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United States v. Benacquista

June 9, 2008

UNITED STATES OF AMERICA,
v.
KIM BENACQUISTA, RAYMOND BENACQUISTA, DEFENDANTS.



The opinion of the court was delivered by: Hon. Hugh B. Scott

Order

Before the Court is the Government's motion to disqualify defense counsel Gary Borek due to an actual or potential conflict of interest with defendant Kim Benacquista (hereinafter "Defendant") (Docket No. 6*fn1 ). After granting an extension of time (Docket No. 8), defense response was due by May 15, 2008, and this motion was argued on May 29, 2008 (id.), and the motion was deemed submitted on May 29, 2008. Other pretrial matters in this case were stayed pending resolution of this motion and the issue of Defendant's representation.

BACKGROUND

Indictment

The Indictment in this case charged Defendant with two counts of willfully making a false statement with regard to their income taxes, in violation of I.R.C. § 7206(1), and charged both defendants with one count of conspiring to defraud the United States, in violation of 18 U.S.C. § 371, by under-reporting the total sales of defendants' business on their tax returns for tax years 1993-2002 (Docket No. 1, Indictment; Docket No. 6, Gov't Atty. Aff. ¶¶ 6-7). Both defendants were arraigned on April 14, 2008, where the potential conflict issue was first noted (text minute entry Apr. 14, 2008). Borek states that he represents defendant Kim Benacquista (see Docket No. 9, ¶ 2)*fn2 .

Factual Background

During a civil tax audit in 2003 and the course of the criminal investigation leading to the Indictment herein, defendants executed powers of attorney for Borek (Docket No. 6, Gov't Atty. Aff. ¶ 8, n.1, Exs. B, C). As defendants' agent-in-fact, the Government contends that Borek made representations on defendants' behalf (id. ¶ 9). Borek responded to the civil auditor's queries and the Government now contends that his answers to two particular questions were false and will be used against defendants in their criminal trial (id. ¶¶ 10-13, Ex. D, Information Document Request of Sept. 12, 2003, questions 4, 5). Borek also provided a purported tax return for Defendant but that was not her actual return; the Government intends to use this at her trial (id. ¶¶ 14-15, Ex. E; see also id. ¶¶ 16, 17, Ex. G (amended return for 2002 with similar problem)). The Government concludes that Borek's actions furthered defendants' conspiracy to defraud the United States (id. ¶ 18). The Government urges that the Court engage in a Curcio review, see United States v. Curcio, 680 F.2d 881 (2d Cir. 1982), to determine whether an actual or potential conflict of interest exists between Borek and his client (id. ¶¶ 19-20). If the Court finds a conflict, the Government states that the next step is determining whether Defendant understands the nature of the conflict and whether she wishes nevertheless to retain her counsel. The Court may also find that the actual conflict is so severe that no rational client would waive it and the Court must disqualify counsel, see United States v. Kliti, 156 F.3d 150, 153 (2d Cir. 1998). (Id. ¶ 21.)

Borek denies that he was acting as an attorney in fact for defendants, but was acting as their attorney at law (Docket No. 9, Def. Response ¶¶ 4.1, 5-9), he merely furnished information to the Internal Revenue Service ("IRS") as counsel representing defendants before the IRS (id. ¶ 4.1). Borek appeared before the IRS, as indicated in its Form 2848, as an attorney at law, with that form constituting the equivalent of an admission certificate to practice before the Service (id. ¶ 5; see Docket No. 6, Gov't Atty. Aff. Exs. B, C, page 2). Borek denies that Form 2848 constitutes a general power of attorney (Docket No. 9, Def. Response ¶ 10.2) but that form allowed him to furnish his clients' information that otherwise could not be furnished under Treasury Regulations (id. ¶¶ 13-14). Defendant argues that the Government is precluded from calling Borek as a witness by the attorney-client and work product (see Hickman v. Taylor, 329 U.S. 495 (1947)) privileges (id. ¶ 16), see In re Grand Jury Subpoena Dated Oct. 22, 2001, 282 F.3d 156 (2d Cir. 2002).

The Government initially argues that Borek was attorney in fact for defendants (see Docket No. 6, Gov't Atty. Aff. ¶ 9). At oral argument, the Government concedes that Borek represented defendants as their attorney at law but the Government contends that its analysis is not changed by this fact.

DISCUSSION

This Court has "broad latitude in making a decision whether to disqualify a defendant's chosen counsel," United States v. Fulton, 5 F.3d 605, 614 (2d Cir. 1993) (citing Wheat v. United States, 486 U.S. 153, 163 (1988)). But this decision also creates a dilemma for the Court, as noted by the Circuit Court in Fulton, "if the judge disqualifies the attorney, the defendant may argue that he was unfairly denied the attorney of his choice; if the judge fails to so disqualify the attorney, the defendant may still contend that he was denied effective assistance of counsel," 5 F.3d at 614.

At oral argument, Borek denied that there was any ethical issue here in having him represent Defendant, resting upon his contention that he can not be called as a witness by the Government. But, as the Government notes, the conflict involved is the choice Defendant will have if Borek is called (or even if his role is referred to through the testimony of other witnesses and evidence). "The test for disqualifying counsel is whether counsel 'ought to be called' as a witness." Keoseian v. von Kaulbach, 707 F. Supp. 150, 154 (S.D.N.Y. 1989) (citing ABA Code of Professional Responsibility, DR 5-102). New York State Code of Professional Responsibility Disciplinary Rule 5-102(A) ("DR 5-102") provides that

"A lawyer shall not act, or accept employment that contemplates the lawyer's acting, as an advocate on issues of fact before any tribunal if the lawyer knows or it is obvious that the lawyer ought to be called as a witness on a significant issue on behalf of the ...


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