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United States of America v. Efrain Gonzalez

July 22, 2011


Appeal from a judgment of the United States District Court for the Southern District of New York, William H. Pauley III, Judge, convicting defendant, following his plea of guilty, of mail fraud, 18 U.S.C. § 1341, and conspiracy to commit mail fraud, federal-program fraud, and wire fraud, 18 U.S.C. § 371; sentencing him principally to 84 months' imprisonment; and ordering him to pay $122,775 in restitution.

The opinion of the court was delivered by: Kearse, Circuit Judge:


USA v. Gonzalez

Argued: April 11, 2011

Before: KEARSE, MINER, and CHIN, Circuit Judges.

Conviction and custodial sentence affirmed; restitution order vacated and remanded for further proceedings as to amount.

Defendant Efrain Gonzalez, Jr. ("Gonzalez"), a former Senator in the New York State Legislature, appeals from a judgment entered in the United States District Court for the Southern District of New York following his plea of guilty before William H. Pauley III, Judge, convicting him on two counts of mail fraud, in violation of 18 U.S.C. § 1341 (Counts 6 and 8 of the superseding indictment), one count of conspiracy to commit mail fraud and federal-program fraud, in violation of 18 U.S.C. § 371 (Count 2), and one count of conspiracy to commit mail fraud, federal-program fraud, and wire fraud, in violation of 18 U.S.C. § 371 (Count 3). Gonzalez was sentenced principally to 84 months' imprisonment, to be followed by a two-year term of supervised release, and was ordered to pay $122,775 in restitution. On appeal, he contends principally that the district court (1) abused its discretion in denying his motion to withdraw his guilty plea, (2) erred in calculating the imprisonment range recommended by the advisory Sentencing Guidelines ("Guidelines"), and (3) erred in ordering restitution without proof that the persons characterized by the government as victims were directly harmed by his offense conduct. For the reasons that follow, we vacate and remand with respect to the amount of the restitution order; in all other respects, we affirm.


The following description of the conduct underlying the present prosecution is drawn largely from the sentencing findings of the district court, adopting the facts described in the presentence report ("PSR"), to which there was no objection by Gonzalez, and from Gonzalez's statements under oath in pleading guilty to the above offenses.

A. The Mail Fraud and Conspiracy Offenses

Gonzalez was a member of the New York State Senate from 1990 through 2008, representing a district in the Bronx. During all or part of that period, the New York State ("State") Legislature ("Legislature") annually allocated $200 million to certain groups or projects for the public benefit ("public benefit funds"); of that annual total, elected members of the Senate were allowed to designate the recipients of $85 million.

Pathways for Youth, Inc. ("Pathways"), was a not-for-profit corporation founded with the stated purpose of helping to improve the lives of young people. From October 1999 through January 2005, Gonzalez caused the Legislature to provide more than $400,000 in public benefit funds to Pathways. Pathways also received funding from a number of federal agencies, including the United States Departments of Health and Human Services, Labor, Education, and Justice; between October 1999 and July 2004, the total amount of federal funding to Pathways exceeded $4 million.
West Bronx Neighborhood Association, Inc. ("West Bronx" or "WBNA"), was a not- for-profit corporation whose bylaws stated that it was organized to foster an interest in, inter alia, civic and community affairs and welfare, and to promote, inter alia, social and civic responsibility in the community. Gonzalez, having procured State funds for Pathways, caused Pathways to provide funding to West Bronx between 1999 and 2004.
The United Latin American Foundation, Inc. ("ULAF"), was a not-for-profit corporation whose certificate of incorporation stated that it was organized to, inter alia, raise funds for the benefit of residents of the Dominican Republic. Gonzalez caused Pathways to enter into consulting agreements with ULAF on ways to strengthen the quality of life for residents of the Bronx and northern Manhattan, with respect to, inter alia, housing and drug problems. ULAF too was a recipient of funds from Pathways.
1. Moneys From Pathways to West Bronx to Gonzalez West Bronx, despite the corporate purposes set out in its bylaws, did not engage in any substantial amount of not-for-profit activity. Instead, WBNA funds were used to pay personal expenses of Gonzalez. Gonzalez was an honorary member of WBNA's board; WBNA's office adjoined Gonzalez's District Office in the Bronx; the two offices shared a common door; and Gonzalez placed members of his Senate staff in key operating positions at WBNA.

From October 1999 through January 2005, Gonzalez had the Legislature provide Pathways with $423,000 in funding. From October 1999 through July 2004, Gonzalez caused Pathways to make payments to WBNA totaling $462,500. From about March 1999 through about May 2006, WBNA funds were used to pay more than $400,000 of Gonzalez's personal bills, funding, inter alia, his membership in a vacation club in the Dominican Republic, his rental of a luxury apartment in the Dominican Republic for his wife, his rental of a summer residence in Monroe, New York, college tuition for his daughter, and his purchases of jewelry, apparel, and premium New York Yankees baseball tickets.

2. Moneys From Pathways to ULAF to Gonzalez

ULAF, having entered into consulting agreements with Pathways, proceeded to send Pathways reports describing work purportedly done by ULAF personnel on behalf of Pathways. Pathways in 2003 paid ULAF a total of $152,500 for the services described. In fact, ULAF had not performed any substantial work in connection with the contracts; it used funds it received from Pathways to pay personal expenses of Gonzalez and others. Miguel Castanos, a former Gonzalez Senate staff employee and an indicted coconspirator in the present case, was installed as ULAF's president; ULAF's business address was Castanos's home address. Other coconspirators became signatories on ULAF's checking account and made payments to Castanos, to creditors of Gonzalez, and to creditors of one of Gonzalez's companies.
3. The Superseding Indictment and Proceedings Toward Trial Gonzalez was arrested in August 2006. A 10-count superseding indictment filed in December 2006 named him in nine counts. He was charged with substantive counts of federal- program fraud and mail fraud with regard to West Bronx (Counts 5 and 6) and substantive counts of federal-program fraud, mail fraud, and wire fraud with regard to ULAF (Counts 7-9); Gonzalez and various co-defendants were charged with conspiracy to commit mail and federal-program fraud with respect to West Bronx (Count 2) and conspiracy to commit mail, wire, and federal-program fraud with respect to ULAF (Count 3). Gonzalez was also charged with defrauding New York citizens of his honest services (Count 1), and money laundering conspiracy (Count 4). Each of the defendants initially pleaded not guilty.

Extensive discovery followed, and, principally for that reason, there were repeated adjournments of the date for trial. Eventually, trial was scheduled for May 4, 2009. In mid-April 2009, Gonzalez's attorney, Murray Richman, asked the district court to, inter alia, postpone the start of trial for one week and to allow Gonzalez to change attorneys. At the ensuing conference with the court, Richman stated as follows:

I know it is late in the game and I hesitate even making this application, but I believe that Mr. Gonzalez is entitled to a trial that he feels he is entitled to. I have been involved in this case from the very beginning. There has been a complete divergence of views on how to handle this case in terms of what the evidence shows, what it doesn't show, how to handle the case. ..

[A]fter his . . . non-election . . . communications seemed to break down.

We have met two times in the last couple of months in order to try to prepare for this case in order to get ready, and we have a different view as to what this evidence is, what the case shows, what counsel can do.

I am in no way impugning my client's integrity. I think it is just an honest breakdown in how a case can be handled. He is of the opinion that there is one course of conduct that can be taken and that establishes his non- guilt. And I am of the opinion that, frankly speaking, that it does not. So we are at a divergence. We can't communicate and we have not communicated and it is difficult to defend him personally under those circumstances.

My concern is that I don't want to throw the weight on him. It is easy to do that and it would not be fair, but we are just not getting this thing done.

I recognize, your Honor, this case is an old case and, at this stage, it should have been tried months ago, years ago or whatever. But I am at that position where, if I go forward, I believe that I am involved in an ethical problem.

(Conference Transcript, April 24, 2009 ("Apr. 24, 2009 Conf.Tr."), at 2-4.)

The court rejected the suggestion that the disagreements Richman described between himself and Gonzalez constituted a sufficient basis for a change of attorneys so shortly before trial. (See id. at 5 ("Mr. Richman, you are a highly experienced and well qualified lawyer. I am sure that there are any number of clients with whom you have had a disagreement over the years about how to approach a case.").) Noting that the May 4, 2009 trial date had been set on October 15, 2008, "after many, many extended adjournments," the court said, "You cannot wait until the eve of trial to report to the Court that you are having a difficulty with your client, especially when you know exactly what the landscape of this case is." (Id.) The court stated:

We are going to go to trial, and I am not going to relieve you as counsel in the case.

If Mr. Gonzalez wants a trial, he will have one. I will endeavor to make sure that it is as fair a trial as possible, but I am not going to relieve you as counsel in this case because we are going to trial, and there is absolutely nothing to indicate that any other lawyer is going to do anything differently than what you have done up to this point in time. (Id.)

The court also addressed Gonzalez directly:

Mr. Gonzalez, are you able to work with your lawyer?

DEFENDANT GONZALEZ: At this time, no, your Honor.

THE COURT: Well, when did that happen?

DEFENDANT GONZALEZ: It happened a couple of months.

THE COURT: Well, I will tell you what. You better start visiting his office and getting ready for trial because this appears to be nothing more than an effort to once again delay this trial for months. I can't be any clearer. Do you understand?

Mr. Gonzalez, the reporter cannot take the nod of a head.

DEFENDANT GONZALEZ: Yes, I understand, your Honor.

(Id. at 5-6.)

Richman had also asked the court to move the start of trial from May 4 to May 11. Richman and the government concurred that the trial would be shorter than had originally been 3 anticipated because there would be two fewer defendants (see id. at 7-8)--a reference to the fact that 4 less than a month earlier two of Gonzalez's co-defendants, Castanos and the executive director of 5 Pathways, had entered guilty pleas. The court granted the adjournment request; and, after discussing 6 its planned daily schedule for trial, the court asked Gonzalez whether he would work with Richman; 7 Gonzalez answered, "Yes, your Honor" (id. at 10).

8 B. Gonzalez's Plea of Guilty

9 On May 7, 2009, the government sent Gonzalez an advisory letter in accordance with 10 the suggestion in United States v. Pimentel, 932 F.2d 1029, 1034 (2d Cir. 1991) ("Pimentel letter"), 11 stating the government's view of the likely advisory Guidelines sentencing range for Gonzalez on 12 Counts 2, 3, 6, and 8 of the superseding indictment if Gonzalez were to plead guilty to, and give an 13 appropriate allocution on, those counts. The letter stated that, on the basis of the information then 14 available to the government, the Guidelines-recommended range of imprisonment would be 87-108 15 months.

16 On May 8, Gonzalez, "pursuant to [the] Pimentel letter" (Plea Hearing Transcript, May 17 8, 2009 ("May 2009 Plea Tr."), at 2), moved to withdraw his plea of not guilty and to plead guilty to 18 Counts 2, 3, 6, and 8. Under oath, Gonzalez stated his desire to plead guilty and stated that he was 19 satisfied with Richman's representation of him:

20 THE COURT: Now, Mr. Gonzalez, your attorney has informed me 21 that you wish to enter a plea of guilty. Do you wish to enter a plea of guilty?

THE DEFENDANT: Yes, your Honor.

1 THE COURT: Have you had a full opportunity to discuss your case 2 with your attorney and to discuss the consequences of entering a plea of 3 guilty?

4 THE DEFENDANT: Yes, your Honor.

5 THE COURT: Are you satisfied with your attorney, Mr. Richman, and his representation of you in connection with this matter?

THE DEFENDANT: Yes, your Honor.

(May 2009 Plea Tr. 5-6.)

The court found: "On the basis of Mr. Gonzalez's responses to my questions and my observations of his demeanor here in my courtroom this afternoon, . . . he's fully competent to enter an informed plea at this time." (Id. at 6.) The court then told Gonzalez that it would describe the 12 constitutional and other rights he would give up by pleading guilty and that the court would ask him 13 questions that were designed to satisfy the court "that you wish to plead guilty because you are guilty 14 and that you fully understand the consequences of your plea"; Gonzalez said he understood. (Id. 15 at 6-7.) After hearing the explanations of those rights, the elements of counts 2, 3, 6, and 8, the 16 maximum possible penalty for each of those counts, and the fact that the sentence to be imposed on 17 him could not yet be determined, Gonzalez said he understood. (See id. at 7-15.) Gonzalez also 18 stated that he understood that he was free to stand trial and not plead guilty:

19 THE COURT: If there were a trial, you would have the right to testify 20 if you wanted to, but no one could force you to testify if you did not want to. 21 Further, no inference or suggestion of guilt could be drawn if you chose 22 not to testify at a trial. Do you understand that, sir?

23 THE DEFENDANT: Yes, your Honor.

24 THE COURT: Do you understand that by entering a plea of guilty 25 today, you're giving up each and every one of the rights that I've described, 26 that you're waiving those rights, and that you'll have no trial?


1 THE DEFENDANT: Yes, your Honor.

2 THE COURT: Do you understand, sir, that you can change your mind 3 right now and refuse to enter a plea of guilty?

4 THE DEFENDANT: Yes, your Honor.

5 THE COURT: You do not have to enter this plea if you do not want 6 to for any reason. Do you understand this fully, Mr. Gonzalez?


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