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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or in the case of an application for KBC itself, knew that the insurance policy for which it sought the loan was no longer in effect.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 ...

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