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Contreras v. United States

April 30, 2009

CARLOS CONTRERAS, PETITIONER,
v.
UNITED STATES, RESPONDENT.



REPORT AND RECOMMENDATION

TO THE HONORABLE JED S. RAKOFF, U.S.D.J.

Carlos Contreras moves pursuant to 28 U.S.C. § 2255 to vacate his sentence for one count of conspiracy to defraud the government and for seventeen counts of aiding and abetting the filing of fraudulent income tax returns. In his petition, Mr. Contreras argues that he was denied the effective assistance of counsel at trial. For the reasons that follow, I recommend that the motion be denied.

Background

Mr. Contreras owned and operated an income tax preparation business called Great American Income Tax ("Great American") in the Bronx. (Trial Transcript ("Trial Tr.") at 36, 539, 541). For the tax years 1999, 2000, and 2001, Mr. Contreras and Great American filed thousands of income tax returns on behalf of clients (Trial Tr. at 48), many of whom worked for hourly wages as laborers or as restaurant wait staff and lacked even a basic understanding of tax law. (Trial Tr. at 131-32, 193-95, 351-53, 406-08, 474-76; Letter of Reed M. Brodsky dated May 19, 2008 ("Brodsky Letter") at 6-9). More than 90% of these returns generated refund payments for claimed deductions (Trial Tr. at 48-49, 526); these refunds were typically worth thousands of dollars. (Trial Tr. at 543, 586).

Business was booming in December 2004 when Mr. Contreras was indicted. (Trial Tr. at 85, 196-97, 202, 359, 640; Brodsky Letter at 1). He was charged with one count of conspiracy to defraud the government by using false identities to file tax returns and with twenty-four counts of aiding and abetting the filing of fraudulent income tax returns, both federal offenses. (Brodsky Letter at 1). In June 2005, he was tried before a jury in the Southern District of New York, with the Honorable Jed S. Rakoff presiding. (Brodsky Letter at 2).

Thirteen witnesses testified for the government during the five-day trial, including nine former Great American clients, five of whom had their taxes prepared by Mr. Contreras personally. Each taxpayer-client testified that, although he or she provided accurate information to Mr. Contreras and to Great American, the deductions ultimately claimed were either inflated or completely fabricated. (Trial Tr. at 623-30; Brodsky Letter at 6-9). Testimony also established that the taxpayer-clients were, at the time of filing, either unaware of what appeared on their tax returns (i.e., they signed their return without reviewing it) or were reassured by Great American that its refund-claiming practices were legitimate. (Trial Tr. at 88, 166, 184-85, 197, 288-92, 309, 339, 388-90, 422-23, 439-40, 479, 500; see also Brodsky Letter at 6-9).

In addition, Dominga Pena, a former Great American employee, testified that under Mr. Contreras' direction and supervision she and other employees routinely falsified deductions in order to obtain large refunds for Great American clients. (Trial Tr. at 583-86). Maria Elena Brito, a Dominican woman whom Mr. Contreras once employed as his children's babysitter, also testified. (Trial Tr. at 527, 529). Although Ms. Brito was never employed by Great American and lost contact with Mr. Contreras after 1998 (Trial Tr. at 536), her name and signature frequently appeared on forms filed electronically by Mr. Contreras and Great American after that date.*fn1 (Trial Tr. at 529-36, 634-35).

The government offered forty-four exhibits, including tax returns filed by Great American, showing large deductions for expenses that were incongruous with the particular taxpayer-client's job and income. (Trial Tr. at 625-26; Brodsky Letter at 3). Documentary evidence also showed that Mr. Contreras used multiple identities, including Ms. Brito's, to access the IRS electronic filing system. (Trial Tr. a 529-32, 634-36; Brodsky Letter at 4-5).

At trial, Mr. Contreras was represented by Luis Diaz and Warren Meth, both privately retained. The defendant sought to establish that he did not willfully falsify tax returns but rather relied in good faith upon the representations of his clients and employees. (Trial Tr. at 14-20, 641-68). The defendant neither testified nor called any witnesses on his behalf.

On June 27, 2008, Mr. Contreras was convicted of one count of conspiracy to defraud the government and of seventeen counts of aiding and abetting the filing of fraudulent income tax returns. (Trial Tr. at 710-13). After the verdict was rendered, defense counsel made an oral motion for a judgment of acquittal, which was denied. (Tr. at 715). They also sought Mr. Contreras' release pending sentencing; this request was denied as well. (Trial Tr. at 723).

Mr. Contreras was subsequently sentenced to sixty months of imprisonment, followed by three years of supervised release. (Sentencing Transcript dated Nov. 8, 2005 ("Sentencing Tr.") at 15). In addition, he was fined $15,000 and ordered to pay special assessments totaling $1,800. (Sentencing Tr. at 15). Finally, Mr. Contreras was ordered to pay restitution in the amount of $3,656,751, less any amount that the IRS recovers from the relevant taxpayers. (Sentencing Tr. at 16; Brodsky Letter at 2).*fn2

Mr. Contreras appealed this judgment to the Second Circuit. In a summary order dated September 18, 2007, that court held that there was sufficient evidence to support Mr. Contreras' conviction and that his sentence was reasonable. United States v. Contreras, 247 Fed. Appx. 293, 294-96 (2d Cir. 2007). Although Mr. Contreras argued that he was denied effective assistance of counsel, the Second Circuit determined that this claim was not fully developed on the record and thus declined to address it on the merits. Id. at 296.

On February 28, 2008, Mr. Contreras filed the instant motion to vacate his sentence on the grounds that he was denied the effective assistance of counsel at trial. He specifically alleges that his attorneys (1) refused to afford him an opportunity to testify; (2) refused to call any defense witnesses; (3) refused to introduce certain relevant business records; (4) stipulated, without his consent, that the tax loss sustained by the government was material, resulting in the preclusion of Mr. Contreras' expert witness; and (5) failed to provide him with the discovery materials. (Petition at 5; Affidavit of Carlos Contreras dated Dec. 11, 2007 ("Contreras Aff."), ¶¶ 5-7, 9).

On February 25 and March 25, 2009, I held an evidentiary hearing on the petitioner's ineffective assistance of counsel claim. Mr. Contreras, represented by B. Alan Seidler, testified on his own behalf, and Mr. Diaz and Mr. Meth, Mr. Contreras' trial counsel, also testified. I accepted ...


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