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U.S. v. PETERSON

November 16, 2002

UNITED STATES OF AMERICA,
V.
WILLIAM PETERSON, ALSO KNOWN AS "CRAZY BILLY", DEFENDANT.



The opinion of the court was delivered by: Arthur D. Spatt, United States District Judge

    MEMORANDUM OF DECISION AND ORDER

In this case, a jury convicted the defendant William Peterson ("Peterson" or the "defendant") of extortion and conspiracy to fire bomb two liquor stores. Presently before the Court is a motion by the defendant pursuant to Rule 33 of the Federal Rules of Criminal Procedure for a new trial based upon newly discovered evidence-an alleged conflict of interest arising from his trial counsel's misdemeanor conviction in the Eastern District of New York for failing to file a tax return. The Court has received affidavits and conducted an evidentiary hearing at which the defendant, his trial counsel and other witnesses testified over a period of four days. This decision contains the Court's findings of fact and conclusions of law.

I. FINDINGS OF FACT

A. The Trial Counsel's Representation of the Defendant

1. The State Investigation

In or about December of 1999, the defendant retained David W. Clayton, Esq. to represent him in connection with a state investigation involving "fire bombings" that took place on December 14, 1995 at two liquor stores in Suffolk County, New York. At that time, Clayton advised the defendant that his fee was $300 per hour and that he did not need a retainer because the state was only conducting an investigation.

Shortly thereafter, Clayton discussed the state investigation with the assistant district attorney handling the case, one Jeremy Scheleppi of the Suffolk County District Attorney's Office. At that time, they discussed the strength of the case against the defendant and a potential plea offer. As to the strength of the case, Clayton told Scheleppi that the state could not make out a prima facie case against the defendant because it was based only on uncorroborated accomplice testimony which was insufficient under New York law. As to a potential plea, Scheleppi stated that any offer must involve a felony and incarceration. Thereafter, Clayton advised the defendant of Scheleppi's position. In response, the defendant stated that he was innocent and that he would not go to jail for something that he did not do.

2. The Federal Investigation

On or about October 4, 2000, the Suffolk County District Attorney's Office referred its investigation involving the defendant to the Office of the United States Attorney for the Eastern District of New York. On October 19, 2000, Clayton spoke with Assistant United States Attorney Leonard Lato who was assigned to the case. At that time, Lato told Clayton that the government would not pursue the case if the defendant negotiated a plea with the state. Within a few days, Clayton advised the defendant of this conversation.

3. The Pre-Trial Proceedings

On December 12, 2000, a federal grand jury indicted the defendant. The indictment contained seven counts. Count one charged a conspiracy to obstruct interstate commerce by threats and violence involving two liquor stores, Bottles & Cases and Bottle Bargains. Count two charged obstruction of interstate commerce by threats and violence involving arson that took place at the above-noted liquor stores. Count three charged the use of fire and explosives to obstruct interstate commerce involving the crimes alleged in counts one and two. Counts four and five charged arson at the above-noted liquor stores. Counts six and seven charged the use of destructive devices, Molotov Cocktails, with regard to the arson charged in counts four and five. On December 27, 2000, United States Magistrate Judge William D. Wall arraigned the defendant on the indictment.

On October 2, 2001, the government filed a superceding indictment. The superceding indictment charged the same counts in the indictment but expanded the scope of the extortion conspiracy to include another owner of a liquor store. On October 12, 2001, the Court denied the defendant's motion to strike the overt acts of the conspiracy referred to in paragraphs 9 through 15 of the superceding indictment and the references to the defendant as "Crazy Billy". See United States v. Peterson, 168 F. Supp.2d 51 (E.D.N.Y. 2001).

4. The Trial

On November 15, 2001, the jury trial commenced. A summary of the evidence at trial is contained in the Court's decision denying the defendant's motion for post-verdict relief. See United States v. Peterson, 190 F. Supp.2d 343, 347-354 (E.D.N.Y. 2002). Familiarity with this decision is presumed. On November 27, 2001, the jury convicted the defendant on all counts in the superceding indictment.

5. The Post-Trial Proceedings

After the conviction, Clayton orally requested an extension beyond the seven day period to move for relief pursuant to Rule 29 of the Federal Rules of Criminal Procedure. By letter dated November 30, 2001, Clayton requested an extension beyond the seven day period to move for relief pursuant to Rule 33 and, also, specifically to preserve his client's right to raise a claim for ineffective assistance of counsel in a Rule 33 motion. The Court granted these requests and extended the seven day periods until December 14, 2001.

On or about December 14, 2001, the defendant discharged Clayton as his attorney and retained Ronald G. Russo, Esq. of Herzfeld & Rubin, P.C. Shortly thereafter, Russo filed a notice of appearance on behalf of the defendant. On or about January 22, 2002, the defendant relieved Russo as his attorney and retained Nathan Z. Dershowitz, Esq. of Dershowitz, Eiger & Adelson, P.C.

B. The Clayton Tax Investigation

In or about March of 1999, the Criminal Tax Unit of the United States Department of Justice (the "Tax Unit") began investigating Clayton for failing to pay taxes in the total amount of $100,500 for years 1993, 1994 and 1995. Within a few weeks, the Tax Unit referred the matter to the United States Attorney's Office for the Eastern District of New York.

During the government's investigation of Clayton, he represented four individuals who were charged with crimes in the Eastern District of New York. The last names of the individuals were: Garone, McKay, Okun and Zangrillo. The McKay case was assigned to this Court. On May 27, 1999, the government submitted a letter in McKay, apparently under seal, requesting that the Court disqualify Clayton or conduct a Curcio hearing. Clayton withdrew as soon as the letter was submitted and a Curcio hearing was never conducted.

On February 24, 2000, Clayton pleaded guilty before United States Magistrate Judge Arlene R. Lindsay to a misdemeanor information charging him with failing to file a tax return for 1993. United States v. Clayton, No. 00-83, at 11 (E.D.N.Y. Feb. 24, 2000). On September 7, 2000, United States Magistrate Judge Michael L. Orenstein sentenced Clayton to three years of probation with two hundred hours of community service. United States v. Clayton, No. 00-83, at 17 (E.D.N.Y. Sept. 7, 2000). Presently, Clayton owes back taxes, interest and penalties in excess of $500,000 to the Internal Revenue Service (the "IRS") and $176,000 to the New York State tax authorities. Pursuant to the plea agreement, Clayton is negotiating with the civil authorities to pay his unpaid taxes.

C. The Disputed Material Facts

There were three areas of factual dispute presented to the Court: (1) whether Clayton advised the defendant of his conviction and tax problems; (2) whether Clayton advised the defendant of the plea negotiations with the state and federal prosecutors; and (3) whether Clayton advised the defendant of the mandatory life sentence if found guilty of counts six and seven in the indictment.

1. As to Clayton's Conviction and Tax Problems

With regard to Clayton's tax conviction, the Court again notes that he pleaded guilty to the misdemeanor charge of failing to file a tax return on February 24, 2000. He was sentenced to probation on September 7, 2000. Also, Clayton is not cooperating with the government.

At the hearing, Clayton testified that shortly after his conviction in February of 2000 the defendant told him that he read an article in Newsday about his conviction for failing to file a tax return. Clayton stated that he explained to the defendant that he made a mistake; that his law license would not be affected; and that he hoped that the defendant would continue to let him represent him. After this explanation, the defendant acted graciously and stated that he still wanted Clayton to represent him.

In particular, Clayton testified:

Q At the time of your plea, in other words, the next day or shortly thereafter, did you read about what had happened in the newspapers?

A I did, on the 23rd of February.

Q Which newspaper did you see this in?

A Newsday.

Q Did you ever discuss or look at that article with Mr. Peterson?
A Not reviewed the article with Mr. Peterson, but discussed it. He brought it to my attention. He had read it.
Q About when did this occur, this conversation with Mr. Peterson?

A I would say it was within two weeks of its publication.

Q Where did this conversation take place?

A Over in my office, in Hauppauge.

Q Who was present at the time of the conversation?

A Just Mr. Peterson and I.

Q What did you and he say to each other with respect to his finding or his having read this article and your tax problems?
A Well, he said he had read it, and he was disappointed. He hoped that I was going to be all right. He was encouraging. I told him that I had screwed up. That's not exactly the word I used with him, and that I hoped that he would permit me to continue to represent him. That I expected to receive an outcome in my personal matters down the road that would not affect my license to practice law. And he was really quite, quite gracious to me and more than decent about it. He was kind.
Q Did he ask you at that point to step aside, or words to that effect?

A No, Sir.

Q Now, at the time this conversation was going on with Mr. Peterson, was there any federal investigation at this point?

A No, not at all.

(7/1/02 at 186-188).*fn1

In contrast, the defendant testified that he did not know about Clayton's conviction or his disciplinary proceedings until December of 2001. In particular, the defendant stated that he first learned of Clayton's tax problems from a friend. After learning of Clayton's tax problems, the defendant allegedly found the Newsday article on Clayton's conviction while searching in the Newsday archives on the Internet. The following defense witnesses also testified that they did not know about Clayton's conviction: Edward Little, Esq., Dr. Robert Rubin, Keith Peterson, Dr. Kerry Peterson and Ronald Gottlieb.

After hearing and viewing the defendant and Clayton, the Court credits Clayton's account of the events. In doing so, the Court relies both on its assessment of the demeanor and credibility of the two witnesses and on the totality of the circumstances. First, the defendant testified that he does not regularly read newspapers. Yet, he stated that his son and friends faxed him articles-which he read-stating he faced a life sentence. (Id. at 408).

Also, Clayton's conviction certainly would be of particular interest to the defendant, his family and many devoted friends. Further, it is reasonable to believe that the defendant would still want Clayton as his attorney even after he found out about his misdemeanor tax conviction because Clayton successfully represented him during the state investigation which was not pursued. In addition, there was obviously good feelings between Clayton and the defendant as exhibited by the complimentary notes and gifts that the defendant gave Clayton. On that point, Clayton testified as follows:

Q At any point during your representation of Mr. Peterson during the federal case, did he ever hand you notes complementing you on what type of a job that you were doing?
A Oh, before the trial, yeah, he sent me a couple of notes, yeah.
Q I'm going to show you Government Exhibit 4 for identification, it's a photocopy of what appear to be pages in your file that you turned over to Mr. Dershowitz. (Handing.) There are 3 pages that are stapled together, they were not so in the original. I stapled those together.

A Okay. Yeah. I see them.

Q Who wrote you those notes?

A This is all from Billy, Mr. Peterson, Bill Peterson.

Q How do you know that they're from William Peterson?

A I recognize his handwriting. It's on his stationary. And I'm sure that I thanked him for his generosity.
Q The first note, do you know about when Mr. Peterson gave that to you?
A I think that was sometime-let me just look at both of them. This first one, I think, my recollection is that this was after the federal case started. The other one —

Q Let's talk about the first one.

A Yeah.

Q What does it say?

A `Dave, thanks to you I sleep at night. Have one on me. Regards, Crazy Billy.'
Q The second note, about when did Mr. Peterson give that to you?
A This one would have been around the, my best recollection, around the summer while the state case was still going on. My ...

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