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United States v. Scali

United States District Court, S.D. New York

January 9, 2018

UNITED STATES OF AMERICA,
v.
JOSEPH SCALI, Defendant,

          ORDER AND OPINION

          NELSON S. ROMAN, United States District Judge.

         Defendant Joseph Scali ("Defendant") is charged in a ten-count indictment with (1) mail fraud in violation of 18 U.S.C. § 1341; (2) structuring to evade currency transaction reports in violation of 31 U.S.C. § 5342(a)(3); (3)- (4) false statements in violation of 18 U.S.C. § 1001; (5) corruptly endeavoring to obstruct and impede the due administration of the Internal Revenue Laws in violation of 26 U.S.C. § 7212(a); (6) tax evasion for the year 2011 in violation of 26 U.S.C. § 7201; (7) tax evasion for the year 2012 in violation of 26 U.S.C. § 7201; (8) obstruction of justice in violation of 18 U.S.C. § 1503; (9) perjury in violation of 18 U.S.C. § 1623; and (10) mail fraud in violation of 18 U.S.C. § 1341. (Second Superseding Indictment ("S2") 2, ECF No. 80.) Before the Court is Defendant's Motion to Dismiss the Indictment. (Decl. of Michael H. Sussman, Esq., Exh. 1 (Mem. of Law in Supp. of Def. Omnibus Mot. ("Def. Mot.")), ECF No. 100.) For the following reasons, Defendant's Motion is DENIED.

         BACKGROUND

         On August 30, 2017, Defendant Scali was charged in a ten-count Second Superseding Indictment. The Indictment stems from three sets of actions concerning Defendant's law practice. First, beginning in 2011, Defendant represented a prospective seller of real estate, Harry Freed, doing business as Opal Industries, Inc. ("Opal"), who entered into a contract to sell two tracts of land in Pennsylvania to a Prospective Buyer, Channel A Co. ("Channel A"). (S2 ¶ 5; Govt. Mem. of Law in Resp. to Def. Omnibus Pre-Trial Motions ("Govt. Mot.") 2, ECF No. 110.) During the course of the negotiations, the prospective buyer signed a contract and sent Defendant approximately $1.67 million toward the real estate purchase to hold in escrow pending the closing of the transaction. (S2 ¶ 5.) The prospective buyer sent approximately $1.5 million of the funds via Federal Express, and Defendant deposited those funds into his Attorney Trust Account. (Id.) Negotiations, however, would soon breakdown and the contract would not be consummated. (Govt. Mot. 3; Def. Mot. 1-2.) Following the breakdown in negotiations, the prospective buyer asked Defendant via letter to return approximately half of the funds that he held in escrow to the prospective buyer and to retain the balance of the funds (approximately $850, 000) in escrow until the buyer and seller entered into a new contract. (S2 ¶ 6.) Defendant Scali obliged, and sent a letter with a check comprising approximately half of the amount. (Id. ¶ 7.) Negotiations would deteriorate further and terminate completely. In the aftermath, the prospective buyer requested the return of the monies from Defendant. Unbeknownst to the parties, however, Defendant Scali allegedly used or distributed the remaining monies held in escrow, (Id. ¶ 8-12.)

         The second set of actions pertains to grievance proceedings conducted before the New York State and Southern District of New York ("S.D.N. Y.") grievance committees. The Government alleges that during the grievance proceedings against the Defendant, the Defendant committed perjury when he submitted an affidavit to the S.D.N.Y. Grievance Committee (Id. ¶ 30-7) and also obstructed the due administration of justice with respect to the disciplinary proceedings against him. (Id. ¶ 26 29.) Further, Defendant allegedly continued to hold himself out as a licensed attorney after his license was suspended. (Id. ¶ 32-34.)

         The third set of actions pertain to Defendant's tax filings. The Government alleges that Defendant evaded taxes for the years 2011 and 2012 (Id. ¶ 22-25) and committed other tax-related offenses.

         Defendant Scali now moves to dismiss the Second Superseding Indictment in its entirety.

         DISCUSSION YOUNGER ABSTENTION

         In Younger v. Harris, 401 U.S. 37, 41 (1971) the Supreme Court of the United States found that a federal district court's order enjoining a state criminal prosecution violated the "national policy forbidding federal courts to stay or enjoin pending state court proceedings except under special circumstances." In doing so, the Court reiterated the long-standing "reason for restraining courts of equity from interfering with criminal prosecutions." Id. at 44. The Second Circuit further explained that Younger abstention "seeks to avoid federal court interference with ongoing state criminal prosecutions, state-initiated civil enforcement proceedings, and state civil proceedings that involve the ability of state courts to perform their judicial functions." Jones v. County of Westchester, 678 Fed App'x 48, 49-50 (2d Cir. 2017) (citing Sprint Commc'ns, Inc. v. Jacobs, 134 S.Ct. 584, 591 (2013)). In sum, "federal courts must abstain from exercising subject matter jurisdiction over federal constitutional claims that involve or call into question ongoing state proceedings." Wilson v. Emond, 373 Fed.App'x 98, 100 (2d Cir. 2010).

         Defendant Scali asks this Court to invoke the Younger abstention doctrine with respect to Count One and Ten (both federal mail fraud charges), or in the alternative, grant a Younger hearing. (Def. Mot. 13-14.) Defendant argues that Counts One and Ten "wholly implicate[] violations of New York State law [and] conduct within New York State[] during proceedings that were initiated in and resolved in state court" before proceedings on the merits took place in federal court. (Id. at 14.) As a result, Defendant asks the Court to exercise its discretion and apply the Younger abstention doctrine.

         The Government argues that Younger "has absolutely no relevance to this case." (Govt. Mot. at 8.) They posit that Younger stands for the proposition that "federal courts should not enjoin a state criminal prosecution begun prior to the institution of the federal suit except in very unusual situations." (Id.) This case, they argue, unlike Younger, is not a civil case brought in federal court to enjoin an)' state court prosecution or proceedings. (Id. at 9.) As a result, the Younger abstention doctrine is "wholly inapplicable." (Id.)

         Under these facts, the Younger abstention doctrine is inapplicable, and the Court declines to grant a Younger hearing. The Younger abstention doctrine is implicated when a federal court exercises jurisdiction over federal constitutional claims that involve or call into question ongoing state proceedings. Wilson, 373 Fed.App'x at 100. This is not the case here. In this case, the federal government charged Defendant Scali solely with federal crimes, and there are no pending actions with which the prosecution would interfere. Further, this Court is not being asked to enjoin any state proceedings. See Younger, 401 U.S. at 41. Thus, because the federal charges against the Defendant do not implicate any state proceedings, the Younger abstention doctrine is inapplicable and Defendant's request for a Younger hearing is denied.

         DISCLOSURE OF GRAND JURY PROCEEDINGS

         A Court may order disclosure of certain Grand Jury proceedings "at the request of a defendant who shows that a ground may exist to dismiss the indictment because of a matter that occurred before the grand jury." Fed. R. Crim. P. 6(e)(3)(E)(ii). Disclosure of Grand Jury proceedings is analyzed within the contours of "a long-established policy that maintains the secrecy of the grand jury proceedings in the federal courts." United States v. Proctor & Gamble Co.,356 U.S. 677, 681 (1958). The "indispensable secrecy" of Grand Jury proceedings should not be broken except where compelling necessity exists. Id. The Defendant must show "with particularity" when such a need outweighs the countervailing policy of secrecy. Id. In instances where the need for disclosure outweighs the policy of secrecy, such secrecy is ...


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