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King v. United States

United States District Court, S.D. New York

April 25, 2017

MELISSA G. KING, Petitioner,
v.
UNITED STATES OF AMERICA, Respondent.

          MEMORANDUM OPINION AND ORDER

          JOHN G. KOELTL, UNITED STATES DISTRICT JUDGE

         The petitioner, Melissa G. King, moves pro se pursuant to 28 U.S.C. § 2255 to vacate and set aside her 72-month sentence of imprisonment, which was entered following her guilty plea to one count of embezzlement from employee benefit plans, in violation of 18 U.S.C. §§ 664 & 2, and to one count of subscribing to false United States individual tax returns, in violation of 26 U.S.C. § 7206(1). The petition and its supporting memorandum (collectively, the “Petition”) --- which were filed over a year after the statute of limitations expired --- raise a host of claims: among others, that the guilty plea was not knowing, intelligent, or voluntary; ineffective assistance of counsel; prosecutorial misconduct; actual innocence; and violation of the Cruel and Unusual Punishments Clause of the Eighth Amendment.

         In response to the request of this Court, see Civ. Dkt. 26, the attorneys that represented the petitioner in the underlying criminal proceedings have submitted declarations and an affidavit to address the ineffective assistance of counsel claims. See Civ. Dkt. 32 (Fontier Declaration); Civ. Dkt. 33 (Schachter Affidavit); Civ. Dkt. 34 (Handwerker Declaration) (collectively, the “Attorney Affidavits”).

         For the reasons explained below, the Petition is dismissed.

         I.

         A.

         On February 17, 2010, the petitioner was charged in an Indictment with one count of embezzlement from employee benefit plans, in violation of 18 U.S.C. §§ 664 & 2, and with eleven counts of money laundering, in violation of 18 U.S.C. §§ 1957 & 2. See Cr. Dkt. 12. The Indictment alleged that the petitioner served as the third-party administrator for the employee benefit plans of a union, the Compressed Air and Free Air Foundations, Tunnels, Caissons, Subways, Cofferdams, Sewer Construction Workers Local 147 of New York, New Jersey States and Vicinity AFL-CIO (“Local 147”). The Indictment alleged that the petitioner embezzled approximately $40 million from three of Local 147's employee benefit plans through King Care LLC (“King Care”), a company the petitioner controlled, which served as the fund manager for the funds pursuant to an administrative agreement, and that the petitioner then laundered the embezzled funds through a series of bank accounts. See Cr. Dkt. 12 at 4-5. The petitioner pleaded not guilty.

         At the time the Indictment was filed, the petitioner was represented by retained counsel, Peter William Till (“Till”) of the Law Offices of Peter W. Till.[1] See Cr. Dkt. 3. The petitioner retained two additional lawyers, Michael Handwerker (“Handwerker”) of Goldstein & Handwerker, LLP, who appeared on behalf of the petitioner in March 2010, and Ronald K. Smith (“Smith”), a solo practitioner, who appeared on behalf of the petitioner in June 2010. See Cr. Dkts. 21, 23, 25, 30. On June 15, 2010, Till moved to withdraw as the petitioner's attorney. See Cr. Dkts. 28-29. The petitioner --- citing “irreconcilable differences” and a “breakdown in communications” with Till, as well as her belief that Handwerker could adequately represent her in the matter --- did not oppose Till's motion, see Cr. Dkt. 32, which was granted on July, 2, 2010, see Cr. Dkt. 34.

         On June 30, 2010, a Superseding Indictment was filed, adding one count of mail fraud, in violation of 18 U.S.C. §§ 1341 & 2, and four counts of tax evasion, in violation of 26 U.S.C. § 7201. See Cr. Dkt. 35. Over the next year, in numerous filings, the Government and counsel for the petitioner battled over a series of dispositive and non-dispositive issues, ranging from the post-indictment restraint and preservation of the petitioner's assets, to the dismissal of the superseding indictment, to the suppression of post-arrest statements. See United States v. King, No. 10 CR. 122 (JGK), 2011 WL 1630676 (S.D.N.Y. Apr. 27, 2011); United States v. King, No. 10 CR. 122 (JGK), 2010 WL 4739791 (S.D.N.Y. Nov. 12, 2010).[2]

         Due in part to the post-indictment freeze of the petitioner's assets, the petitioner lost the ability to pay for Smith and Handwerker. See Cr. Dkt. 128. On March 14, 2011, at the request of the petitioner, Michael S. Schachter (“Schachter”) of Willkie Farr & Gallagher LLP (“WFG”) was appointed to represent the petitioner pursuant to the Criminal Justice Act (the “CJA”), 18 U.S.C. § 3006A. See Cr. Dkt. 130. Because the petitioner could no longer pay for retained counsel, on March 23, 2011, Handwerker was temporarily appointed to the CJA Panel so that Handwerker could continue representing the petitioner pursuant to the CJA. Cr. Dkt. 136. The purpose of the dual representation was to provide the petitioner with the benefit of her choice of counsel, Handwerker, and the experience of Schachter, along with the resources of a larger firm, WFG, that could review the immense amount of discovery in the case.

         As counsel for the petitioner, Handwerker and Schachter continued to contest issues in the case, including by moving in limine to exclude certain evidence. See, e.g., Cr. Dkts. 192, 209. While preparing for the possibility of a trial, the petitioner also negotiated with the Government regarding the possibility of a disposition short of trial.

         On October 21, 2011, the petitioner waived her right to be indicted by a grand jury, and consented to being charged in a Superseding Information S3 10 Cr. 122 (JGK) (the “Information”). See Cr. Dkt. 218. The Information charged the petitioner with one count of embezzlement from employee benefit plans, in violation of 18 U.S.C. §§ 664 & 2 (“Count I”), and with one count of subscribing to false United States individual tax returns, in violation of 26 U.S.C. § 7206(1) (“Count II”).

         On the same date, the petitioner appeared before this Court, and pleaded guilty to both Counts in the Information pursuant to a plea agreement dated October 20, 2011 (the “Plea Agreement”) with the Government. The Plea Agreement contained a waiver by the petitioner of any direct appeal or collateral challenge of any sentence of or below the Stipulated Guidelines Range of 96 months' imprisonment. Plea Agr. at 8-9. The Plea Agreement also noted that, for the purposes of calculating the Sentencing Guidelines offense level, the petitioner and the Government disputed the loss amount attributable to the petitioner's conduct: the petitioner contended that the loss amount was between $7 million and $20 million, while the Government contended that the loss amount was between $20 million and $50 million. Plea Agr. at 7. This was a sentencing issue that did not affect the petitioner's ability to plead guilty to Counts I and II of the Information. Indeed, the Stipulated Guidelines Range of 96 months' imprisonment was based on the statutory maximum sentence for the two Counts of conviction. Under both the Government's calculations and the petitioner's calculations, the Guideline Sentencing Range would have been higher if it were not capped by the statutory maximum sentence.

         At the petitioner's guilty plea, this Court conducted an allocution in conformity with Rule 11 of the Federal Rules of Criminal Procedure. The petitioner was placed under oath and then answered a series of questions establishing that she was competent to enter a guilty plea. Plea Tr. at 9-13. For example, the petitioner explained that she was highly educated: she had a master's degree, and had nearly completed a Ph.D. Plea Tr. at 10.

         The petitioner also explained that she had had psychiatric treatment for post-traumatic stress “a couple of years ago” and that she was separately being treated for several physical ailments --- namely, back problems and “a chronic infection.” She swore that her past psychiatric condition and treatment “[a]bsolutely [did] not” affect her ability to understand the proceedings and to consult with her lawyer. Plea Tr. at 10-12. She also swore that her physical condition did not interfere with her ability to understand the proceedings and to consult with her lawyer. Plea Tr. at 12. The petitioner swore that her mind was clear; that she wanted to proceed with the plea allocution; and that she had not taken any drugs, medicine, pills, or alcohol in the preceding 24 hours. Plea Tr. at 12-13. Counsel for the petitioner, and the petitioner herself, confirmed that “nothing about [the petitioner's] physical condition in any way impact[ed] her ability to proceed with the guilty plea.” Plea Tr. at 5-8. The guilty plea allocution occurred in the afternoon at 4:35 p.m. The petitioner's counsel confirmed that the petitioner had refrained from taking her medication so that she could participate in the guilty plea allocution that afternoon. Plea Tr. at 6.

         The petitioner also swore that she had “extensive discussion” with her counsel regarding her case, and the consequences of waiving indictment, proceeding by information, and entering a guilty plea. Plea Tr. at 14. The petitioner swore that she was satisfied with Schachter's representation of her --- “very much so.” Plea Tr. at 14.

         On the basis of the petitioner's responses to this Court's questions, and the Court's observations of her demeanor, this Court found that the petitioner was “fully competent to waive indictment, agree to proceed by information, and enter an informed plea.” Plea Tr. at 14.

         The petitioner acknowledged the various rights that she was giving up by pleading guilty. Plea Tr. at 14-17. The petitioner acknowledged that she consented to being charged by information rather than indictment. Plea Tr. at 17-19. The petitioner was advised of the nature of the charges to which she was pleading guilty, Plea Tr. at 20-23, the maximum penalties for those charges (including restitution), the possibility of forfeiture, and the implications of any term of supervised release. Plea Tr. at 21-28.

         As to the Plea Agreement, the petitioner acknowledged that she signed it, that she discussed it with her counsel before signing it, and that she fully understood it before signing it. Plea Tr. at 28-29. She affirmed under oath that no one had offered her any inducements, or threatened her, or forced her to plead guilty or to enter into the Plea Agreement. Plea Tr. at 29. The Court discussed with the petitioner the provision of the Plea Agreement in which the petitioner agreed to waive her right to file an appeal or collateral challenge of any sentence of or below the Stipulated Guidelines Range. Plea Tr. at 29-30. The petitioner swore that she understood the provision:

THE COURT: So, do you understand that if I sentence you to any sentence of 96 months' imprisonment or less, you have given up your right to appeal any such sentence or challenge any such sentence in any proceeding including any habeas corpus proceeding? Do you understand that?
THE DEFENDANT: I understand that.

         Plea Tr. at 30. The Court ensured that there was an adequate factual basis for the petitioner's guilty plea, that the petitioner was aware that her actions were illegal, and that venue was proper. Plea Tr. at 32-38. Regarding Count I, the petitioner explained that, between 2002 and 2008, she served as a third-party administrator for three of Local 147's employee benefit retirement funds. Plea Tr. at 32-33. The petitioner swore that she “caused to be transferred a substantial amount of money from the bank accounts for those funds into King Care” and then “caused that money to be transferred for [her] own use rather than for the benefit of the funds for the participants of the funds.” Plea Tr. at 33. The petitioner swore that she “knew [she] was not entitled to the money and [she] knew that [what] [she] was doing [was] wrong, unlawful, and unauthorized, ” and that she “was aware that those funds were governed by ERISA at the time.” Plea Tr. at 33. She affirmed in response to a question by the Court that she “knew that [she] [was] not entitled to those funds . . . .” Plea Tr. at 33.

         Regarding Count II, the petitioner swore:

I also willfully and knowingly subscribed and filed personal tax returns between 2004 and 2007 that were false as to material matters. I knew that the tax returns were false because they did not report a substantial amount of income I received from King Care. I verified the false tax returns by written declaration that they were made under penalties of perjury.

         Plea Tr. at 33. The petitioner swore that she knew that what she was doing was wrong and illegal. Plea Tr. at 34.

         In addition, the petitioner swore: “I accept full responsibility for my actions which I deeply regret and I am sorry for the harm that my actions caused to others, especially to the participants of the funds.” Plea Tr. at 33.

         The Government summarized the evidence against the petitioner that would have been introduced at trial. The evidence would have included “law enforcement and lay testimony, bank records and other financial records, records of the [petitioner's] purchases, records of Local 147 funds including statements mailed to participants, board of directors' minutes, forms filed with the Department of Labor, tax returns and accounting records for the [petitioner] including [the petitioner's] personal tax returns.” Plea Tr. at 35. The Government explained that the evidence would show that the petitioner was a third-party administrator for three of Local 147's funds; “that between 2002 and 2008 she took over $40 million from the [funds'] account and placed it into her personal account”; that “[s]he spent a substantial portion of that [money] on many personal expenses including horses, jewelry, travel and private jets, luxury hotels, her home in Irvington, credit card bills for additional personal expenses and two Park Avenue apartments in Manhattan”; and that “[n]one of these expenses were justified by her contracts, nor were those expenses authorized by the trustees of the Local 147 funds.” Plea Tr. at 35-36. The Government also explained that the evidence would show that, for “the tax years 2004 through 2007[, ] [the petitioner] filed tax returns . . . that were signed under penalty of perjury[, ] [which] failed to declare her income from the embezzlement[, ] understating her income by millions of dollars” even though the petitioner knew “that those returns contained material misstatements.” Plea Tr. at 36. The Government stated that the evidence would establish the elements of each of the crimes beyond a reasonable doubt. Plea Tr. at 36.

         The petitioner pleaded guilty to both Counts I and II. Plea Tr. at 36-37. The petitioner also noted that she disputed the $40 million loss amount proffered by the Government. Plea Tr. at 36-37. This Court noted that the disagreement over the loss amount was reflected in the Plea Agreement, and that the exact amount of money embezzled was not an element of any offense. Plea Tr. at 37; see also Plea Agr. at 7. In response, the petitioner twice affirmed that she was knowingly and voluntarily pleading guilty to Count I even though she would be disputing the ultimate loss amount for sentencing purposes. Plea Tr. at 37, 39. The petitioner swore that she was pleading guilty to both Counts because she was in fact guilty, and that she was pleading guilty voluntarily and of her own free will. Plea Tr. at 37. Neither counsel for the petitioner nor the Government could offer a reason for this Court not to accept the petitioner's guilty plea. Plea Tr. at 37-38.

         At the conclusion of the proceeding, the Court found that the petitioner understood the rights that she was giving up by pleading guilty and the consequences of her plea, and that she did so knowingly and voluntarily. The Court further found that the petitioner acknowledged her guilt, that the plea was entered knowingly and voluntarily, and that the plea was supported by an independent basis in fact containing each of the essential elements of the offenses. Plea Tr. at 38. The Court also entered a consent order of forfeiture. Plea Tr. at 41; see also Cr. Dkt. 216. The Court set February 17, 2012 as the date for sentencing. Plea Tr. at 40.

         B.

         Handwerker and Schachter began preparing for sentencing, including by engaging experts to advocate a low loss amount to mitigate the severity of the petitioner's conduct. During this period, the relationship between the petitioner and Schachter quickly frayed and splintered. While preparing for sentencing, the petitioner came to the belief that Schachter had given her incorrect legal advice by advising her to plead guilty to charges for which (she believed) the Government could not have proven her guilt at a trial. See Petition at 263; Petition, Ex. 2H; Schachter Aff. ¶ 5; Schachter Aff., Ex. 3.

         Around November 31, 2011, the petitioner informed Schachter that she would like to withdraw her guilty plea. Schachter Aff., Ex. 3. Schachter vehemently disagreed with the petitioner's proposal because he did not believe that there was a nonfrivolous basis for withdrawal. Schachter Aff. ¶ 29. In an email to the petitioner dated December 1, 2011, an associate of Schachter at WFG told the petitioner that, “after hundreds of hours sifting through documents and evidence and speaking to you, as well as your statement to us that you were guilty and your statement under oath in Court that you are guilty, we believe that you are guilty.” Schachter Aff., Ex. 3. The e-mail informed the petitioner that she should explore her options with Handwerker, and recommended that she focus on sentencing, but also explained that, if she insisted on filing a motion to withdraw the guilty plea, Schachter would likely have to withdraw as counsel. Schachter Aff., Ex. 3.

         The differences between the petitioner and Schachter had indeed become irreconcilable. At a conference on February 2, 2012, Schachter and the petitioner jointly asked this Court to relieve Schachter as counsel. See Cr. Dkt. 244 at 2-3. On February 6, 2012, Schachter was terminated as counsel for the petitioner, and Alice L. Fontier (“Fontier”) of the Law Offices of Joshua L. Dratel, P.C., was appointed as replacement counsel pursuant to the CJA. Cr. Dkt. 236. Handwerker continued his representation of the petitioner.

         The petitioner continued to raise the issue of withdrawing her guilty plea with Fontier. See Fontier Decl. ¶ 4. Like Schachter, Fontier believed that withdrawal would be frivolous. Fontier Decl. ¶ 4. In e-mail and letter correspondence, Fontier strongly advised the petitioner against withdrawal, informing the petitioner that the evidence in the case was sufficient for a reasonable jury to convict her, and warning that an attempted withdrawal could result in the original terms of the Plea Agreement being imposed on the petitioner, while also exposing the petitioner to far greater liability because the Government would pursue a trial on the other 15 Counts. See Petition, Exs. 2H, 5; Fontier Decl. ¶ 4. Fontier told the petitioner that she would not make the motion on the petitioner's behalf; however, Fontier informed the petitioner of the petitioner's right to represent herself. Petition, Ex. 5. The petitioner did not move to withdraw the guilty plea.

         The Government and the petitioner each submitted extensive sentencing submissions, which included expert reports and documentary evidence. The petitioner's revised sentencing memorandum relied on two expert reports, the “EisnerAmper Report, ” Cr. Dkt. 284, and the “Vasil Report, ” Cr. Dkt. 286. See Cr. Dkt. 280 at 31-38, 49. In essence, the EisnerAmper and Vasil Reports argued that the loss amount attributable to the petitioner's conduct was far less even than the $7 million that the petitioner had conceded in the Plea Agreement. The Reports even suggested that the loss amount might be $0, meaning (if true) that there might be no factual basis for the petitioner's guilty plea to Counts I and II. The revised sentencing memorandum also tended to cast the petitioner as the victim in the case while blaming others, such as the trustees of the funds and the petitioner's accountants. The revised sentencing memorandum suggested that the petitioner was actually innocent of the crimes to which she had pleaded guilty because the petitioner was legally entitled to any money that she had received from the funds. Far from underreporting her personal income in her tax returns, the revised sentencing memorandum argued that the petitioner had actually overreported her income, meaning that she should be entitled to a tax refund. See Cr. Dkt. 280 at 23-31, 38-40.

         The Government disagreed with the methodologies and underlying assumptions (and thus the conclusions) of the EisnerAmper and Vasil Reports because both Reports were based on faulty assumptions. Both Reports relied upon statements by the petitioner to the exclusion of other, more credible evidence from the documents and fact witnesses. See, e.g., Cr. Dkt. 277 at 7. For example, both Reports accepted the petitioner's statement that she did not control King Care because the petitioner's elderly parents were listed as the members of the LLC in King Care's operating agreement, see Cr. Dkt. 284 at 4; Cr. Dkt. 286 at 6, even though there was substantial evidence that the petitioner controlled King Care. The EisnerAmper Report indicated that the loss amount with respect to Count I was far less than that asserted by the Government, and might be even less based on the petitioner's statements that adequate documentation justifying all of the allegedly embezzled monies existed (documentation that neither the petitioner nor anyone else could produce or locate). See Cr. Dkt. 277 at 2-3, 11 n.2; Cr. Dkt. 280 at 32-39; Cr. Dkt. 284 at 1-2, 19, 24; Schachter Aff. ¶ 11. However, in her revised sentencing memorandum, the petitioner accepted a loss amount of slightly more than $7 million. Cr. Dkt. 280 at 38.

         Likewise, with respect to Count II, the Vasil Report concluded (among other implausible things) that expenses for grooming the petitioner's pets were properly considered business expenses, rather than personal expenses, and that expenses associated with the petitioner's horses were properly considered deductible business expenses. See, e.g., Cr. Dkt. 277 at 22-24; Cr. Dkt. 277-10 ¶ 14; Cr. Dkt. 286 at 5-6. The Vasil Report also accepted that the petitioner's elderly parents owned the petitioner's horses, and that they were thus responsible for any taxes on those horses, see Cr. Dkt. 286 at 2-3, even though this Court, after a hearing, concluded that the petitioner in fact owned the horses. See King, 2010 WL 4739791, at *4-5. With respect to the owner of the horses, this Court rejected the very argument that the Vasil Report accepted: that an entity purportedly controlled by the petitioner's parents owned the horses, because there was no evidence to support the claim. See id. at *4 & nn. 3-4.

         To rebut the petitioner's claims, the Government submitted (among other things) the administrative agreement between King Care and the funds, which was signed by the petitioner on behalf of King Care, see Cr. Dkt. 277-1; affidavits from fund trustees, investigative reports (including notes of investigative interviews with King Care's employees), and other materials that showed that the petitioner controlled King Care and negated the assertion that the petitioner was entitled to the additional monies that she had received, see Cr. Dkts. 277-2, 277-4-8; King Care invoices to show that the petitioner was overbilling Local 147's funds for work-performed, see Cr. Dkt. 277-9; and a declaration from an Internal Revenue Service Grand Jury Revenue Agent who had reviewed various tax and accounting documents, and concluded that the petitioner had failed to report at least $12 million in personal income during the relevant period, see Cr. Dkt. 277-10 at 1-2.

         After several adjournments, the parties appeared before this Court for sentencing on June 21, 2012. This Court noted that it had reviewed the extensive submissions by the petitioner and the Government, as well as victim impact statements. Sent. Tr. at 9-10. The parties agreed that, for purposes of sentencing, this Court could consider $7 million and one cent as the loss amount in the case, and thus defer the resolution of the precise loss amount, because any Guideline Sentence based on losses in excess of $7 million would already be in excess of the maximum term of 96 months' imprisonment that the Court could impose under the violated statutes. Sent. Tr. at 16, 35, 57.

         Counsel for the petitioner argued that the petitioner should receive a non-custodial sentence based on her age and poor health; and the health of her family members; and the theory that others who had not been charged with any crimes, such as the trustees of Local 147's funds, were complicit in the petitioner's embezzlement. Sent. Tr. at 26-27, 29-30, 32. In arguing for a sentence of 96 months' imprisonment, the Government again summarized the evidence against the petitioner, including by cataloguing the petitioner's use of employee retirement funds for personal expenses. Sent. Tr. at 40-48. This Court also heard statements from victims: union workers who had had their retirement savings diminished or completely wiped out as a result of the petitioner's conduct. Sent. Tr. at 49-56.

         The petitioner swore that she had reviewed and discussed with her counsel the Pre-Sentence Report (the “PSR”), its recommendation, and its addendum. Sent. Tr. at 33. The petitioner raised several objections to the PSR that sought to absolve or minimize the petitioner's responsibility for the crimes to which she had pleaded guilty. Sent. Tr. at 12-13, 18-23. In particular, this Court overruled objections to the effect that the petitioner had not attempted to disguise the embezzlement; that the petitioner did not have control over King Care; that King Care was legally entitled to any monies received; and that the petitioner did not knowingly pay for personal expenses using money from the retirement funds; but sustained objections related to the precise loss amount, which had yet to be established. Sent. Tr. at 61-63.

         The Government also objected to affording the petitioner any credit for acceptance of responsibility in light of her sentencing submissions, an objection this Court overruled because the petitioner had accepted responsibility at the time of her guilty plea. Sent. Tr. at 35-36, 63-64. The Court noted that whether she had since ceased accepting responsibility was an issue that could be considered in determining an appropriate sentence.

         This Court found that there could be no question that the Guideline Sentence was the statutory maximum of 96 months' imprisonment because, under any formulation, the sentence under the Guidelines based on the actual ...


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