United States District Court, S.D. New York
January 23, 2004.
ROBERT McCARTHY, Petitioner, -v.- UNITED STATES OF AMERICA, Respondent
The opinion of the court was delivered by: GABRIEL GORENSTEIN, Magistrate Judge
REPORT AND RECOMMENDATION
Robert McCarthy was convicted on October 13, 1999 of 24 counts of
theft of employee benefit plan funds; money laundering; creation of, and
conspiracy to create, false documents required by the Employee Retirement
Income Security Act of 1974 ("ERISA"); and embezzlement of bankruptcy
assets. He was sentenced on September 13, 2000 to 78 months imprisonment,
3 years of supervised release, a special assessment of $1200, and
restitution of $1.6 million. His conviction and sentence were affirmed on
November 16, 2001 by the United States Court of Appeals for the Second
Circuit. McCarthy, who is currently in prison serving his sentence, has
petitioned this Court pro se under
28 U.S.C. § 2255 to vacate, set aside, or correct his sentence. For the
reasons below, the petition should be denied.
A. Procedural History Prior to Trial
McCarthy was indicted on December 18, 1998. See Indictment,
filed December 18, 1998 (Docket #1) ("Indictment"). The 28-count
indictment charged McCarthy with the following offenses:
(1) Theft of employee benefit plan funds in violation of
18 U.S.C. § 664 (Counts 1-7). These counts charged that McCarthy, while
Chief Executive Officer and Executive Vice-President of Lloyd's Shopping
Centers, Inc. ("Lloyd's"), had unlawfully directed the transfer of funds
out of employee benefit plans sponsored by Lloyd's. One of these plans
was a defined benefit pension plan ("Pension Plan") and the other was a
defined contribution 401(k) plan ("401(k) Plan") (collectively, the
"Employee Benefit Plans"). According to the indictment, monies from these
plans were used by McCarthy for the purposes of persons or entities other
than the Employee Benefit Plans or their employee beneficiaries.
Indictment ¶¶ 1-11.
(2) Money laundering in violation of
18 U.S.C. § 1956(a)(1)(B)(i). 1956(a)(2). 1957 (Counts 8-25). These counts
charged that McCarthy had conducted transactions using monies stolen from
the Employee Benefit Plans knowing that these monies represented the
proceeds of unlawful activity and that he conducted these transactions to
conceal the nature, location, source, ownership, and control of these
monies. Id. ¶¶ 12-21.
(3) Creation of. and conspiracy to create, false documents
required by ERISA in violation of 18 U.S.C. SS 371. 1027 (Counts
26-27). These counts charged that McCarthy had made, and conspired
to make, false statements to Lloyd's employees in their 1995 year-end
statements for their 401(k) Plan accounts. Id. ¶¶ 22-27.
(4) Embezzlement of bankruptcy assets in violation of
18 U.S.C. § 153 (Count 28). This count charged that McCarthy had embezzled
$420,000 from the bankruptcy estate of Discount Harry, Inc. ("Discount
Harry"), a company unrelated to Lloyd's and for which McCarthy had acted
as the disbursing agent responsible for paying the claims of Discount
Harry's creditors. Id. ¶¶ 28-31.
On June 4, 1999, McCarthy moved to dismiss various counts of the
indictment. See Notice of Motion, filed June 4, 1999 (Docket
#7). On July 21, 1999, McCarthy's motion was denied in its entirety by
Judge Barrington D. Parker, Jr., who was at that time a United States
District Judge. See Transcript of Hearing, dated July 21, 1999
(Docket #60), at 24-35.
B. Evidence at Trial
Judge Parker presided over McCarthy's jury trial, which began on
September 23, 1999 and ended on October 13, 1999.
1. The Prosecution's Case-in-Chief
Lloyd's was a publicly held corporation that had operated two
combination supermarket and department stores in Orange County, New York
since the 1950's. (Kelder: Tr. 223). It filed for bankruptcy protection
under Chapter 11 of the United States Bankruptcy Code in the Southern
District of New York on December 1, 1992. (Kelder: Tr. 225). Prior to
this filing, Lloyd's had retained the services of Robert J. McCarthy
& Co. ("McCarthy & Co."), a consulting company owned by McCarthy.
(Kelder: Tr. 225). McCarthy & Co. was hired to consult Lloyd's in its
attempt to emerge from bankruptcy. (Kelder: Tr. 225). McCarthy, a
certified public accountant, began working at Lloyd's himself at the end
of October 1994. (Kelder: Tr. 225). At the time McCarthy was hired,
Lloyd's sponsored the Employee Benefit Plans. (McGloine: Tr. 55; Kelder:
On December 6, 1994, McCarthy reached an agreement with Edmund Lloyd
("Mr. Lloyd"), the owner of Lloyd's, to act as its Chief Executive
Officer and Executive Vice-President for an annual salary of $160,000.
(O'Reilly: Tr. 525, 528-29, 534). The agreement also granted McCarthy the
right to purchase three 18-month options entitling him to buy, in total,
shares of Lloyd's. (O'Reilly: Tr. 531, 534). If exercised, McCarthy
would have been Lloyd's majority shareholder. (O'Reilly: Tr. 531-32). In
addition, the agreement provided that McCarthy would receive as part of
his compensation ten percent of Lloyd's pre-tax profit per year provided
that certain base-level profits were met each year. (O'Reilly: Tr. 535).
Thus, if Lloyd's prospered, so would McCarthy.
At trial, the prosecution presented evidence that, while Chief
Executive Officer and Executive Vice-President of Lloyd's, McCarthy (1)
stole more than $2 million from the Employee Benefit Plans in order to
pay off various corporate debts namely, a tax lien held by Orange
County, a mortgage on Lloyd's properties held by Fleet Bank, and a letter
of credit in favor of one of Lloyd's gas suppliers; (2) embezzled
bankruptcy funds from Discount Harry in order to satisfy the Orange
County tax lien; (3) laundered the monies stolen from the Employee
Benefit Plans in transactions intended to disguise their source; and (4)
conspired to create, and did create, false ERISA documents by
distributing to employees falsified year-end statements for their 401(k)
Plan accounts. The prosecution's evidence on each of these schemes will
be considered in turn.
a. Theft of Employee Benefit Plan Funds
i. Tax Lien Held by Orange County
In order for Lloyd's to emerge from bankruptcy and avert both a
shutdown and liquidation, its reorganization plan needed to be approved
by the bankruptcy court. (Kelder: Tr. 350-52; O'Reilly: Tr. 541-42). The
bankruptcy court would not approve the reorganization plan, however,
unless Lloyd's paid several outstanding debts, the most significant of
which was an outstanding $400,000 tax lien held by Orange County.
(O'Reilly: Tr. 541-42).
McCarthy thus began searching for a source of funds that could be used
to pay off the Orange County tax lien in time for the bankruptcy hearing,
which was scheduled for December 28, 1994. (Kelder: Tr. 231-39; O'Reilly:
Tr. 541-42). In mid-to late-December 1994, McCarthy asked the treasurer
of Lloyd's, William R. Kelder, whether Lloyd's employees could take loans
from the 401(k) Plan and then use the proceeds to purchase stock in
Lloyd's so that the company would have funds to pay the tax lien.
(McGloine: Tr. 57-59; Kelder: Tr. 231-32). On December 21, 1994, Kelder
contacted the administrator of the 401(k) Plan, State Mutual Life
Insurance Company ("State Mutual"), and spoke with the account manager
assigned to the 401(k) Plan, Edward McGloine. (McGloine: Tr. 53-54,
57-58; Kelder: Tr. 227-28, 233-35). Kelder had McGloine speak directly
with McCarthy. (McGloine: Tr. 58; Kelder: Tr. 235).
According to McGloine, McCarthy was primarily interested in whether, if
a loan program were instituted, the employee participants would be
restricted in what they could do with the loan proceeds. (McGloine: Tr.
58). Specifically, McCarthy asked whether the participants could use the
loan proceeds to buy stock in Lloyd's "to basically protect their job and
invest in the company and try to keep Lloyd's going." (McGloine: Tr. 59).
McGloine informed McCarthy that the 401(k) Plan could be amended to
permit Lloyd's employees to take a loan from the 401(k) Plan and that
they could then use the proceeds however they wished. (McGloine: Tr. 59;
Kelder: Tr. 235). McGloine also told McCarthy that any loans would have
to be repaid by the employees through payroll deductions. (McGloine: Tr.
59). McCarthy was apparently dissatisfied with this proposal because it
required amending the 401(k) Plan, which would take time, and the
December 28 bankruptcy hearing was imminent. (Kelder: Tr. 235).
Having rejected this option, McCarthy then asked McGloine whether
Lloyd's could withdraw monies from the Pension Plan specifically,
$500,000 and then use these monies to pay off the Orange County
tax lien. (McGloine: Tr. 60). McGloine responded that such a transaction
would be permissible under the Pension Plan only if Lloyd's could prove
that the monies were being transferred to a trust that would be
maintained on behalf of the employee participants. (McGloine: Tr. 60).
McGloine also told McCarthy that, given that the proposed transaction
involved an investment in a bankrupt company Lloyd's the
transaction would probably be prohibited. (McGloine: Tr. 60-61, 75).
McGloine informed McCarthy that, in any event, the proposed transaction
would take some time to complete. (McGloine: Tr. 61-62). McCarthy
responded that if he could not withdraw the $500,000 immediately, he
would seek to cancel both the Pension Plan and the 401(k) Plan with State
Mutual. (McGloine: Tr. 62).
McGloine brought the matter to the attention of his supervisor,
Alexander T. Dike, who was Assistant Vice President and General Counsel
for State Mutual. (Dike: Tr. 96-98). In turn, Dike spoke with Richard G.
Hickey, who was outside counsel for Lloyd's. (Dike: Tr. 98; Hickey: Tr.
1144). Dike informed Hickey that McCarthy's proposal to use $500,000 from
the Pension Plan to pay the Orange County tax lien a corporate
tax obligation would be both imprudent, because Lloyd's was in
bankruptcy, and prohibited by ERISA, because it would not be done for the
benefit of the employee participants. (Dike: Tr. 98-99). Dike
subsequently spoke with McCarthy, relayed the substance of his
conversation with Hickey, confirmed that the $500,000 would be used to
pay off the tax lien, and told him that in order for the transaction to
proceed Lloyd's would need to establish a trust on behalf of its
employees and to provide a certification that it had considered and
complied with ERISA. (Dike: Tr. 99-100). McCarthy
replied that State Mutual did not have the authority to withhold
the distribution and that it was none of State Mutual's business what
Lloyd's did with the $500,000. (Dike: Tr. 100-01).
McCarthy then contacted Terrence P. O'Reilly, who was a partner at
Mickey's law firm, and conveyed the substance of his conversation with
Dike. (O'Reilly: Tr. 524, 535-37). O'Reilly researched the proposed
transaction's legality and concluded that the transaction would be
prohibited by ERISA because it would be done primarily for the benefit of
Lloyd's and not for the employee participants. (O'Reilly: Tr. 538).
However, O'Reilly also concluded that State Mutual had no authority to
withhold the distribution, regardless of the transaction's legality.
(O'Reilly: Tr. 538). O'Reilly also researched the penalties that could be
levied for engaging in a transaction prohibited by ERISA. (O'Reilly: Tr.
544-46). He concluded that the penalties ranged from civil fines of up to
100% of the value of the transaction to criminal fines and/or
imprisonment. (O'Reilly: Tr. 546). O'Reilly relayed these conclusions to
McCarthy. (O'Reilly: Tr. 538-39, 546). McCarthy dismissed O'Reilly's
concerns and told him to prepare a letter to State Mutual demanding that
the $500,000 be released from the Pension Plan. (O'Reilly: Tr. 536-37,
On December 23, 1994, McCarthy faxed Dike a letter, which had been
prepared by O'Reilly, formally requesting that State Mutual release
$500,000 from the Pension Plan. (Dike: Tr. 101-02; O'Reilly: Tr. 536-37).
On December 27, McCarthy faxed Dike another letter indicating that,
because State Mutual had ignored his December 23 letter, he was demanding
the liquidation of the entire Pension Plan, in addition to the $500,000
which he had previously requested. (Dike: Tr. 104-06). McCarthy also
indicated in this letter that an employee trust had been established with
the Bank of New York ("BNY") and that all of the Pension Plan monies
should be transferred to it. (Dike: Tr. 105; Kelder: Tr. 237). This
trust (the "Pension Plan Trust") had been opened earlier in the day by
McCarthy and Kelder, with Kelder named as trustee. (Amodio: Tr. 158-59,
162, 165; Kelder: Tr. 237-38, 258-60).
On December 28, Dike had not yet received McCarthy's December 27
letter. (Dike: Tr. 104-05). But he did fax McCarthy a letter responding
to McCarthy's December 23 letter. (Dike: Tr. 102). In his response, Dike
specified why State Mutual would not distribute the $500,000 from the
Pension Plan as McCarthy had requested. (Dike: Tr. 102-03). First, Dike
indicated that the Pension Plan, as written, did not provide for a
single, lump-sum distribution and would need to be amended. (Dike: Tr.
103). Second, Dike indicated that State Mutual would need to receive from
Lloyd's counsel a certification that the transaction would be in
compliance with ERISA. (Dike: Tr. 103-04). Dike did not receive any
response from McCarthy until the following day, after the bankruptcy
hearing had already taken place. (Dike: Tr. 106).
At the hearing on December 28, the bankruptcy court confirmed the
reorganization plan without McCarthy's using any of the State Mutual
funds because, as described further in section I.B.1.b below, McCarthy
paid the $400,000 Orange County tax lien using bankruptcy funds that he
had embezzled from Discount Harry. Nonetheless, McCarthy continued to
pursue the removal of the funds in the Employee Benefit Plans from State
Mutual. On December 29, he faxed Dike a letter reiterating his request to
have all of the Pension Plan monies transferred to the Pension Plan Trust
at BNY. (Dike: Tr. 106-07). The letter also stated that McCarthy had
instructed Lloyd's attorneys to file a lawsuit against State Mutual on
January 4, 1995 if the funds were not so transferred. (Dike: Tr. 107). On
December 30, Dike received two letters, one from O'Reilly and the other
from Kelder, both of which relayed McCarthy's instructions that the
401(k) Plan also be liquidated. (Dike: Tr. 108-10). After receiving
these two letters, Dike hired David Duff and Ellen Quackenbos, attorneys
at Debevoise & Plimpton LLP, to represent State Mutual. (Dike: Tr.
On January 5, 1995, Dike sent a letter to Kelder responding to Kelder's
December 30 letter. (Dike: Tr. 111-12). He indicated that the 401(k) Plan
would not be liquidated because Lloyd's counsel had not yet certified
that the transaction would be in compliance with ERISA and the Internal
Revenue Code. (Dike: Tr. 112). Thereafter, between January 5 and January
12, McCarthy, Kelder, O'Reilly, Dike, Duff, and Quackenbos engaged in
negotiations to structure the transfer of the monies in the Employee
Benefit Plans and to arrive at a mutually agreeable certification. (Dike:
Tr. 112-19). On January 13, with no agreement having been reached,
McCarthy faxed Dike a letter, which had been prepared by O'Reilly,
stating that he intended to file a complaint against State Mutual with
the Department of Labor. (Dike: Tr. 120-22; O'Reilly: Tr. 551-53).
Attached to this letter was a letter on Lloyd's letterhead from McCarthy
to the regional director of the New York State Department of Labor.
(Dike: Tr. 120, 125-26). Although McCarthy indicated that "[t]he attached
letter [was] going to be mailed today," it was never sent and was later
found in McCarthy's desk still sealed after he was fired in February
1996. (Dike: Tr. 122, 126; O'Reilly: Tr. 577).
Dike responded to McCarthy's letter on January 16, again stating that
State Mutual would release the funds in the Employee Benefit Plans only
upon receiving an appropriate certification. (Dike: Tr. 122-23). On
January 17, McCarthy and Kelder caused another trust at BNY to be opened
(the "401(k) Plan Trust") (collectively with the Pension Plan Trust, the
"Employee Benefit Plan Trusts"), again with Kelder named as trustee.
(Amodio: Tr. 158-59, 163-65;
Kelder: Tr. 258-59). On January 18, McCarthy faxed Dike a letter
signed by both McCarthy and Kelder certifying that the Employee Benefit
Plan Trusts had been created and that the monies from the Employee
Benefit Plans would be managed and invested in compliance with ERISA.
(Dike: Tr. 124-25). On January 20 or January 21, State Mutual liquidated
the Pension Plan and the 401(k) Plan and sent checks for the balance of
each account to Lloyd's; one of the checks was payable to the Pension
Plan Trust and the other to the 401(k) Plan Trust. (McGloine: Tr. 67;
Dike: Tr. 127; Kelder: Tr. 260; O'Reilly: Tr. 555-56). Kelder then
deposited these checks into the respective Employee Benefit Plan Trusts
at BNY. (Kelder: Tr. 260; O'Reilly: Tr. 555-56).
Less than a week later, McCarthy began transferring these monies to
accounts under his control. On January 26, McCarthy signed a wire
transfer request directing that $300,000 be wired from the Pension Plan
Trust to an account at National Westminster Bank (the "Alliance Account")
held by a company named Alliance Capital Design Group, Ltd. ("Alliance").
(Kelder: Tr. 261-63; Fries: Tr. 437, 441-42). Alliance was a corporation
partially owned by McCarthy that had been created as a holding company to
sell franchise rights and to receive franchise payments for Gibraltar
Transmission, a muffler repair business also partially owned by McCarthy.
(Salas: Tr. 411-12; Fries: Tr. 435-36). Alliance was not a financial
services firm and was not in the business of administering employee
benefit plans. (Salas: Tr. 412). McCarthy had Kelder deliver the wire
transfer request to BNY. (Kelder: Tr. 261-62). The $300,000 was
transferred to the Alliance Account on January 26. (Fries: Tr. 441-42).
Kelder testified that he believed erroneously at the time that Alliance
was a large Wall Street investment firm. (Kelder: Tr. 262-63).
In February or March of 1995, Edward Fries, who maintained Alliance's
books, noticed the $300,000 transfer and asked McCarthy about it. (Fries:
Tr. 437, 441-42). McCarthy told Fries that the money belonged to Lloyd's,
that he should ignore it, that he should not use it for Alliance
expenses, and that it was going to be returned to Lloyd's after a short
while. (Fries: Tr. 442).
ii. Mortgage Held by Fleet Bank
As part of the bankruptcy reorganization, McCarthy had been meeting
with representatives of Fleet Bank ("Fleet"), which held a mortgage
secured by the Lloyd's properties in Orange County (the "Fleet
Mortgage"). (Kelder: Tr. 263-64; Kehoe: Tr. 455-57). Prior to the
bankruptcy hearing in December 1994, Fleet agreed to extend the payment
date of the Fleet Mortgage by two months, from April 1, 1995 to June 1,
1995, but insisted that Lloyd's lease a portion of the properties or try
to sell them by June 1, 1995. (Kelder: Tr. 264; Kehoe: Tr. 455-58). If
Lloyd's failed to meet these conditions, escalating penalty clauses,
beginning at $15,000 per month, would have taken effect and would have
further reduced Lloyd's chances of emerging from bankruptcy. (Kelder: Tr.
264; Kehoe: Tr. 457-58; McGowan: Tr. 474).
Beginning in January 1995, McCarthy began exploring whether monies from
the Employee Benefit Plans could be used to pay down the Fleet Mortgage.
(Kelder: Tr. 264-65; Kehoe: Tr. 458-59). McCarthy discussed several
proposals with O'Reilly. The first would have had the Employee Benefit
Plans directly loan funds to Lloyd's so that Lloyd's could purchase the
properties secured by the Fleet Mortgage, with the Employee Benefit Plans
taking a mortgage on the properties. (O'Reilly: Tr. 556-57). O'Reilly
informed McCarthy that this transaction would be prohibited by ERISA
because it would be done for the benefit of Lloyd's and not the
employee participants and because ERISA's diversification rules
prohibited investing the bulk of the Employee Benefit Plans' assets in a
single investment. (O'Reilly: Tr. 557). McCarthy then proposed having the
Employee Benefit Plans purchase the property outright. (O'Reilly: Tr.
557). O'Reilly informed McCarthy that this transaction also would be
prohibited by ERISA's diversification rules. (O'Reilly: Tr. 557-58).
In May 1995, McCarthy asked O'Reilly whether the monies in the Employee
Benefit Plan Trusts could be transferred to "an independent investment
company" referring to Alliance which would then loan the
money to Lloyd's, take a mortgage to secure the loan, and return
mortgage-backed securities to the Employee Benefit Plan Trusts.
(O'Reilly: Tr. 558). O'Reilly told McCarthy that using a straw company to
do indirectly what could not be done directly would not validate the
transaction and that it would still be prohibited by ERISA. (O'Reilly:
Tr. 558-59). McCarthy replied that he was "getting tired of hearing `no'
from my lawyers." (O'Reilly: Tr. 559).
Notwithstanding O'Reilly's advice, McCarthy went ahead and used monies
from the Employee Benefit Plan Trusts to pay down the Fleet Mortgage.
(O'Reilly: Tr. 560). McCarthy had Kelder go to BNY and initiate wire
transfers to Alliance for $1,115,000 (from the Pension Plan Trust) and
$635,000 (from the 401(k) Plan Trust). (Kelder: Tr. 265-66). Kelder
understood that McCarthy intended to use these monies through Alliance to
pay down the Fleet Mortgage. (Kelder: Tr. 266-67). In return, Fleet would
extinguish the mortgage on one of the two Orange County properties,
leaving the other as security for the remaining loan balance. (McGowan:
Tr. 475, 485). Because the wire transfer documents were signed only by
McCarthy and not by Kelder (the trustee), however, BNY would not accept
them. (Kelder: Tr. 267). McCarthy thus
instructed Kelder to draw, sign, and have certified checks for the
same amount from the two Employee Benefit Plan Trusts. (Kelder: Tr.
On June 14, Kelder signed two checks, one from each of the Employee
Benefit Plan Trusts, and brought them to BNY to be certified. (Amodio:
Tr. 184-85; Kelder: Tr. 270-71). Because these were trust accounts, BNY
asked for additional documentation concerning how Alliance intended to
use these trust funds. (Kelder: Tr. 271). Kelder conveyed this to
McCarthy and was told by McCarthy that "he would take care of it."
(Kelder: Tr. 271). Later that day, Kelder received a fax copy of an
unsigned letter written on Alliance letterhead from Herbert N. Salas to
Kelder, as trustee. (Amodio: Tr. 185-86; Kelder: Tr. 273). Salas was one
of McCarthy & Co.'s accountants. (Kelder: Tr. 273; Salas: Tr.
407-09). The letter stated that Alliance had obtained a mortgage-backed
investment for the Employee Benefit Plan Trusts that would earn interest
of eight percent. (Amodio: Tr. 186). This statement was false, however,
because Alliance had never obtained such a mortgage. (Pan: Tr. 519-20).
After Kelder received the letter, McCarthy had him obtain Salas's
signature and then fax the letter to BNY. (Amodio: Tr. 185-86; Kelder:
Tr. 273-74; Salas: Tr. 410-12). The checks were then certified and given
to McCarthy by Kelder. (Kelder: Tr. 274). The next day, June 15, McCarthy
went to the Middletown branch of Fleet, opened a corporate account in the
name of "Lions Capital Design Group Limited" (the "Lions Account"), and
deposited the certified checks (totaling $1,750,000) into this account.
(Vance: Tr. 429-34). McCarthy apparently intended to open the account in
Alliance's name but, because of a clerical error made by Fleet, it was
opened with the Lions name instead. (Vance: Tr. 432).
On June 22, a closing was held on the Fleet Mortgage. (McGowan: Tr.
476). Among those in attendance were McCarthy, Hickey, and Mr. Lloyd.
(McGowan: Tr. 477). Fleet extinguished the mortgage on one of the two
Orange County properties, leaving the other as security for the remaining
balance. (McGowan: Tr. 475, 485). For payment, McCarthy wired $1,750,000
from the Lions Account to a Fleet corporate account. (McGowan: Tr.
478-79, 481-83). However, Lloyd's needed an additional $50,000 to fully
meet its obligations under the Fleet Mortgage. (McGowan: Tr. 483).
Accordingly, McCarthy arranged a $50,000 wire transfer from the Alliance
Account. (McGowan: Tr. 477, 482-83). By satisfying this portion of the
Fleet Mortgage, Lloyd's avoided the imposition of the penalties that had
been provided for when Lloyd's and Fleet agreed to amend the Fleet
Mortgage prior to the bankruptcy hearing. (McGowan: Tr. 485).
iii. Letter of Credit
After transferring the monies from the Employee Benefit Plans into the
Alliance Account and the Lions Account, McCarthy began using those funds
to bolster Lloyd's precarious financial position. In March 1995, McCarthy
used monies from the Alliance Account to guarantee a Lloyd's corporate
obligation namely, a $50,000 letter of credit owed to Warex
Terminal Corporation ("Warex"), the gas supplier for Lloyd's service
stations. (Amodio: Tr. 179, 183). McCarthy wired $50,000 from the
Alliance Account to his own personal account at BNY. (Fallik: Tr.
724-25).*fn1 On March 15, 1995, he used these funds to purchase a
one-year, $50,000 certificate of deposit with BNY. (Amodio: Tr. 180-83).
McCarthy used this certificate of
deposit to guarantee (and later satisfy) the $50,000 letter of
credit Lloyd's owed to Warex. (Amodio Tr. 179, 183-84).
b. Embezzlement of Bankruptcy Assets
While McCarthy was attempting to secure monies from the Employee
Benefit Plans to pay the Orange County tax lien in time for the December
28 bankruptcy hearing, he was also attempting to obtain funding from a
different source. Prior to his involvement with Lloyd's, McCarthy had
been appointed as accountant and disbursing agent for the Official
Committee of Unsecured Creditors in the Chapter 11 bankruptcy proceeding
of Discount Harry, a New Jersey corporation specializing in the sale of
goods at discount prices. (Deiches: Tr. 487, 491-93). In that role,
McCarthy was responsible for receiving monies in trust from the
bankruptcy estate of Discount Harry and for paying creditors under the
terms of Discount Harry's court-approved bankruptcy plan. (Deiches: Tr.
On December 13, 1994, in connection with his role as disbursing agent,
McCarthy received two checks from Discount Harry's bankruptcy estate
totaling $420,000. (Deiches: Tr. 502). McCarthy deposited them into an
account at National Westminster Bank (the "Discount Harry Account") that
had been set up for the purpose of disbursing monies to Discount Harry's
creditors. (Deiches: Tr. 502-03; Fallik: Tr. 718). On December 22,
McCarthy opened a personal checking account in his own name at BNY.
(Amodio: Tr. 174). That same day, McCarthy directed a wire transfer of
$420,000 from the Discount Harry Account to his just-opened personal
account. (Fallik: Tr. 718-19). McCarthy then directed Kelder to include
the balance in his personal account as an asset available to Lloyd's in
connection with the upcoming bankruptcy hearing. (Kelder: Tr. 252-53).
At the bankruptcy hearing on December 28, McCarthy agreed to take
personal responsibility for satisfying the Orange County tax lien.
(Kelder: Tr. 253). The hearing was adjourned for lunch, at which time
McCarthy went to BNY and obtained a certified check on his personal
account payable to Orange County. (Kelder: Tr. 254-55; O'Reilly: Tr.
542). McCarthy returned to the bankruptcy court and delivered the
certified check as payment in satisfaction of the $400,000 Orange County
tax lien. (Kelder: Tr. 253, 255; O'Reilly: Tr. 542-43). The debt was
paid, the bankruptcy court confirmed Lloyd's reorganization plan, and
Lloyd's emerged from bankruptcy. (Kelder: Tr. 255; O'Reilly: Tr. 543).
McCarthy eventually replenished the funds he had taken from the
Discount Harry Account through loans from friends and acquaintances, as
well as from funds taken from Lloyd's operating account. (Accardi: Tr.
674-76; Posillico: Tr. 680-82; Razack: Tr. 684-87).
c. Money Laundering
After transferring the monies from the Employee Benefit Plans into the
Alliance Account and the Lions Account, McCarthy also began using those
funds to assist him in a separate business venture entirely unrelated to
Lloyd's. In the Spring of 1995, McCarthy and others formed Med-Ox
Technologies, Limited ("Med-Ox"), a company that provided hyperbaric
therapy to patients in hospital burn units. (Butler: Tr. 419-22).
Hyperbaric therapy is a type of medical treatment in which a patient is
placed into a pressurized chamber that provides pure oxygen. (Reimers:
On July 2, 1995, Med-Ox entered into a contract with Westchester County
Medical Center ("Westchester Medical") to provide it with hyperbaric
equipment and personnel for treating its patients. (Butler: Tr. 423-24).
McCarthy purchased two hyperbaric chambers needed
for this contract from Reimers Systems, Incorporated ("Reimers
Systems"). (Reimers: Tr. 210-14). McCarthy paid for this equipment in
installments, totaling $56,000, through wire transfers from the Alliance
Account. (Reimers: Tr. 213-16, 219; Fallik: Tr. 708, 710-11).
Ultimately, the contract with Westchester Medical was terminated before
any hyperbaric treatment could be attempted. (Reimers: Tr. 216; Butler:
Tr. 425-27). Med-Ox still retained the hyperbaric chambers, however, and
McCarthy, with the assistance of Reimers Systems, leased one of the
chambers to a third party. (Reimers: Tr. 216-18). In so doing, McCarthy
personally received lease payments totaling $60,000. (Reimers: Tr. 218).
d. Creation of, and Conspiracy to Create, False ERISA
In the Spring of 1995, after McCarthy had already liquidated the
Employee Benefit Plans, Lloyd's employees began to inquire why they had
not yet received quarterly statements for their 401(k) Plan accounts.
(Kelder: Tr. 274-75). In response, McCarthy instructed Kelder to
distribute to them copies of their 401(k) Plan account statements
indicating contributions through November 1994. (Kelder: Tr. 275-76, 280;
Owen: Tr. 749-51). This was the last account statement showing that any
assets were still in the 401(k) Plan. (Kelder: Tr. 395-96). Additionally,
McCarthy had Kelder circulate a memorandum, which McCarthy had prepared,
stating that the 401(k) Plan would earn interest at five percent per year
and that, effective March 1, 1995, Lloyd's would begin matching a quarter
of the employees' weekly contributions. (Kelder: Tr. 276; Owen: Tr.
Notwithstanding their receipt of these documents, employees continued
to inquire about the status of their 401(k) Plan accounts. (Kelder: Tr.
277). Near the end of 1995, McCarthy told Kelder to create a spreadsheet
listing each 401(k) Plan participant and the balance in each
account at the time the funds were withdrawn from State Mutual.
(Kelder: Tr. 277-78, 280). After Kelder gave the spreadsheet to McCarthy,
McCarthy added to it false information purporting to show employee and
company contributions, and interest accrued thereon, since the date the
401(k) Plan had been liquidated. (Kelder: Tr. 281-85). McCarthy then
returned the spreadsheet to Kelder and told him that when participating
employees asked for information concerning their accounts, Kelder should
generate individual statements showing account balances using the figures
from the revised spreadsheet. (Kelder: Tr. 285-86). Although no assets
remained in the 401(k) Plan, McCarthy instructed Kelder to tell employees
that these statements accurately reflected how their monies were being
invested. (Kelder: Tr. 395-96). When one Lloyd's employee went to
McCarthy's office to inquire about the status of her 401(k) Plan account,
McCarthy showed her what purported to be a statement of her account,
reflecting a balance of nearly $20,000, though in fact her account no
longer existed. (Owen: Tr. 750-52).
2. McCarthy's Case-in-Chief
McCarthy was the only witness called by the defense. McCarthy testified
that when he first became Lloyd's Chief Executive Officer, a company
named J&B was under contract to purchase one of Lloyd's Orange County
properties and that the proceeds from that sale were intended to be used
to confirm Lloyd's reorganization plan with the bankruptcy court.
(McCarthy: Tr. 807, 811). However, J&B withdrew from the contract on
December 19, 1994, prior to the bankruptcy hearing. (McCarthy: Tr.
810-11). Thereafter, McCarthy began negotiating with Lloyd's creditors to
defer their claims so that Lloyd's reorganization plan could be
confirmed. (McCarthy: Tr. 812-13). The tax lien held by Orange County,
however, could not be deferred. (McCarthy: Tr. 813-15).
McCarthy discussed the situation with Hickey, O'Reilly, Mr. Lloyd, and
Kelder and determined that if monies from the Employee Benefit Plans
could be used to purchase the tax lien, then the bankruptcy
reorganization could proceed. (McCarthy: Tr. 815-17). McCarthy testified
that he believed this was lawful because the Employee Benefit Plans would
be receiving in return an investment secured by the Orange County
properties. (McCarthy: Tr. 817, 976). Accordingly, McCarthy had O'Reilly
begin the process of having State Mutual release $500,000 from the
Pension Plan. (McCarthy: Tr. 817).
McCarthy testified that several of the letters sent to State Mutual
bearing his signature were drafted originally by O'Reilly. (McCarthy: Tr.
818-24). McCarthy acknowledged sending the January 13, 1995 letter to
Dike in which he complained about State Mutual's refusal to release the
funds without a certification and in which he indicated that a complaint
against State Mutual would be filed with the Department of Labor.
(McCarthy: Tr. 831-34). McCarthy also claimed to have discovered that the
Employee Benefit Plans had an undeclared surplus of approximately
$500,000 to $750,000 that had not been identified by State Mutual.
(McCarthy: Tr. 839-41). McCarthy testified that this surplus existed even
though Lloyd's accountants who prepared the financial statements
for the Employee Benefit Plans had never identified any such
surplus. (McCarthy: Tr. 838-39). McCarthy testified that he thought
Lloyd's could force State Mutual to turn over this surplus and that
Hickey, O'Reilly, and Kelder agreed initially with this assessment.
(McCarthy: Tr. 841-42).
McCarthy also testified that in mid-January 1995 a cash flow emergency
arose at Lloyd's because Kelder had used nearly all of Lloyd's available
cash to pay a real estate tax bill of over $200,000 that was not yet due.
(McCarthy: Tr. 847). McCarthy stated that, after learning of this
emergency, he directed Kelder to wire $300,000, which he believed
was surplus, from the Pension Plan Trust to the Alliance Account.
(McCarthy: Tr. 846-48). McCarthy testified that he directed the monies be
wired to Alliance (as opposed to Lloyd's) so that Kelder could not again
misspend funds. (McCarthy: Tr. 848). In addition, McCarthy claimed that
he told Hickey about the $300,000 wire transfer and that Hickey knew of
McCarthy's control over Alliance. (McCarthy: Tr. 84849, 852).
Concerning the pay down of the Fleet Mortgage using monies from the
Employee Benefit Plans, McCarthy testified that, based on discussions
with Hickey, O'Reilly, Kelder, and Mr. Lloyd, he had believed that the
transaction was legal under an emergency exception to ERISA. (McCarthy:
Tr. 879). According to McCarthy, he elected to use Alliance as a
middleman to ensure that sufficient reserves remained in the Employee
Benefit Plans to pay any employee withdrawal demands. (McCarthy: Tr.
879-80). McCarthy also claimed that he was told by Hickey or O'Reilly
that using Alliance in this transaction was permissible since the
Employee Benefit Plans would be receiving a secured investment in return.
(McCarthy: Tr. 880-81).
McCarthy acknowledged his role in the Discount Harry transaction and
did not deny using the bankruptcy estate's funds to pay off the tax lien,
but he claimed that he believed it to be permissible because Discount
Harry was receiving a secured investment in return. (McCarthy: Tr.
901-03). McCarthy did admit, however, that he had no paperwork concerning
the existence of this alleged secured investment. (McCarthy: Tr. 937).
McCarthy also acknowledged his role in the Med-Ox transaction with
Westchester Medical and that he purchased the hyperbaric chambers for
Med-Ox using the funds in the Alliance Account, but he claimed that
Hickey advised him on the transaction, knew all of its
details, and performed the legal work for Med-Ox in attempting to
finalize it. (McCarthy: Tr. 859-66).
3. The Prosecution's Rebuttal
In rebuttal, Hickey testified that, contrary to McCarthy's testimony,
he had told McCarthy that using $500,000 from the Pension Plan to pay off
the Orange County tax lien or to purchase Lloyd's property directly would
be prohibited transactions under ERISA because they would be done for the
benefit of Lloyd's and not the employee participants. (Hickey: Tr.
1150-52, 1156). Hickey denied discussing any alleged surplus in the
Employee Benefit Plans with McCarthy. (Hickey: Tr. 1167). Hickey also
testified that he never told McCarthy that paying down the Fleet Mortgage
using monies from the Employee Benefit Plans would be permissible or that
it would meet any alleged emergency exception to ERISA. (Hickey: Tr.
Concerning the pay-down of the Fleet Mortgage using Alliance as a
middleman, Hickey testified that in May 1995 McCarthy described to him
his plan to invest the assets from the Employee Benefit Plans in an
"investment house" named Alliance Capital Design Group, Ltd., which would
give back a mortgage to secure the investment. (Hickey: Tr. 1158-59).
Hickey stated that he expected to represent Lloyd's with respect to both
the Alliance and the Fleet aspects of the transactions but that on June
16, 1995, McCarthy instructed him to work only on the Fleet portion.
(Hickey: Tr. 1159-61).
C. The Jury Verdict and Sentencing
On October 13, 1999, a jury found McCarthy guilty on three counts of
theft of employee benefit plan funds in violation of 18 U.S.C. § 664
(Counts 1-3), eighteen counts of money laundering in violation of
18 U.S.C. § 1956(a)(1)(B)(i), 1956(a)(2), 1957 (Counts 8-25), two
counts of creating, and conspiring to create, false ERISA documents
in violation of 18 U.S.C. § 371, 1027 (Counts 26-27), and one count
of embezzlement of bankruptcy assets in violation of 18 U.S.C. § 153
(Count 28). (Tr. 1477-80). The jury found McCarthy not guilty on four
counts of theft of employee benefit plan funds in violation of
18 U.S.C. § 664 (Counts 4-7). (Tr. 1477). These counts specifically related to
four withdrawals made by McCarthy in November and December 1995 from the
Employee Benefit Plan Trusts totaling $50,000. See Indictment
On September 13, 2000, McCarthy was sentenced to 78 months
imprisonment, 3 years of supervised release, a special assessment of
$1200, and restitution of $1.6 million. (Sentencing Tr. 37-38).
D. McCarthy's Appeal
McCarthy timely filed his notice of appeal on September 15, 2000.
See Notice of Appeal, filed September 15, 2000 (Docket #52).
McCarthy proffered the following grounds in support of reversing his
conviction and/or sentence: (1) The evidence presented at trial was
legally insufficient to support his money laundering convictions.
See Brief for Defendant-Appellant, dated January 26, 2001
("Def. App. Brief), at 21-29. (2) Judge Parker failed to instruct the
jury properly on McCarthy's good-faith defense. See
id. at 29-39. According to McCarthy, Judge Parker erred by
telling the jury that the prosecution had to prove that McCarthy did not
believe in good faith that his use of the Employee Benefit Plan funds was
authorized "by law." See id. at 34. McCarthy argued
that he should have instructed the jury that the prosecution had to prove
that McCarthy did not believe in good faith that his use of the Employee
Benefit Plan funds was authorized "by the Plan's representatives," such
as Kelder, who was the trustee of the Employee
Benefit Plans. See id. at 33. (3) The
prosecution knowingly permitted and elicited the perjured testimony of
O'Reilly and Hickey. See id. at 39-44. (4) Judge
Parker erred in applying the sentencing guidelines to McCarthy, resulting
in an increased sentence from 33 to 78 months. See
id. at 44-61.
On November 16, 2001, the Second Circuit affirmed both McCarthy's
conviction and his sentence. See United States v.
McCarthy, 271 F.3d 387 (2d Cir. 2001). The court ruled with respect
to each of the four grounds for reversal as follows: (1) On the
sufficiency of the evidence claim, the court held that there was
"sufficient evidence for a rational trier of fact to have `found the
essential elements of the crime [of money laundering] beyond a reasonable
doubt.'" Id. at 395-96 (quoting Jackson v. Virginia,
443 U.S. 307, 319 (1979)). (2) The court rejected the jury instruction
claim on the ground that "McCarthy did not raise a valid good faith
defense by arguing he believed in good faith that Kelder had authorized
use of the funds. Rather, McCarthy had to believe, in good faith, that
the use of the funds was authorized by law." Id. at 398. (3)
The court "dispense[d] quickly" with McCarthy's claim as to perjured
testimony on procedural grounds because there was "no evidence in the
record suggesting McCarthy made a motion [for a new trial] within seven
days after the verdict and there is no hint of newly discovered
evidence." Id. at 399; see also
Fed.R.Crim.P. 33 (unless new evidence is presented, motion for a new trial
must be made within seven days of the verdict). The court also stated
that it would have rejected McCarthy's third claim even if it had
considered it on the merits since McCarthy's trial counsel "addressed the
conflicting testimony on cross examination" and "nothing in the record
indicates the alleged perjury remained undisclosed during trial."
McCarthy, 271 F.3d at 399-400. (4)
Finally, the court concluded that Judge Parker applied the
sentencing guidelines correctly. Id. at 400-02.
E. McCarthy's Legal Representation
Prior to his indictment, McCarthy was represented at various times by
Orin Snyder, Robert Chan, Susan Egan, and Charles Ross. See
Declaration in Opposition to Petition for Habeas Corpus, filed February
28, 2003 (Docket #70) ("Resp. Dec!."), ¶¶ 4-6. Ross represented
McCarthy at his arraignment. See Petition Under
28 U.S.C. § 2255 to Vacate, Set Aside, or Correct Sentence by a Person in
Federal Custody, filed November 14, 2002 ("Petition"), ¶ 15(b). Afterward,
McCarthy proceeded pro se for a brief period, with
Paul Davison appointed by Judge Parker as standby counsel. See
Resp. Decl. ¶ 6. At trial, McCarthy was represented by Richard B.
Lind. See Petition ¶ 15(c). At sentencing and through the
Second Circuit's decision, McCarthy was represented by Jason Brown of the
law firm of Holland & Knight LLP. See id.
F. The Instant Petition
McCarthy timely filed the instant petition with this Court on November
14, 2002. In his petition, McCarthy asserts seven grounds for relief,
which can be broken down into two general categories. Grounds One, Two,
Three, and Seven contend that McCarthy was denied effective assistance of
counsel at trial. See Statement of Grounds ("Grounds") (annexed
to Petition), at 1-4, 8. Grounds Four, Five, and Six assert that the
prosecution violated Brady v. Maryland, 373 U.S. 83 (1963), by
failing to disclose to McCarthy certain exculpatory and impeachment
evidence. See Grounds at 5-7.
With respect to his ineffective assistance of counsel claims,
McCarthy contends that Lind's representation was deficient in four ways:
(1) Lind failed to interview Stephen Mayka, an attorney from the Official
Committee of Unsecured Creditors in the Chapter 11 bankruptcy proceeding
for Discount Harry. See id. at 1 (Ground 1). (2) He
failed to interview Janet Kibrick, the Director of Personnel at Lloyd's
from September 1995 to February 1997. See id. at 2-3
(Ground 2). (3) He failed to move for a new trial based on "new" evidence
supplied by Kibrick. See id. at 4 (Ground 3). (4) He
miscalculated McCarthy's maximum sentence exposure at 48 months.
See id. at 8 (Ground 7).
For his Brady claims, McCarthy asserts that the Government
failed to disclose to him certain statements made by Kibrick, Diane
Caputo (Kibrick's daughter), and John Numchek (an individual purportedly
familiar with the Med-Ox/Westchester Medical transaction). See
id. at 5-7 (Grounds 4-6).
In support of his petition, McCarthy submitted a portion of an
affidavit from Kibrick. See Affidavit of Janet Kibrick, dated
May 16, 2003 ("Kibrick 2003 Aff") (reproduced as Ex. B to Letter from
Robert McCarthy to the Hon. Gabriel W. Gorenstein, dated July 15, 2003
("McCarthy Ltr. I")). No other affidavits or documentary evidence were
submitted. On August 12, 2003, this Court ordered Lind to submit an
affidavit addressing the following two issues: (1) "Whether Mr. Lind was
aware of [Kibrick]; if so, the approximate date on which he became aware
of her and whether any investigation was conducted to evaluate her
potential testimony; the results of any such evaluation; and the
reason(s) for the decision not to call her at trial"; and (2) "Whether
Mr. Lind estimated McCarthy's possible sentence exposure were he to go to
the nature of such estimate; and discussions with McCarthy
regarding the decision to enter into a plea." Order, filed August 12,
2003 (Docket #76), at 1.
As is described in greater detail in section III.B below, Lind
responded to the Order with an affidavit dated September 4, 2003.
See Affidavit of Richard B. Lind, filed September 8, 2003
(Docket #78) ("Lind Aff"). In his affidavit, Lind addressed the two
requested issues and also submitted as an exhibit a 1996 affidavit of
Kibrick. See Affidavit of Janet Kibrick, dated March 5, 1996
("Kibrick 1996 Aff") (reproduced as Ex. A to Lind Aff). McCarthy
responded to Lind's affidavit with a letter dated September 11, 2003.
See Letter from Robert McCarthy to the Hon. Gabriel W.
Gorenstein, dated September 11, 2003 (Docket #79) ("McCarthy Ltr. II").
In this letter, McCarthy refutes some of the statements made in Lind's
affidavit and also makes statements concerning why Lind was ineffective
for failing to move for a new trial. See id. at 1-2.
The Government responded to McCarthy's letter on September 19, 2003,
setting forth reasons why it did not commit any Brady
violations. See Letter from Cynthia K. Dunne, Assistant United
States Attorney, to the Hon. Gabriel W. Gorenstein, dated September 19,
2003 ("AUSA Ltr."). Lind also responded to McCarthy's letter, refuting
McCarthy's statements that he was ineffective for failing to move for a
new trial. See Letter from Richard B. Lind to the Hon. Gabriel
W. Gorenstein, dated September 19, 2003 ("Lind Ltr."). In his most recent
submissions to this Court, McCarthy has responded to Lind's letter and to
the Government's letter. See Letter from Robert McCarthy to the
Hon. Gabriel W. Gorenstein, dated September 24, 2003; Letter from Robert
McCarthy to the Hon. Gabriel W. Gorenstein, dated September 25,
2003. The letters are being docketed herewith and have been
considered by the Court, to the extent they are relevant, in addressing
II. APPLICABLE LEGAL PRINCIPLES
A. Law Governing Petitions Under 28 U.S.C. § 2255
28 U.S.C. § 2255 provides:
A prisoner in custody under sentence of a court
established by Act of Congress claiming the right
to be released upon the ground that the sentence
was imposed in violation of the Constitution or
laws of the United States, or that the court was
without jurisdiction to impose such sentence, or
that the sentence was in excess of the maximum
authorized by law, or is otherwise subject to
collateral attack, may move the court which
imposed the sentence to vacate, set aside or
correct the sentence.
Relief under § 2255 is available "only for a constitutional error,
a lack of jurisdiction in the sentencing court, or an error of law or
fact that constitutes a fundamental defect which inherently results in
[a] complete miscarriage of justice." Graziano v. United
States, 83 F.3d 587, 590 (2d Cir. 1996) (per curiam) (internal
quotation marks and citation omitted).
In considering a § 2255 petition, "[u]nless the motion and the
files and records of the case conclusively show that the prisoner is
entitled to no relief, the court shall . . . grant a prompt hearing
thereon, determine the issues and make findings of fact and conclusions
of law with respect thereto." 28 U.S.C. § 2255. However, even when a
hearing maybe warranted, "`the statute itself recognizes that there are
times when allegations of facts outside the record can be fully
investigated without requiring the personal presence of the prisoner.'"
Chang v. United States, 250 F.3d 79, 85 (2d Cir. 2001) (quoting
Machibroda v. United States, 368 U.S. 487, 495 (1962));
see 28 U.S.C. § 2255 ("A court may entertain and determine
such motion without requiring the production of the prisoner at the
hearing."). Depending on the allegations in the
petition, a "court may use methods under [§] 2255 to expand the
record without conducting a full-blown testimonial hearing."
Chang, 250 F.3d at 86 (citing Blackledge v. Allison,
431 U.S. 63, 81-82 (1977)). Potential methods available to a court to
supplement the record include "`letters, documentary evidence, and, in an
appropriate case, even affidavits.'" Id. (quoting Raines
v. United States, 423 F.2d 526, 529-30 (4th Cir. 1970)).
B. Law Governing Ineffective Assistance of Counsel Claims
"In order to prove ineffective assistance, [a petitioner] must show (1)
`that counsel's representation fell below an objective standard of
reasonableness'; and (2) `that there is a reasonable probability that,
but for counsel's unprofessional errors, the result of the proceeding
would have been different.'" Pham v. United States,
317 F.3d 178, 182 (2d Cir. 2003) (quoting Strickland v. Washington,
466 U.S. 668, 688 (1984)); accord United States v.
Guevara, 277 F.3d 111, 127 (2d Cir. 2001): see
Massaro v. United States, 123 S.Ct. 1690, 1694 (2003) ("[A]
defendant claiming ineffective counsel must show that counsel's actions
were not supported by a reasonable strategy and that the error was
In evaluating the first prong whether counsel's performance
fell below an objective standard of reasonableness "`[j]udicial
scrutiny . . . must be highly deferential'" and "`every effort [must] be
made to eliminate the distorting effects of hindsight, to reconstruct the
circumstances of counsel's challenged conduct, and to evaluate the
conduct from counsel's perspective at the time.'" Bell v. Cone,
535 U.S. 685, 698 (2002) (quoting Strickland, 466 U.S. at 689);
see Dunham v. Travis, 313 F.3d 724, 730 (2d Cir.
2002) (according counsel a presumption of competence); Guevara,
277 F.3d at 127 (same). Concerning the second prong whether there
is a reasonable probability that, but for counsel's unprofessional
errors, the result
of the proceeding would have been different the Second
Circuit generally "requires some objective evidence other than
defendant's assertions to establish prejudice." Pham, 317 F.3d
at 182 (citing United States v. Gordon, 156 F.3d 376, 380-81
(2d Cir. 1998) (per curiam)).
C. Law Governing Brady Claims
In order to establish a violation of Brady v. Maryland,
373 U.S. 83 (1963), "[t]he evidence at issue must be favorable to the
accused, either because it is exculpatory, or because it is impeaching;
that evidence must have been suppressed by the State, either willfully or
inadvertently; and prejudice must have ensued." Strickler v.
Greene, 527 U.S. 263, 281-82 (1999); accord United
States v. Gil, 297 F.3d 93, 101 (2d Cir. 2002). In addition, for
prejudice to have resulted any such exculpatory or impeachment evidence
must have been material. See Brady, 373 U.S. at 87
(evidence must be "material either to guilt or to punishment");
United States v. Coppa, 267 F.3d 132, 139 (2d Cir. 2001) ("[A]
Brady violation occurs only where the government suppresses
evidence that `could reasonably [have been] taken to put the whole case
in such a different light as to undermine confidence in the verdict.'"
(alteration in original) (quoting Kyles v. Whitley.,
514 U.S. 419, 435 (1995))).
A. McCarthy's Brady Claims
McCarthy's allegations of Brady violations concern three
persons Kibrick, Numchek, and Caputo each of whom
allegedly provided a statement to the Government that would have either
cast doubt on McCarthy's guilt or impeached prosecution witnesses
most notably, Hickey and Kelder. Specifically, McCarthy alleges that the
Government violated Brady by not disclosing to him the
following statements: (1) A statement from Kibrick that would have
demonstrated that McCarthy did not have the requisite intent to
commit fraud. According to McCarthy, in this statement Kibrick informed
the Government that Hickey had advised McCarthy and others that it was
legal to use the Employee Benefit Plans to pay down the Fleet Mortgage.
See Grounds at 5 (Ground 4). (2) A statement from Numchek that
would have demonstrated that the Med-Ox transaction with Westchester
Medical was intended to benefit Lloyd's and not McCarthy himself.
See id., at 6 (Ground 5). (3) A statement from Caputo
that would have shown that Kelder and Mr. Lloyd knew that the Employee
Benefit Plans "were borrowed and that the intended security for this
borrowing was good and valid." Id. at 7 (Ground 6). The
Government has asserted that none of the statements were exculpatory.
See AUSA Ltr. at 2-3.
This Court need not consider the merits of McCarthy's Brady
claims, however, because he never raised them on direct appeal to the
Second Circuit; thus, he may not now assert them in the instant petition.
Case law makes clear that claims not raised on direct appeal may not be
raised in a subsequent proceeding under 28 U.S.C. § 2255 absent cause
and prejudice for the default, or a showing of "actual innocence."
See, e.g., Bousley v. United States,
523 U.S. 614, 622 (1998); DeJesus v. United States, 161 F.3d 99,
102 (2d Cir. 1998); Marone v. United States, 10 F.3d 65, 67 (2d
Cir. 1993) (per curiam). Cause "`must be something external to
the petitioner, something that cannot be fairly attributed to him.'"
Marone, 10 F.3d at 67 (quoting Coleman v. Thompson,
501 U.S. 722, 753 (1991)).
McCarthy could show "cause" for his procedural default by showing that
the factual bases underlying the statements at issue were unavailable to
him or his counsel prior to his direct appeal. See,
e.g., McCleskev v. Zant, 499 U.S. 467, 497-98 (1991);
Murray v. Carrier,
477 U.S. 478, 488 (1986); United States v. Helmslev,
985 F.2d 1202, 1206 (2d Cir. 1993). But McCarthy's submissions make no
allegation that he came into possession of such information only after his
appeal. Indeed, he gives no indication of when he actually discovered let
alone could have discovered the alleged Brady
violation. He states without explanation that he believes Kibrick gave
exculpatory information to the Government, see, e.g.,
McCarthy Ltr. I at 5, but he does not state when or how he learned of
this fact. While he asserts Lind was ineffective for failing to interview
Kibrick at the time of his trial, see, e.g., Grounds
at 2-3, that contention is analytically separate from his allegation of
Brady violations and is discussed in the next section.
Moreover, the Government has stated, without contradiction, that Orin
Snyder and Robert Chan, who represented McCarthy prior to Lind, not only
were actually present during the entirety of the Government's interviews
of Kibrick and Caputo but also had actually arranged for these interviews
to take place. AUSA Ltr. at 2. This makes it even more clear that
McCarthy has failed to provide "cause" for why any claimed
Brady violation was not raised on direct appeal.
McCarthy theoretically could demonstrate "cause" for his failure to
raise the Brady claims on direct appeal if either his appellate
counsel, Jason Brown, had been ineffective or there had since been a
change in the law governing Brady violations. See
Ramirez v. United States, 2002 WL 31654982, at *4 (S.D.N.Y.
Nov. 21, 2002) ("A petitioner may only prove `cause' by successfully
asserting a change in the law or ineffective assistance of appellate
counsel." (citing, inter alia, Underwood v.
United States, 15 F.3d 16, 18(2d Cir. 1993); Barton v. United
States, 791 F.2d 265, 267 (2d Cir. 1986) (per curiam))). Since
McCarthy's conviction, however, there has been no change in
Brady law that could establish "cause." Moreover, McCarthy has
not claimed and there is nothing to suggest that Brown's representation
was deficient in any way or
that Brown acted unreasonably in not presenting McCarthy's
Brady claims to the Second Circuit. See
Strickland, 466 U.S. at 689 (a court must "indulge a strong
presumption that [appellate] counsel's conduct falls within the wide
range of reasonable professional assistance"). Thus, McCarthy has not
demonstrated "cause" for his failure to raise the Brady claims
on direct appeal to the Second Circuit. It is therefore unnecessary to
determine whether he could demonstrate prejudice.*fn2
In sum, because McCarthy never raised his Brady claims on
direct appeal to the Second Circuit, and because he has not demonstrated
either cause for the default or actual innocence, he may not now assert
his Brady claims in the instant petition. Accord
Mendez v. United States, 2002 WL 1402321, at *6 (S.D.N.Y. June
28, 2002) (petitioner's Brady claim was procedurally barred
because, inter alia, he failed to raise the issue on
direct appeal even though he was aware of it at that time).
B. McCarthy's Ineffective Assistance of Counsel Claims
McCarthy's remaining claims concern the alleged ineffectiveness of
Lind, McCarthy's trial counsel. Specifically, McCarthy alleges four
deficiencies in Lind's representation: (1) his failure to interview
Stephen Mayka, see Grounds at 1 (Ground 1); (2) his failure to
interview Kibrick, see id. at 2-3 (Ground 2); (3) his
failure to move for a new trial based on the "new" evidence supplied by
Kibrick, see id., at 4 (Ground 3); and (4) his
miscalculation of McCarthy's maximum sentence exposure at 48 months,
see id., at 8 (Ground 7). None of these claims was
raised on direct appeal to the Second Circuit. See
generally Def. App. Brief at 21-61. Nevertheless, claims of
ineffective assistance of counsel, even if not raised on direct appeal,
are reviewable in a petition under § 2255. See
Massaro, 123 S.Ct. at 1696. Each claim is discussed in turn.
1. Lind's Failure to Interview Mayka
McCarthy claims that Lind was deficient for failing to interview
Stephen Mayka, an attorney from the Official Committee of Unsecured
Creditors in the Chapter 11 bankruptcy proceeding for Discount Harry.
According to McCarthy, Mayka would have disclosed that he had told
McCarthy that it was permissible to "invest" the monies in the Discount
the trust fund account used for paying Discount Harry's creditors.
Thus, according to McCarthy, Mayka would have revealed that McCarthy did
not have the requisite intent to commit "fraud." See Grounds at
1 (Ground 1).
As with all ineffective assistance of counsel claims, a petitioner must
show deficient representation and prejudice resulting therefrom.
See, e.g., Strickland, 466 U.S. at 688. The
Court need not consider the issue of deficient representation, however,
because McCarthy has not shown that he was prejudiced by Lind's failure
to interview Mayka. See id. at 697 ("If it is easier
to dispose of an ineffectiveness claim on the ground of lack of
sufficient prejudice,. . . that course should be followed."). McCarthy
cannot demonstrate prejudice because he has not produced any evidence or
even alleged that Mayka would have testified at trial. "Courts have
viewed claims of ineffective assistance of counsel skeptically when the
only evidence of the import of a missing witness' testimony is from the
[petitioner]." Croney v. Scully, 1988 WL 69766, at *2 (E.D.N.Y.
June 13, 1988) (citation omitted), aff'd, 880 F.2d 1318 (2d
Cir. 1989), and thus have refused to entertain claims of ineffective
assistance for failure to interview a witness where the petitioner fails
to demonstrate that the witness would have testified at trial.
See, e.g., Stewart v. Nix, 31 F.3d 741, 744
(8th Cir. 1994) ("To prove prejudice from a trial attorney's failure to
investigate potential witnesses, a petitioner must show that the uncalled
witnesses would have testified at trial. . . ." (citing Lawrence v.
Armontrout, 900 F.2d 127, 130 (8th Cir. 1990), cert
denied, 513 U.S. 1161 (1995))): Alexander v. McCotter.
775 F.2d 595. 602 (5th Cir. 1985) ("In order for the appellant to
demonstrate the requisite Strickland prejudice, the appellant must show not
only that this testimony would have been favorable, but also that the
witness would have testified at trial." (citations omitted));
Pullman v. United States, 2001 WL
1640091, at *2 (D. Minn. June 7, 2001) (same); Nicholson v.
Cain, 1999 WL 681392, at *5 (E.D. La. Aug. 27, 1999) (same);
Cadavid v. United States, 1994 WL 22005, at *9 (D.N.J. Jan. 18)
(same), aff'd, 39 F.3d 1168 (3d Cir. 1994); Cronev,
1988 WL 69766, at *2 (same).
McCarthy has not produced any evidence, such as an affidavit from
Mayka, showing that Mayka would have testified at trial to what McCarthy
claims he would have. Moreover, he has not produced evidence that Mayka
would have testified at all. Thus, McCarthy has failed to demonstrate
that Lind's failure to interview Mayka prejudiced him.
2. Lind's Failure to Interview Kibrick
McCarthy claims that Lind was ineffective because he failed to
interview Janet Kibrick, the Director of Personnel at Lloyd's from
September 1995 to February 1997. According to McCarthy, Kibrick would
have testified that, contrary to Kelder's testimony at trial, Kelder knew
that Alliance was controlled by McCarthy when Kelder wired $300,000 on
January 26, 1995 from the Pension Plan Trust to the Alliance Account. In
addition, Kibrick would have disclosed that she heard Hickey tell
McCarthy and Kelder in a telephone conference in June 1995 that it was
legal to use monies from the Employee Benefit Plans to pay down the Fleet
Mortgage. Thus, according to McCarthy, Kibrick would have revealed that
McCarthy did not have the requisite intent to defraud and, if she
testified at trial, would have thrown into question the credibility of
Kelder, who testified that he did not believe the transaction was legal,
and the credibility of Hickey and O'Reilly, who each testified that they
did not advise McCarthy that the transaction was legal. Finally, Kibrick
allegedly would have disclosed the existence of Diane Caputo and John
Numchek, who, according to McCarthy, would have provided additional
information for McCarthy's defense. See Grounds at 2-3 (Ground
This claim must be rejected for the same reason as the claim made with
respect to Mayka: McCarthy has not submitted any evidence that Kibrick
actually would have testified at his trial. As previously noted, McCarthy
has submitted a portion of an affidavit from Kibrick. See
Kibrick 2003 Aff. But Kibrick does not state in that affidavit that she
would have been available and willing to testify at McCarthy's trial.
In addition, the claim must be rejected because Lind's decision not to
interview Kibrick did not represent ineffective assistance of counsel. In
her affidavit, Kibrick states that she observed Kelder fax "instructions
to [BNY] . . . requesting that State Mutual . . . wire transfer funds"
and that, after Kelder faxed these instructions, he stated, "Now
[McCarthy] could steal the money." Id. ¶¶ 1-2. In addition,
Kibrick states that she overheard Hickey tell McCarthy on June 10, 1995
that using the Employee Benefit Plans to pay off the Fleet Mortgage was
"okay." Id. ¶ 5. The remaining paragraphs of her affidavit
concern the fact that she told this information to prosecutors prior to
trial and that she knew Alliance was controlled by McCarthy.
See id. ¶¶ 3-4, 6. Notably, nothing in the
affidavit states that she knew that Numchek or Caputo had exculpatory or
other information that would have assisted McCarthy in his defense. In
fact, the affidavit makes no reference at all to Numchek or Caputo.
The "failure to call a witness for tactical reasons of trial strategy
does not satisfy the standard for ineffective assistance of counsel."
United States v. Eyman, 313 F.3d 741, 743 (2d Cir. 2002) (per
curiam) (citations omitted), cert. denied,
123 S.Ct. 1949 (2003); accord United States v. Best,
219 F.3d 192, 201 (2d Cir. 2000) ("[C]ounsel's decision as to whether to call
specific witnesses even ones that might offer exculpatory
evidence is ordinarily not viewed as a lapse in professional
representation." (internal quotation marks and citation omitted)),
denied, 532 U.S. 1007 (2001); United States v.
Nersesian, 824 F.2d 1294, 1321 (2d Cir.) ("The decision whether to
call any witnesses on behalf of the defendant, and if so which witnesses
to call, is a tactical decision of the sort engaged in by defense
attorneys in almost every trial."), cert. denied,
484 U.S. 958 (1987). This decision "fall[s] squarely within the ambit of
trial strategy, and, if reasonably made, will not constitute a basis for
an ineffective assistance claim." Nersesian, 824 F.2d at 1321.
While the choice whether or not to call a particular witness is a
strategic choice that is "virtually unchallengeable," counsel "has a duty
to make reasonable investigations or to make a reasonable decision that
makes particular investigations unnecessary." Strickland, 466
U.S. at 690-91. Thus, "no lawyer could make a `strategic' decision not to
interview witnesses thoroughly, because such preparation is necessary in
order to know whether the testimony they could provide would help or
hinder his client's case, and thus is [a] prerequisite to making any
strategic decisions at all." Newton v. Coombe, 2001 WL 799846,
at *5 (S.D.N.Y. July 13, 2001); see also Griffin
v. Warden. Md. Corr. Adjustment Ctr., 970 F.2d 1355, 1358 (4th Cir.
1992) ("An attorney's failure to present available exculpatory evidence
is ordinarily deficient, unless some cogent tactical or other
consideration justified it." (internal quotation marks and citation
omitted)). Thus, if Lind knew that Kibrick potentially had material
favorable to McCarthy's defense and failed to investigate what evidence
she may have been able to offer at trial, his representation of McCarthy
would have been deficient.
Lind has submitted to this Court an affidavit indicating his reasons
for not interviewing Kibrick and for not calling her as a witness at
McCarthy's trial. See Lind Aff. ¶¶ 9-30. According to Lind,
McCarthy told him about Kibrick in July or August 1999 and said that "the
gist of [Kibrick's] testimony would be along the lines of an
affidavit [Kibrick] had executed in March 1996," which Lind attached to
his affidavit. Id. ¶ 9; see Kibrick 1996 Aff. In
Kibrick's March 1996 affidavit, she states that she overheard McCarthy
ask Mr. Lloyd if he understood that the monies in the Employee Benefit
Plans were going to be used to pay down the Fleet Mortgage, to which Mr.
Lloyd responded, "I know, you have to, Bob." Kibrick 1996 Aff. ¶ 4.
She also states that "[t]his conversation was consistent with other
conversations I had heard at the company prior to that date" and that she
knew that Mr. Lloyd and Kelder were aware that the Employee Benefit Plans
were being used "for Company purposes." Id. ¶¶ 5-6.
According to Lind, he believed that most of the contents of Kibrick's
1996 affidavit would be cumulative and inadmissible hearsay at trial.
See Lind Aff. ¶¶ 10, 12-16; accord AUSA Ltr. at 3
("[Kibrick's] alleged marginally relevant testimony would have been
inadmissible at trial as a prior inconsistent statement that does not fit
within any exception to the hearsay rules."). Additionally, "after
investigation, [Lind] perceived potentially troubling drawbacks to
[Kibrick's] credibility." Lind Aff. ¶ 17. First, Lind learned that
Kibrick had maintained the financial records for Med-Ox while she was a
Lloyd's employee. Id. ¶ 19. According to Lind, Kibrick's
"involvement with Med-Ox drastically undercut whatever limited usefulness
she might have had as a witness, since it could have served to undermine
a central theme of [McCarthy's] case, namely that McCarthy had not
personally profited from" the $300,000 wire transfer on January
26, 1995 from the Pension Plan Trust to the Alliance Account.
Id. ¶ 20. Second, Lind "also found disconcerting the fact
that [Kibrick] was promoted almost immediately following the [closing on
the Fleet Mortgage]" and "thought a jury might perceive this as a reward
to [Kibrick] for acting as a spy for McCarthy in his battle to gain
Lloyd's. Id. ¶ 21. Third, Lind "found it a little too
convenient for [Kibrick] to have overheard all of the matters which she
claimed to have heard" in her 1996 affidavit, which he considered
"contrived." Id.; accord AUSA Ltr. at 2 n.2
(Kibrick's "current recollection of the conversation that she overheard
in 1996 is dramatically different from what she told both the Government
and the defense in 1996."). Finally, Lind "was also troubled by the fact
that, upon information and belief, [Kibrick] was fired at the same time
as was McCarthy" and felt that "a jury might well believe that she might
have had a number of motives to testify favorably to McCarthy, including
retribution and financial reward." Lind Aff. ¶ 22. In sum, Lind
believed that "the limited potential utility of [Kibrick's] testimony was
far outweighed by its drawbacks" and therefore "decided not to call her
at trial." Id. ¶ 23.
McCarthy has responded to Lind's affidavit. See McCarthy Ltr.
II. In his response, McCarthy indicates (1) that Lind "does not indicate
in his affadavit [sic] that he spoke with [Kibrick] at any time prior to
the completion of the trial," (2) that "Lind claims that he did an
investigation which didn't even include talking to Kibrick," (3) that,
were Lind to have interviewed Kibrick, he would have learned that Med-Ox
was to be merged into Lloyd's, and (4) that because Lloyd's Board of
Directors consisted of Hickey, O'Reilly, Kelder, and Mr. Lloyd, the fact
that Kibrick was fired on the same day as McCarthy would have been
"consistent with a cohesive defense strategy." Id. at 1-2.
After considering the above submissions, this Court cannot say that
Lind acted unreasonably in not interviewing Kibrick prior to trial, nor
that McCarthy has overcome "the presumption that, under the
circumstances, the challenged action might be considered sound trial
strategy," Strickland, 466 U.S. at 689 (internal quotation
marks and citation omitted). None of
the statements in McCarthy's response to Lind's affidavit suggest
that McCarthy was not himself aware of the information Kibrick
purportedly would have offered. Although Lind did not actually interview
Kibrick, effective representation does not necessarily entail an
interview of all individuals whom an attorney might know have knowledge
of a relevant fact.
[S]trategic choices made after less than complete
investigation are reasonable precisely to the
extent that reasonable professional judgments
support the limitations on investigation. In other
words, counsel has a duty to make reasonable
investigations or to make a reasonable
decision that makes particular investigations
unnecessary. In any ineffectiveness case, a
particular decision not to investigate must be
directly assessed for reasonableness in all the
circumstances, applying a heavy measure of
deference to counsel's judgments.
Id. at 690-91 (emphasis added); accord United
States v. Vargas, 920 F.2d 167
, 170 (2d Cir. 1990) (affidavit from
co-defendant who allegedly should have been called to testify at trial,
and which stated "in conclusory fashion that [defendant] had no knowledge
of [co-defendant's] drug-related activities," did not indicate that "the
decision not to call [co-defendant] as a defense witness at [defendant's]
trial was unreasonable"), cert. denied, 502 U.S. 826
In his submissions to this Court, McCarthy cites in support of his
claim Pavel v. Hollins, 261 F.3d 210 (2d Cir. 2001).
See McCarthy Ltr. I at 7-8. In Pavel, a child sexual
abuse case, the Second Circuit had before it an affidavit from trial
counsel indicating his reasons for not calling any witnesses at trial
other than the defendant, who was claiming in his petition for writ of
habeas corpus under 28 U.S.C. § 2254 that counsel's representation at
trial was deficient. 261 F.3d at 212. In that affidavit, counsel
indicated the following:
Prior to [trial], I concluded that the State's
case was without merit because I felt that the
medical evidence was insufficient to sustain a
conviction. As a result, I did not prepare a
defense for [the defendant], believing instead
that a motion to dismiss the State's case at the
close of its evidence in chief would be granted by
Id. at 212 n.2. In fact, the motion was denied by the
trial judge and counsel "had not prepared for this eventuality."
Id. at 212.
The court found that counsel's representation was constitutionally
deficient. Counsel "decided not to prepare a defense for [the defendant]
solely because he was confident that, at the close of the prosecution's
presentation of its evidence, the trial judge would grant [his] motion to
dismiss the government's charges against [the defendant]. That [counsel]
opted not to prepare a defense based entirely on this rationale militates
strongly in favor of the conclusion that his representation of [the
defendant] was constitutionally deficient." Id. at 216;
accord id. at 217-18 (counsel's decision not to call
two fact witnesses at trial was motivated "solely because he believed
that the motion to dismiss would be granted" and "by a desire to save
himself labor to avoid preparing a defense that might ultimately
prove unnecessary"). In addition, that counsel had decided not to
interview a medical expert to rebut the prosecution's physical evidence
of abuse also favored a finding of ineffective assistance. Id.
at 223-25. The court indicated that, because "of the `vagaries of [child]
abuse indicia,' such pre-trial investigation and analysis . . . generally
require[s] some consultation with an expert." Id. at 224
(quoting Lindstadt v. Keane, 239 F.3d 191, 201 (2d Cir. 2001)).
Counsel did not have "the education or experience necessary to assess
relevant physical evidence, and to make for himself a reasonable,
informed determination as to whether an expert should be consulted or
called to the stand." Id.
Here, McCarthy does not allege nor is there any indication that Lind
did not prepare any defense for trial or that the reason he decided not
to interview Kibrick was because he pinned McCarthy's acquittal on the
wholly speculative belief that he would win the case on other grounds.
Indeed, Lind's affidavit reveals that, after learning of Kibrick and of
the substance of
her potential testimony, he conducted an investigation and
determined that whatever information she could have offered at trial was
outweighed by what his investigation revealed to be a lack of
credibility. See generally Lind Aff. ¶¶ 17-23.
McCarthy's case ultimately depended upon the jury's positive evaluation
of his credibility. Lind's determination, after investigation, that
Kibrick's perceived bias and lack of credibility could have damaged
McCarthy's case was not unreasonable under the circumstances. In other
words, Lind could have reasonably determined that, no matter what Kibrick
would have said in an interview, the statements in her 1996 affidavit,
combined with her prior connection to McCarthy, rendered any exculpatory
testimony she had to offer useless. Finally, unlike the situation in
Pavel, no such specialized experience or education was
necessary to make this determination. In a situation such as Lind was
faced with here, counsel may make a reasonable assessment of credibility
based on extrinsic information and without necessarily conducting an
Judging this matter from Lind's perspective at the time of trial, and
in light of the "highly deferential" nature of this Court's review,
Bell, 535 U.S. at 698 (citing Strickland, 466 U.S. at
689), Lind's determination that interviewing Kibrick was unnecessary was
not an unreasonable one. Because the Court concludes that Lind acted
reasonably, we need not consider whether McCarthy was prejudiced,
i.e., whether there is a reasonable probability that the
outcome of the trial would have been different in light of Kibrick's
proffered testimony, see Strickland, 466 U.S. at 694.
Accordingly, the Court finds that Lind was not ineffective for failing
to interview Kibrick.
3. Lind's Failure to Move for a New Trial
McCarthy claims that Lind was ineffective for failing to move for a new
trial based on the "new" evidence supplied by Kibrick concerning an
alleged telephone conference in June 1995, in which she allegedly heard
Hickey tell McCarthy and Kelder that it was legal to use monies from the
Employee Benefit Plans to pay down the Fleet Mortgage. See
Grounds at 4 (Ground 3). McCarthy claims that Kibrick "reminded" him of
the telephone conference within seven days following the verdict and
that, after relaying this information to Lind, Lind stated, "I will not
shoot myself in the foot," and refused to bring it to Judge Parker's
attention. Id. While Lind denies that such a conversation ever
took place, see Lind Ltr. at 2, it is not necessary to resolve
this factual dispute in deciding McCarthy's claim.
The Federal Rules of Criminal Procedure provide that a "court may
vacate any judgment and grant a new trial if the interest of justice so
requires." Fed.R.Crim.P. 33(a). If the motion is grounded on the
discovery of "new" evidence, a defendant must file the motion within
three years of the verdict. Fed.R.Crim.P. 33(b)(1). "Relief is
justified under rule 33 if the defendant makes a showing that the
evidence is in fact `new', i.e., it could not have been
discovered, exercising due diligence, before or during trial."
United States v. Siddiqi, 959 F.2d 1167, 1173 (2d Cir. 1992)
(citations omitted): accord United States v. Gallego,
191 F.3d 156, 161 (2d Cir. 1999), cert, denied,
530 U.S. 1216 (2000); United States v. Moore, 54 F.3d 92, 99 (2d
Cir. 1995), cert. denied, 516 U.S. 1081 (1996).
Additionally, granting a motion for a new trial based on "new" evidence
is generally disfavored. See, e.g.,
Spencer, 4 F.3d at 118 ("[A] district court must exercise great
caution in determining whether to grant a retrial on the ground of newly
discovered evidence, and may grant the motion only in the most
extraordinary circumstances." (internal quotation marks and citation
As discussed above in footnote 2 (section III.A), the testimony Kibrick
allegedly would have provided cannot be considered "new" within the
meaning of Rule 33. McCarthy has failed to rebut Lind's statements that
McCarthy had informed Lind of Kibrick prior to trial and that "the gist
of her testimony would be along the lines of an affidavit [she] had
executed in March 1996," Lind Aff. ¶ 9. Furthermore, as a participant
in the alleged telephone conference, McCarthy certainly knew of the
contents of the conversation prior to trial. Thus, it cannot be said that
Kibrick's testimony "could not have been discovered, exercising due
diligence[,] before or during trial," Spencer, 4 F.3d at 119.
Because this evidence could not have been grounds for a Rule 33 motion
for a new trial, Lind was not ineffective for failing to move for one
based on it.
4. Lind's Failure to Correctly Calculate McCarthy's Sentence
McCarthy's final ground alleges that Lind was ineffective for
miscalculating McCarthy's maximum sentence exposure at 48 months.
See Grounds at 8 (Ground 7). According to McCarthy, because of
Lind's calculation "there was no particular reason to accept" the
prosecution's plea bargain offered on the eve of trial of 30 to 36 months
imprisonment. Id. McCarthy was subsequently sentenced to 78
months imprisonment, (Sentencing Tr. 37), which was affirmed on appeal,
see McCarthy, 271 F.3d at 402.
Lind has responded to McCarthy's allegations. See Lind Aff.
¶¶ 31-39. Lind first states that "McCarthy's recollection on this
issue is faulty." Id. ¶ 31. According to Lind, he told
McCarthy that, pursuant to United States Sentencing Guidelines, his
sentence could range from 33 to 97 months, depending on Judge Parker's
resolution of certain disputed factors. See id.
¶¶ 32-38. Lind states that he has "no recollection [of telling]
McCarthy that his maximum exposure [would be] a flat 48 months."
Id. ¶ 38.
The Second Circuit has indicated that an attorney who "grossly
underestimat[es]" a client's sentence exposure "breach[es] his duty as a
defense lawyer in a criminal case to advise his client fully on whether a
particular plea to a charge appears desirable." Gordon, 156
F.3d at 380 (internal quotation marks and citation omitted). The reason
for this is that "[k]nowledge of the comparative sentence exposure
between standing trial and accepting a plea offer will often be crucial
to the decision whether to plead guilty." Id. (internal
quotation marks and citation omitted). Thus, if McCarthy's allegations
were true and Lind grossly underestimated McCarthy's sentence exposure,
Lind's representation would have fallen "below the prevailing
professional norms for advising a client during plea negotiations of his
maximum exposure to imprisonment at sentencing," id. (internal
quotation marks and citation omitted).
The Court need not resolve this factual dispute, however, because
McCarthy has not demonstrated that but for Lind's alleged error he would
have pled guilty. The Second Circuit has made clear that a claim of the
kind McCarthy makes lacks merit if the petitioner fails to show that, had
the attorney correctly estimated his sentence exposure, he would have
accepted the plea offer. See, e.g., Aeid v.
Bennett, 296 F.3d 58, 64 (2d Cir.), cert.
denied, 537 U.S. 1093 (2002); accord Smith v.
McGinnis, 2003 WL 21488090, at *4 (S.D.N.Y. June 25, 2003) ("To
succeed on his claim, petitioner . . . must affirmatively demonstrate
prejudice by showing a reasonable probability that, but for his counsel's
failure to advise him of the desirability of taking [the plea offer],
petitioner would have accepted the offer." (internal quotation marks and
In Purdv v. Zeldes, 337 F.3d 253, 260 (2d Cir. 2003), the
Second Circuit clarified that a petitioner need not affirmatively present
"objective evidence" that he would have accepted a plea and may simply
rely on his own unsubstantiated testimony. See also
id. at 259 (discussing a court's "responsibility to actually
make a credibility finding in each case, even absent objective evidence,"
but noting that "in most circumstances a convicted felon's self-serving
testimony is not likely to be credible"). But while a petitioner need not
present independent, "objective evidence" that he would have accepted the
plea, he must nonetheless still aver that he would have accepted it. In
rejecting an ineffective assistance claim, Aeid noted that the
never asserted that he would have accepted an
offer of 7 1/2 to 15 years of imprisonment. This
is a critical omission in light of Hill v.
Lockhart, [474 U.S. 52, 60 (1985)], in which
the United States Supreme Court held that the
defendant had failed adequately to allege
prejudice where he had failed to "allege in his
habeas petition that, had counsel correctly
informed him about his parole eligibility date, he
would have not pleaded guilty and [would have]
insisted on going to trial." Thus, while [the
petitioner in Hill] accepted a plea
bargain and [the petitioner in this case] rejected
one, both claims suffer from the same defect:
failure to allege that correct advice from defense
counsel would have altered the defendant's
296 F.3d at 64; see also Smith, 2003 WL
21488090, at *4 (denying petition because, "[e]ven if I accepted
petitioner's claim that his counsel failed to advise him of the
desirability of the 2 to 4 year plea offer, I find little evidence that
had he been advised, there was a reasonable probability that he would
have accepted the plea when it was offered").
McCarthy has offered several submissions to this Court in support of
his petition. Nowhere in these submissions, however, does McCarthy state
that had Lind properly calculated his sentence exposure he would have
accepted the offered plea. At most, McCarthy states merely that "since
[Lind] calculated my sentence exposure to be four years (48 months) there
particular reason to accept [the Government's] offer," Grounds at 8
(Ground 7), and that "[c]ourts have long recognized that guilty pleas are
sometimes entered by innocent people to avoid cost and reduce jail time
when their defense is not provable," McCarthy Ltr. II at 2. Neither of
these statements shows, however, that McCarthy would have accepted a
Moreover, any such statement now would be unworthy of credence for at
least two reasons. First, Lind has stated that McCarthy "wanted to have
his day in court," "insisted on telling his version of events," and
"adamantly rejected any and all plea offers from the Government." Lind
Aff. ¶ 39. Although McCarthy responded to Lind's affidavit,
see McCarthy Ltr. II, he did not refute or otherwise question
Second, McCarthy's continued protestations of innocence in the face of
a guilty verdict would undercut any claim that he would have entered into
a plea of guilty. See, e.g., Custodio v. United
States, 945 F. Supp. 575, 579 (S.D.N.Y. 1996) ("[Petitioner]
continues to maintain his innocence. . . . In the face of that assertion,
his belated claim that he would have pleaded guilty is frivolous."
(citations omitted)); Keats v. United States, 856 F. Supp. 162,
166 (S.D.N.Y. 1994) ("In the face of [petitioner's] assertions [of
innocence] his belated claim that he would have pleaded guilty lacks any
semblance of credibility."), aff'd, 50 F.3d 3 (2d Cir. 1995);
see also Scire v. United States, 1997 WL
138991, at *12 (E.D.N.Y. Mar. 24, 1997) ("[Petitioner] asserts that he is
not guilty of the crimes of which he was convicted. Therefore,
[petitioner] fails entirely to demonstrate that he would have accepted a
plea offer."). McCarthy's papers are replete with such claims of
innocence. See, e.g., Grounds at 1 (Ground 1) ("I
thought I was acting legally and . . . I did not have any intent to
commit fraud."); id., at 3 (Ground 2) ("I did not believe I was
acting either illegally or recklessly. There was no intent to defraud on
my part."); Specific
Factual Allegations with Trial Transcript References, dated July
15, 2003 (reproduced as Ex. A to McCarthy Ltr. I), at 1 ("McCarthy
maintains that during the events leading to his convictions that he was
acting under the advice of Counsel at all times.").
In sum, even if the Court were to accept the assertion that Lind
grossly underestimated McCarthy's sentence exposure, McCarthy has not
demonstrated that he was prejudiced by it.
Because the record of the case, including the submissions during the
pendency of this petition, conclusively shows that all of McCarthy's
claims are meritless, no evidentiary hearing is required. McCarthy's
petition should be denied.
PROCEDURE FOR FILING OBJECTIONS TO THIS
REPORT AND RECOMMENDATION
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal
Rules of Civil Procedure, the parties have ten (10) days from service of
this Report and Recommendation to file any objections. See
also Fed.R.Civ.P. 6(a), (e). Such objections (and any
responses to objections) shall be filed with the Clerk of the Court, with
copies sent to the Hon. Lewis A. Kaplan, 500 Pearl Street, New York, New
York 10007, and to the undersigned at 40 Centre Street, New York, New
York 10007. Any request for an extension of time to file objections must
be directed to Judge Kaplan. If a party fails to file timely objections,
that party will not be permitted to raise any objections to this Report
and Recommendation on appeal. See Thomas v. Arn,
474 U.S. 140