "the proceeds of specified unlawful activities, to
wit, monies unlawfully transferred and concealed from Sabbeth
Industries, Ltd. in violation of Title 18 U.S.C. § 152 (1993)."
(Indictment ¶ 24.)
Sabbeth was the sole shareholder of Sabbeth Industries, Ltd.
("Sabbeth Industries") and its president until December of 1990.
He also was the corporation's landlord, and lent monies to the
After many years of successful operations, Sabbeth Industries
experienced plummeting sales during the late 1980s. By the end of
the decade, it was in dire financial straits and a probable
candidate for bankruptcy. It managed to survive because of a
revolving line of credit provided jointly by National
Westminister Bank USA ("Nat West") and Manufacturers Hanover
Trust, Co. ("Manufacturers"), the outstanding balance of which
ranged between $14,000,000 and $18,000,000 during the period from
July 1989 to September 1990. The indebtedness was collateralized
via a pledge of basically all of Sabbeth Industries' assets and
was personally guaranteed by Sabbeth.
Notwithstanding what was intended by the banks to be a tightly
controlled line of credit, it developed that Sabbeth had been
withdrawing funds from Sabbeth Industries during 1990. The total
sums taken exceeded $1,000,000, with approximately $750,000 of
that amount being received by Sabbeth from June 1, 1990 to
December 28, 1990 in the form of fifty-five Sabbeth Industries'
checks. The corporation filed a voluntary petition for Chapter 11
reorganization on December 28, 1990.
Sabbeth categorizes the above-referenced payments to him as
being made "openly." (Def.'s Mem. Supp. at 3.) That
characterization is accurate in the sense the payments were made
by corporate checks. Additionally, Sabbeth had testified during
the bankruptcy proceeding that a Nat West loan officer had
approved his withdrawal of funds from Sabbeth Industries
notwithstanding, inter alia, the subordination agreements and his
personal guarantee. The jury was aware of the bankruptcy court
testimony in that it was the subject matter for Sabbeth's
conviction for perjury under Count Four.
The jury also heard testimony, however, that the banks were
unaware that corporate checks were being written to Sabbeth for
antecedent debts prior to being alerted to that fact by a third
party in mid-November 1990. That third party was Robert
Eisenberg, a business consultant hired by the corporation-at the
request of the banks-to stop the downward spiral. Upon being
tipped-off by Eisenberg of Sabbeth's activities, Nat West
obtained copies of Sabbeth Industries' checks from its check
retention department which confirmed the subject payments. Bank
officers then confronted Sabbeth on a number of occasions, each
time angrily demanding to know what he had done with the money.
He obliquely responded by simply indicating that he no longer had
it, although he did tell Eisenberg when they were alone that the
missing monies were used to prevent his brother-in-law from being
killed by the Mafia due to unpaid gambling debts.
As later discovered, however, the bulk of the funds were in the
C. Fiore brokerage account which was established by Sabbeth in
December 1989 using his wife's maiden name, his mother-in-law's
home address, and with a number of false entries, including a
bogus social security number. The subject monies that Sabbeth
received from Sabbeth Industries traveled through various bank
and brokerage accounts on route to the C. Fiore account. (See
Gov't's Trial Exs. 231-235.) Those transfers are the subject of
the money laundering charged in Count Six.
3. Basis for Present Application
In seeking bail pending appeal, Sabbeth identifies the
"substantial" legal issue for purposes of § 3143 as the
instruction given to the jury concerning "property belonging to
Sabbeth Industries." (Def.'s Mem. Supp. at 3-4.) Sabbeth proffers
that the definition provided by the Court was wrong. He urges
now, as he did at trial, that since the monies that Sabbeth
removed from the corporation, and thereafter secreted, were "in
payment of bona fide debts" owed to Sabbeth, the sums involved
ceased being corporate property at the moment of transfer and
thereafter constituted "his property"; as such, he could not be
legitimately convicted of bankruptcy fraud, and concomitant money
laundering, involving the "property of Sabbeth Industries." Id.
Sabbeth contends that the legitimacy of the other counts of his
conviction are "called into doubt" and "equally shaky" given the
purported charging deficiencies as to Counts One and Two. (Def.'s
Mem. Supp. at 28.)
1. Section 152(7) and its ...