United States District Court, S.D. New York
OPINION AND ORDER
GABRIEL W. GORENSTEIN, UNITED STATES MAGISTRATE JUDGE.
Securities and Exchange Commission ("SEC") has sued
Stephen B. Pence for allegedly violating federal securities
laws in connection with a scheme to defraud General
Employment Enterprises, Inc. ("GEE") and its
investors in 2009 and 2010. Both the SEC and Pence seek to
depose Gregory Bartko, an inmate at the Coleman Federal
Correctional Institution in Sumterville, Florida. Bartko has
moved to invoke his Fifth Amendment privilege against
self-incrimination. For the reasons set forth below,
Bartko's motion is granted in part and denied in part.
seeks to invoke his privilege against self-incrimination with
respect to two distinct sets of facts: (I) the conduct
underlying his prior criminal conviction, including the
related arrest, trial, sentencing, and post-sentencing
proceedings; and (ii) his role in the scheme alleged in the
Bartko's Criminal Conviction and Related Matters
In his memorandum of law, Bartko states that his prior
criminal conduct and all related proceedings stem from his
management of two private equity funds in 2004 and 2005: the
Caledonian Fund and the Capstone Fund. See Bartko
Mem. at 3-8.
to Bartko, in 2004, he was a "securities lawyer and
securities dealer" and managed the Caledonian Fund
alongside his partner Darryl Laws. See Bartko Mem.
at 3-5. An individual named James K. Colvin agreed with
Bartko to raise $3 million in investments for the Caledonian
Fund. See id. at 4. Colvin's source of funding
was the fraudulent investment activities of an individual
named Scott Hollenbeck. See id. Bartko's law
firm also represented Hollenbeck in an SEC civil enforcement
proceeding. See id. at 4. In October 2004, the
Caledonian Fund was "shuttered" after Colvin's
$3 million commitment proved "hollow." Id.
November 2004, Bartko started another private equity fund,
the Capstone Fund. See Bartko Mem. at 3, 5. Bartko
arranged for Hollenbeck to refer potential investors to the
fund from November 2004 through January 2005, even though
Hollenbeck was prohibited by law from directly selling
investments as a result of the civil enforcement action
against him. See Id. at 5-6. The Government
contended that "[b]etween December 21, 2004, and January
10, 2005, a total of $1, 156, 125 from 18 different victims
was deposited into accounts controlled by Hollenbeck, and the
exact same amount was transferred by Hollenbeck to
Bartko's account." See Brief for Appellee
at 15, United States v. Bartko, 728 F.3d 327 (4th
Cir. 2013), cert, denied, 134 S.Ct. 1043 (No.
12-4298). In Bartko's view, after "problems
developed in the manner that Hollenbeck forwarded investor
funds and subscription documents, " Bartko sought to
refund $1 million to investors, but Hollenbeck devised a
scheme to embezzle or otherwise retain these funds.
See Bartko Mem. at 6. Bartko claims to have later
refunded approximately 94% of these investments after being
confronted by an SEC attorney in March 2005. See id.
connection with these activities, Bartko was tried and
convicted in the United District Court for the Eastern
District of North Carolina for "conspiracy to commit
mail fraud, selling unregistered securities, engaging in
money laundering . . . unlawful monetary transactions . . .
[four counts of] mail fraud and aiding and abetting . . .
[and] selling unregistered securities and aiding and abetting
. . . ." Sentencing Transcript for Gregory Bartko in
United States v. Bartko, No. 5:09 Cr. 321-D-l
(annexed as Ex. C to the Declaration of Nicholas A. Pilgrim,
filed Aug. 8, 2017 (Docket # 59) ("Pilgrim Decl."))
("Sent. Tr."), at 4. Bartko had testified at trial,
and the sentencing judge found that Bartko gave "false,
material, perjurious" testimony that was "intended
to obstruct justice." Id. at 89. The judge
added an obstruction enhancement to Bartko's sentencing
guidelines calculation. Id.
trial, Bartko filed four motions for a new trial. See
Bartko, 728 F.3d at 334. These motions contained claims
that the government failed to turn over exculpatory and
impeachment evidence, that the government permitted
Hollenbeck to testify falsely, that the trial court erred in
considering an ex parte sealed document the
government submitted, that the trial court erred in failing
to give jury instructions regarding multiple conspiracies and
accomplice liability, and that the trial court improperly
computed Bartko's sentencing range under the Sentencing
Guidelines. See id. at 334-47. All of these motions
were denied by the district court. See Id.
at 331. The Fourth Circuit affirmed Bartko's conviction
and sentence. See id. at 347.
thereafter filed a motion to vacate the trial court's
judgment pursuant to 28 U.S.C. § 2255. See
Motion to Vacate, Set Aside, or Correct Sentence Pursuant to
28 U.S.C. § 2255 in Gregory Bartko v. United
States, No. 5:09 Cr. 321-D-l (E.D. N.C. Jan. 26, 2015)
(Docket # 292) ("Bartko Mot. to Vacate"). In that
petition, Bartko seeks to vacate his judgment of conviction
based on "various instances of prosecutorial misconduct
and the presentation of false and misleading evidence, "
Id. at 1, including failures to produce notes of
witness interviews and exculpatory documents, i<i at
13-43. This motion is still pending and Bartko asserts that
"it is possible, and perhaps even likely, that Bartko
may testify in further support of his claims" at an
evidentiary hearing held in his habeas proceeding. Bartko
Mem. at 12. While Bartko does not mention it, we note also
that if the judgment of conviction were vacated, a new trial
would potentially be held and the Government would be able to
use any statements Bartko made in a deposition in the instant
case against him as evidence in the new trial.
SEC's Civil Suit Against Pence
September 9, 2015, the SEC filed the complaint in this action
accusing Pence of various securities law violations between
July 2009 and November 2010. See Complaint, filed
Sept. 9, 2015 (Docket # 1) ("CompL"), ¶ 1.
SEC's complaint alleges that on July 1, 2009, PSQ, LLC
("PSQ") acquired a majority interest in GEE by
means of a securities purchase and tender offer agreement.
See Id. ¶¶ 2, 27. Although Pence allegedly
owned PSQ in its entirety, the SEC claims that Pence in fact
owned PSQ on behalf of a convicted felon named Wilbur Anthony
Huff, and that Pence acted as Huffs agent. See id.
¶¶ 2, 23, 28, 32. The purpose of this arrangement
was to circumvent "legal and practical barriers
[preventing Huff from] operating business entities in his own
name, " inasmuch as Huff was a convicted felon who could
not operate the company in his own name. Id. ¶
17. This arrangement persisted until "November 17, 2010,
when [Pence] transferred his 100% interest in PSQ to another
Huff associate, who, like Pence, paid no consideration to
become PSQ's nominal owner." Id. ¶ 14.
Entities affiliated with Huff had provided PSQ with the money
to purchase GEE. See id ¶¶ 28, 31.
GEE's acquisition, Huff carried out a fraudulent scheme
to have GEE transfer $2.3 million from GEE's checking
account to an entity owned by the President of Park Avenue
Bank ("PAB"), Charles J. Antonucci, Sr., with whom
Huff allegedly had prior business dealings. Id.
¶¶ 4-5, 18. As part of its acquisition of GEE, PSQ
caused $1, 925, 000 to be deposited in an account for GEE at
PAB. See id. ¶ 35. Also, after PSQ acquired
GEE, Pence and then Huff gained the ability to appoint three
of GEE's five directors. See id. ¶¶ 2,
27, 32. Pence appointed himself chairman of the board,
appointed two other directors, and then selected Ronald E.
Heinemen, to whom Huff had directed "substantial monthly
payments, " as GEE's CEO. See id.
¶¶ 20, 27. GEE then deposited an additional $750,
000 from its other bank accounts into its PAB account.
See id. ¶ 35. In July 2009, $2.3 million of the
funds in GEE's PAB account were allegedly withdrawn.
See id ¶ 38. Heinemen claimed that these funds
were invested in a certificate of deposit at PAB, when in
fact they were transferred to Park Avenue Insurance, another
entity owned by Antonucci. See id. ¶¶ 5,
38-41. Entities affiliated with Huff ultimately returned the
same amount to GEE's PAB account after an outside audit
committee investigated the funds' disappearance. See
id. ¶¶ 5, 48-53.
accuses Pence of, inter alia, making a series of
false or materially misleading claims to GEE's outside
auditor during GEE's 2009 fiscal year end audit, and of
otherwise withholding information material to the audit.
Id. ¶¶ 1, 6, 48, 51, 53, 57, 63, 65. More
specifically, the SEC alleges that Pence signed a 2009 Form
10-K on January 8, 2010, containing false statements of fact,
including, inter alia, that the $2.3 million
withdrawn from GEE's account was used to buy a
certificate of deposit from PAB, see Id.
¶¶ 1, 7, 66-67, and that GEE retrieved this money
"through a non-recourse assignment of the CD for face
value to an unrelated party." Id. ¶ 7. The
SEC also accuses Pence of misrepresenting in certain
securities filings the source of PSQ's funding to acquire
GEE. See id. ¶ 29.
April 26, 2017, Pence filed a motion seeking leave to depose
Bartko in connection with this matter. See Notice of
Motion of Defendant Stephen B. Pence for Leave to Depose
Inmate Gregory Bartko, filed Apr. 27, 2017 (Docket # 39)
("Leave Mot."). Pence alleged that Bartko
"represented PSQ in connection with its purchase of
shares in GEE, " and that Bartko served as GEE's
general counsel from on or about October 13, 2009, through
November 19, 2010. See Memorandum of Law in Support
of Defendant's Motion for Leave to Depose Inmate Gregory
Bartko, filed Apr. 27, 2017 (Docket # 41), at 2. Pence
alleged that Bartko advised him regarding "the
disclosures he needed to make in connection with PSQ's
acquisition of GEE and immediately thereafter .... [and] how
GEE's excess funds should be invested." Id.
at 4. Pence also asserted that Bartko helped investigate the
disappearance of the $2.3 million from GEE's bank
account. Id. This Court ordered Bartko to send a
letter to the parties explaining his objections, if any, to
being deposed. See Order, filed Apr. 26, 2017
(Docket # 38). Bartko responded that he had no objections,
but sought to reserve his right to claim "any
appropriate attorney-client privilege during my deposition
which may be required under the law, as well as any other
relevant evidentiary privileges." Letter from Gregory
Bartko, filed May 11, 2017 (Docket # 43). This Court granted
Pence's motion on May 15, 2017. See Memo
Endorsement of Notice of Motion of Defendant Stephen B. Pence
for Leave to Depose Inmate Gregory Bartko, filed May 15, 2017
(Docket # 44) ("Leave Memo Endorsement").
14, 2017, this Court received a letter written by Bartko,
which stated that Bartko would "declin[e] to submit to
any testimonial deposition in any pending civil or criminal
matter until [his] Habeas Petition is fully litigated."
Letter from Gregory Bartko (annexed as Ex. A to the SEC's
Letter to the Court, filed July 14, 2017 (Docket # 49)), at
1. The Court thereafter instructed the SEC and Pence to
submit letters to Bartko and his habeas attorney containing a
list of potential areas of questioning. See Order,
filed July 14, 2017 (Docket # 50), at 1. The Order further
specified that if Bartko intended to refuse to answer
questions relating to any of these topics, he should submit a
letter or memorandum of law to this Court setting forth his
legal arguments for such refusals. See id.
and the SEC submitted their proposed topics to Bartko shortly
thereafter. See Letter from SEC to Gregory Bartko
and Don Samuel Re: July 14, 2017 Order Re: Deposition of
Federal Inmate Gregory Bartko (annexed as Ex. A to Pilgrim
Decl.) ("SEC Proposed Topics"); Letter from Stephen
B. Pence to Gregory Bartko (annexed as Ex. A to the
Declaration of Alan S. Lewis in Response to Gregory
Bartko's Invocation of his Fifth Amendment Privilege,
filed Aug. 8, 2017 (Docket # 56) ("Lewis Decl."))
("Pence Proposed Topics"). Bartko then filed a
memorandum of law in which he argued that he may refuse to
answer deposition questions by either party relating to all
of the proposed topics "[e]xcept for general
biographical information, ...