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United States District Court, Southern District of New York

August 20, 2003


The opinion of the court was delivered by: Denise Cote, District Judge


On May 22, 2002, Michael Kagan ("Kagan") filed a petition for a writ of habeas corpus pursuant to 28 U.S.C. § 2255. The petition was fully submitted early this year. Kagan principally argues that his retained counsel at trial, Lee Ginsberg, and his retained counsel at sentencing, Paul Henchman, were both ineffective. The Government has submitted affidavits it obtained from Messrs. Ginsberg and Shechtman to respond to accusations made by Kagan in his petition. Kagan also raises other challenges to his conviction and sentence. For the reasons that follow, the petition is denied. [ Page 2]


A superceding indictment charged Kagan and three co-defendants, Donald Ferrarini, Bruno Rumignani, and Everett Vieira, in eighty-six counts with conspiracy and mail fraud, among other offenses. After a trial held from January 4 to February 3, 1999, Kagan was convicted on each count in which he was named. On May 21, 1999, Kagan was sentenced principally to a term of imprisonment of seventy months. The conviction was affirmed on July 18, 2000. United States v. Ferrarini, 219 F.3d 145 (2d Cir. 2000). Kagan's petition for a writ of certiorari was denied on May 21, 2001.

At trial, the Government proved that Ferrarini, the President and Chief Executive Officer of UFG International ("UFG"), a commercial insurance brokerage firm, orchestrated an extensive fraud that obtained millions of dollars from companies, including CPF Premium Funding, Inc. ("CPF"), through the submission of fraudulent loan applications. Kagan was a member of CPF's Board of Directors, and used his influence at CPF to help UFG defraud CPF of over $9 million. Kagan was rewarded with $425,000 in kickbacks. On an invoice submitted to UFG, Kagan described these payments as "consulting fees."

Kagan had previously used a similar scheme to defraud CPF himself, using KBC Systems, Inc. ("KBC"), an insurance agency that he owned. Through KBC, Kagan submitted five fraudulent [ Page 3]

premium finance loan applications to CPF, requesting a total of $284,349 on behalf of various entities, when he knew that those entities were unaware of the loan applications and had already paid their annual insurance premiums, or in the case of an application for KBC itself, knew that the insurance policy for which it sought the loan was no longer in effect. KBC eventually repaid the loans in full before CPF learned of the KBC fraud.

At trial, the defense argued inter alia that the premium finance loan applications submitted to CPF were part of a legitimate arrangement in which CPF had agreed to make millions of dollars in bridge loans with no collateral in order to help UFG pay its operating expenses, and that CPF had UFG prepare the loan documents to make them appear to be premium finance loans to UFG's clients because CPF's charter did not authorize it to make any loans other than premium finance loans.

Kagan called two witnesses to testify on his behalf. Their testimony was offered to explain why Kagan had received $425,000 from UFG immediately after some of the fraudulent premium finance loans were approved by CPF. Witness Cohen described negotiations between UFG and Kagan for UFG's purchase of Kagan's insurance agency. Witness Trauma, a real estate developer, described Kagan's assistance in arranging for financing for various transactions. Kagan also introduced stipulations concerning his assets. [ Page 4]


A habeas petition brought pursuant to Section 2255 "is not a substitute for an appeal," and a defendant who did not raise his claims on appeal will be barred from raising them for the first time in a habeas petition unless he "can demonstrate either (1) cause for failing to raise the issue, and prejudice resulting there from; or (2) actual innocence." Rosario v. United States, 164 F.3d 729, 732 (2d Cir. 1998) (citation omitted). A claim of ineffective assistance of counsel, however, may be raised through a petition for a writ of habeas corpus, whether the claim could have been raised on direct appeal or not. Massaro v. United States, 123 S.Ct. 1690, 1694 (2003); Poindexter v. Nash, 333 F.3d 372, 379 (2d Cir. 2003). To succeed on a claim of ineffective assistance of counsel, a petitioner must establish that (1) "the identified acts or omissions were outside the wide range of professionally competent assistance," Strickland v. Washington, 466 U.S. 668, 690 (1984), and (2) "there is a reasonable probability that, but for counsel's unprofessional errors, the result of the proceeding would have been different," id. at 694. A court's "scrutiny of counsel's performance is highly deferential because it is all too tempting for a defendant to second-guess counsel's assistance after a conviction or adverse sentence." Eze v. Senkowski, 321 F.3d 110, 125 (2d Cir. 2003) (citation omitted). "[A]ctions or omissions that `might be [ Page 5]

considered sound trial strategy' do not constitute ineffective assistance." United States v. Berkovich, 168 F.3d 64, 67 (2d Cir. 1999) (citation omitted); see also Eze, 321 F.3d at 125, 132, 135-36.

Ineffective Assistance of Counsel: Trial Counsel

1. Kagan's right to testify and his medical condition.

Kagan suffered a heart attack in the summer of 1998. The trial was adjourned from the Fall of 1998 to 1999, in order to permit him to recover and participate. Kagan argues that his attorney failed to advise him fully of his right to testify or to discuss with him the impact of his heart condition on his ability to testify.*fn1

Mr. Ginsberg has submitted an affidavit that states that he "spent an enormous amount of time with Mr. Kagan in preparing this case for trial." They discussed, among other things, Kagan's medical status and whether he would testify. Mr. Ginsberg asserts that Kagan "was completely aware" of his right to testify and "made a conscious choice not to testify." Mr. Ginsberg also points out that Kagan's ability to testify due to his physical and mental condition was litigated prior to the trial. Kagan disputes that Mr. Ginsberg ever "fully" articulated [ Page 6]

to him that he had a right to testify. He contends that Mr. Ginsberg told him in less than one minute that he was not calling Kagan as a witness because Kagan might collapse on the stand.

While the duty of effective assistance includes the responsibility to advise the defendant concerning the exercise of the constitutional right to testify on his own behalf, the defendant must still show a "reasonable probability" that counsel's deficiency "prejudiced the outcome." Rega v. United States, 263 F.3d 18, 21 (2d Cir. 2001) (citation omitted). If Kagan had taken the stand at trial, "the probability of conviction would have increased." Id. at 22. Kagan's testimony would have been directly contradicted by the testimony of highly credible trial witnesses, the documentary evidence, and the circumstantial evidence, including the timing of the kickback payment to him. Had he testified, and been subject to cross examination, his uncorroborated denials would have placed him in a worse position than before he took the stand. Kagan has failed to show, therefore, that the alleged deficiency by counsel prejudiced him at trial.

In a related argument, Kagan contends that his trial counsel was ineffective because he did not subpoena or otherwise obtain the testimony of Dr. Michael Lux, an expert retained by Kagan, for the hearing held prior to trial on his motion for a severance, a motion based on his medical condition. At the [ Page 7]

hearing, the Court accepted as true the report from Dr. Lux and found that Dr. Lux and the Government's expert agreed as to the basic facts concerning Kagan's medical condition. The dispute lay in the conclusions the doctors reached. The Court noted that even Kagan's own treating physicians did not recommend the aggressive treatment outlined by Dr. Lux. In reviewing the Court's determination, the Second Circuit found that "[I]t was well within the court's discretion to choose between the competing conclusions" of the experts. Ferrarini, 219 F.3d at 153. Kagan has not shown that he was prejudiced by Dr. Lox's absence from the hearing.

Kagan also contends that his attorney should have been more effective in cross-examining the Government's expert at the hearing on his medical condition. In particular, he argues that the attorney should have presented a pharmacological expert to correct errors by the Government expert's description of the interactions of the drugs he was taking. Again, Kagan has not shown that he was prejudiced by the purported failure.

Finally, Kagan contends that his attorney should have offered evidence of his medical condition during the trial. Such evidence was not admissible.

2. Mark Beeline's Testimony

During the testimony of Government witness Mark Bailine, his [ Page 8]

attorney spoke from outside the well of the courtroom. The Court sustained the Government's objection and the cross examination of Bailine continued. Kagan claims that his own attorney was ineffective for failing to add his own objection. Kagan has shown no prejudice.

3. Presence of Attorneys for Witnesses in the Courtroom

The attorneys for several Government witnesses were present in the courtroom during the witness testimony. Defense counsel, including Mr. Ginsberg, elicited that fact during cross examination. Kagan complains that his attorney did not sufficiently object to the attorneys' presence in the courtroom. He has not shown prejudice. He speculates solely that an attorney may have suborned perjury by shaping each witness' testimony so that it did not contradict the other witnesses' testimony.

4. Government's Summation

In its rebuttal summation, the prosecutor referred to the evidence about a potential sale of KBC to UFG and then pointed out that defense witness Cohen had testified that there had not been any sale of Kagan's business. Kagan contends that his attorney should have objected to that summation argument. This summation argument was adequately grounded in the record and [ Page 9]

Kagan has shown neither error in the strategic decision not to object nor prejudice.

5. Alibi Defense

Kagan contends that his trial counsel should have presented evidence that between July and October 1994, he was intensively involved in the care of his mother and visiting her at the hospital. The evidence at trial included five fraudulent premium; finance applications that Kagan submitted to CPF during this time for loans of close to $300,000. The defense that Kagan did present at trial was that these loans were part of a legitimate arrangement between CPF and UFG. Mr. Ginsberg reports that he made a strategic decision not to offer the evidence about Kagan's involvement with his mother's care since it did not provide a complete defense to the charges, and any argument that he was unable to participate in the fraud would have been substantially contradicted by the credible evidence. This was a reasonable strategic decision and Kagan has not shown prejudice.

6. Decision to Plead Guilty

Kagan contends that his trial counsel never discussed the option of entering a plea with him, or the likely impact on sentencing of going to trial. Nonetheless, Kagan continues to protest his innocence, as he did at sentencing. Indeed, he [ Page 10]

requested an opportunity before trial to make an "innocence proffer" to the Government and his trial counsel arranged for such an interview with the Government.

Mr. Ginsberg represents that he raised the option of a guilty plea with Kagan on numerous occasions, but that it was always rejected "out of hand" by Kagan. Mr. Ginsberg also represents that he described sentencing possibilities with Kagan on "many" occasions. In his reply, Kagan continues to deny that Mr. Ginsberg ever discussed a plea with him "at any time" and asserts that he would "have been open to proper and informative discussions concerning a shorter possible period of incarceration," and that there was "a reasonable possibility that I would have been amenable to a change of my plea."

A defense attorney must give a defendant "the benefit of counsel's professional advice" on whether the defendant should plead guilty. Purdy v. United States, 208 F.3d 41, 44 (2d Cir. 2000). Counsel's advice may take into account such relevant factors as whether the defendant has "maintained his innocence." Id. at 45. The ultimate decision, of course, resides with the defendant. Id. To prevail on a claim that counsel failed to discuss a plea with him, Kagan must demonstrate a "reasonable probability" that, but for counsel's deficiencies, he would have pled guilty. United States v. Feyrer, 333 F.3d 110, 120 (2d Cir. 2003). Kagan does not indicate an "unequivocal willingness to [ Page 11]

plead guilty and his affidavits repeatedly assert his innocence, a position that is obviously incompatible with the suggestion that he would have readily pled guilty." Id. Under these circumstances, Kagan has failed to demonstrate the required reasonable probability that, but for counsel's performance, he would have pled guilty.

7. Decision to Sell KBC

Kagan contends that his attorney did not present sufficient evidence of his efforts to attempt to sell his business, KBC, to UFG to explain the "kickback" payments he received from UFG. Evidence regarding the negotiations was presented. Mr. Ginsberg's affidavit explains his strategic decision not to call additional witnesses. Kagan has not shown that these were not reasonable strategic decisions or prejudice.

8. Evidence Regarding Civil Suit

Kagan complains that his attorney failed to introduce evidence that attorneys for CPF threatened Kagan with moving for sanctions if he did not withdraw a civil suit against CPF. As explained by Mr. Ginsberg, this was a reasonable strategic decision, and Kagan has not shown otherwise or prejudice. [ Page 12]

9. Tape Recorded Conversations

Kagan claims that his counsel should have offered audiotape recordings of his conversations with co-defendant Vieira, and with Tom Manion and Bruno Cadispott. Kagan contends that these tapes would have shown that UFG was defrauding clients of KBC.

Mr. Ginsberg explains that he made a strategic decision not to offer this evidence, which in any event carried with it significant issues of relevance and admissibility. Kagan has not shown that this was not a reasonable strategic decision or that he suffered prejudice.

10. Stipulations

Kagan contends that his trial counsel failed to discuss stipulations with him. Mr. Ginsberg represents that he did discuss the stipulations with Kagan. In any event, Kagan has not shown prejudice.

11. Financial Condition

Kagan argues that his attorney failed to offer certain evidence regarding his financial condition. In fact, evidence of his personal financial condition was offered by his counsel and received into evidence at trial and used by his attorney to argue that Kagan had no motive to participate in the frauds with which he was charged. Kagan has not shown prejudice for the failure to [ Page 13]

offer more such evidence.

12. NPP Red Herring Prospectus

Kagan argues that his attorney should have offered a red herring prospectus relating to a company named NPP. Kagan's attorney did cross-examine Richard Pace about NPP. Kagan has failed to show prejudice from the failure to offer the prospectus.

13. Alan Kaufman's Appointment to United States Attorney's Office

During the trial, the Court and the defendants were advised that defense counsel for Vieira, Alan Kaufman, had been chosen as the next Chief of the Criminal Division in the United States Attorney's Office for the Southern District of New York. This news was also a surprise to Mr. Ginsberg and the other defense counsel. The issue was raised mid-day, and again at the end of the day so that defense counsel could discuss the issue in detail with their clients. Mr. Ginsberg represents that during the interval he discussed Kagan's options with him, including moving for a mistrial. Trial counsel reported in Kagan's presence that he had consulted with Kagan and that they had no objection to proceeding with the trial. Kagan remained silent when this representation was made. The Court inquired of each defendant [ Page 14]

individually whether the matter gave him "any concern about the fact that you have received the proper advice and counsel from your own lawyer." Kagan responded "No, your Honor." In his reply, Kagan contends that Mr. Ginsberg never told him that he could request a mistrial or what his options were. This representation is substantially undercut by the colloquy recited above. In any event, Kagan has failed to show prejudice.

14. Ferrarini's Possible Testimony

Co-defendant Ferrarini informed counsel for the other defendants that he was considering testifying in his own behalf. Mr. Ginsberg spoke to Ferrarini, and represents that he relayed their conversation to Kagan. Mr. Ginsberg explains that he had the conversation in order to better represent Kagan. Kagan complains about the conversation but has identified no prejudice. He contends only that Mr. Ginsberg was trying to get him to change his defense to make it consistent with the defense presented by the other defendants, but that he refused to do so because it would have been a fraud on the court.

15. Vieira Document

Kagan argues that his attorney should have offered into evidence a document received from the Government in discovery that was purportedly written by co-defendant Vieira to an [ Page 15]

attorney. It states, "If Kagan turns commissions over to UFGI wouldn't that hurt our case that our payments to him were for arranging financing. No Problem!" Kagan has not shown that the document was admissible or that he was prejudiced from the failure to introduce the document.

Throughout the trial, Mr. Ginsberg provided excellent representation to Kagan. Mr. Ginsberg is an experienced, able attorney who is also a well respected member of this district's Criminal Justice Act panel. This Court observed nothing during the trial to suggest that Mr. Ginsberg provided anything other than able representation to Kagan. Mr. Ginsberg was well prepared, conducted focused cross-examination, appeared to have a strategy for dealing with the Government's evidence, and appeared to have a working relationship with a difficult and challenging client. There is no need for a hearing to resolve the many differences between the representations made by Kagan and Mr. Ginsberg concerning their prior conversations. Kagan has failed to show that he was prejudiced at trial by any of the alleged deficiencies in counsel's representation of him.

Ineffective Assistance of Counsel: Sentencing Counsel

1. Failure to Advise Kagan of Prior Relationships

Kagan contends that Mr. Shechtman did not inform him that he had a prior professional and social relationship with the [ Page 16]

sentencing judge or that his firm had previously represented Jerome Belson, a UFG client. At sentence, Kagan was questioned with regard to both issues and responded when asked whether he had any problem regarding either issue, "none whatsoever." Mr. Shechtman's affidavit asserts that Kagan was informed of both relationships prior to sentencing. In his reply, Kagan continues to assert that he was not told that Mr. Shechtman had a social relationship with the sentencing judge or that his firm had represented Mr. Belson. The sentencing transcript sufficiently addresses this issue and indicates that Kagan was adequately informed and waived any complaint.

2. Fatico Hearing Regarding Loss

Kagan contends that his representation at sentence was deficient for his counsel's failure to contest the loss calculation and request a Fatico hearing. Mr. Shechtman's affidavit reports that he never agreed that he would seek a Fatico hearing and that it was his judgment, along with the judgment of Alan and Nathan Dershowitz, that Kagan would not benefit from such a hearing. Kagan has not shown that that strategic decision was in error.

3. Sentencing Submissions

Kagan contends that his attorney should have submitted more [ Page 17]

information about Kagan, more letters, and a fuller response to a letter written on behalf of victim CPF. He also argues that Mr. Shechtman should have argued for leniency based not just on Kagan's health, but also on his charitable contributions and community service. Mr. Shechtman has described his strategy at sentence in presenting information favorable to Kagan. Kagan has not shown prejudice regarding the strategic decisions made by counsel.

Newly Discovered Evidence

Kagan contends that Nanette Miller, an accountant who purportedly audited UFG's financial statements, has been barred from practicing before the SEC as an accountant. Kagan has not shown how this fact, if true, would assist him.

Following trial, co-defendant Howard Miller committed suicide. Kagan seeks Miller's suicide notes. The Government represents that the documents found at the scene of Miller's death do not contain information material to Kagan's defense. This issue does not warrant a new trial.

Kagan contends that only after the trial did he learn that the Government had obtained his credit card records. Since such evidence was within his own grasp, he has not shown why knowledge that the Government had this information entitles him to a new trial. In any event, the Government did turn over evidence that [ Page 18]

it had about Kagan's financial condition and Kagan himself introduced such evidence at trial.

Kagan contends that he did not review the final Pre-Sentence Report until after the sentence, and only then learned that it did not include adequate information regarding his charitable contributions or community service. Kagan was silent when his attorney responded to the Court's inquiry at sentence as to whether Kagan and his attorney had reviewed and discussed the PSR. In any event, the facts regarding Kagan's life and grounds for a downward departure were submitted to the Court through multiple sources, including through a sentencing memorandum and letters.

Claims of Error

Kagan raises issues that are procedurally barred for failure to raise them before the trial court in a timely fashion, and/or for failure to raise them on direct appeal. They include whether enough grand jurors voted to indict him, the loss calculation undergirding his sentence and the calculation for the restitution order, a breach of grand jury secrecy, perjury by witnesses Richard Pace and Richard Lampack, and the alleged tampering with potential witness Lester Shufro. With respect to the perjury claim, it should be observed that perjury without the prosecution's knowledge does not provide a ground for habeas relief unless the testimony was material and the court is left [ Page 19]

with a "firm belief that but for the perjured testimony, the defendant would most likely not have been convicted." Ortega v. Duncan, 333 F.3d 102, 108 (2d Cir. 2003) (citation omitted). Kagan has not made such a showing.

Other issues in Kagan's petition were already raised and rejected on appeal. They include whether there was evidence that certain mailings essential to some mail fraud counts were in fact made.

Kagan's claims regarding the calculation of his sentence under the Sentencing Guidelines based on the Apprendi decision are without merit. Kagan was sentenced within the maximum allowed by statute. In any event, Apprendi does not apply retroactively to a Section 2255 motion for habeas relief. Coleman v. United States, 329 F.3d 77, 82 (2d. Cir 2003).


Michael Kagan's petition for a writ of habeas corpus is denied in all respects. In addition, I decline to issue a certificate of appealability. The petitioner has not made a substantial showing of a denial of a federal right and appellate review is, therefore, not warranted. Tankleff v. Senkowski, 135 F.3d 235, 241 (2d Cir. 1998); Rodriguez v. Scully, 905 F.2d 24 (2d Cir. 1990). I also find pursuant to 28 U.S.C. § 1915(a)(3), that any appeal from this Order would not be taken in good faith. [ Page 20]

Coppedge v. U.S., 369 U.S. 438, 445 (1962). The Clerk of Court shall dismiss this petition and close the case.

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