Not what you're
looking for? Try an advanced search.
Buy This Entire Record For
U.S. v. PETERSON
November 16, 2002
UNITED STATES OF AMERICA,
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.
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.
On November 21, 2000, Clayton again spoke with Lato. At that time, Lato
Clayton that the government would defer its prosecution if the
defendant entered a plea of guilty with the state involving a three,
four, or five year jail sentence. On November 27, 2000, Clayton met with
the defendant and advised him of the November 21, 2000 plea discussions.
In response, the defendant stated that he was not interested in a plea
involving a term of incarceration. Also, Clayton reviewed the applicable
statutes with the defendant and explained to him that in a worst case
scenario he could be sentenced to life if convicted of the two
18 U.S.C. § 924(c) counts involving destructive devices.
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
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).
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.
On January 25, 2002, the Court denied the defendant's motion for
judgment of acquittal under Rule 29 and his motion for a new trial in the
interests of justice under Rule 33. Peterson, 190 F. Supp.2d at 343.
On that date, the defendant moved for a new trial under Rule 33 based upon
newly discovered evidence, a claim of ineffective assistance of counsel.
On March 6, 2002, the Court directed that the parties appear for an
evidentiary hearing on the motion for a new trial. Between June 5, 2002
and July 2, 2002, the Court held a four day evidentiary hearing.
Thereafter, the Court permitted the parties to submit additional papers
in support of their respective positions.
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
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:
A I did, on the 23rd of February.
Q Which newspaper did you see this in?
Q Did you ever discuss or look at that article with Mr.
A Not reviewed the article with Mr. Peterson, but
discussed it. He brought it to my attention. He had read
Q About when did this occur, this conversation with Mr.
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
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
Q Now, at the time this conversation was going on with
Mr. Peterson, was there any federal investigation at
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).
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
A Oh, before the trial, yeah, he sent me a couple of
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 `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
A This one would have been around the, my best
recollection, around the summer while the state case was
still going on. My ...