01 Civ. 6612 (DLC); 97 Cr. 950
May 29, 2002
Cynthia W. Lobo, Esq., Bronx, NY, for Petitioner.
William F. Johnson, Assistant United States Attorney, United States Attorney's Office, New York, NY, for Respondent.
OPINION AND ORDER
In this petition for a writ of habeas corpus, brought pursuant to Title 28, United States Code, Section 2255, Donald Ferrarini ("Ferrarini") challenges his federal conviction and sentence in 1999, following trial for crimes arising out of his fraudulent management of UFG International, Inc. ("UFG"), a commercial insurance brokerage firm of which he was President and Chief Executive Officer. Ferrarini alleges in this timely-filed habeas petition (1) that his conviction violated principles established by the Supreme Court in Apprendi v. New Jersey, 530 U.S. 466 (2000), and (2) that his retained counsel at sentence provided ineffective assistance by failing to challenge several of the adjustments to his offense level as computed under the Sentencing Guidelines, and the amount of restitution. For the following reasons, the petition is denied.
Indictment 97 Cr. 950 charged Ferrarini and four others in eighty-six counts with conspiracy to commit securities fraud, to make false statements to the SEC, and to commit mail and wire fraud, as well as substantive violations of the laws that were the objects of the conspiracy. In a trial that began on January 4, 1999, and concluded on February 3, 1999, four of the defendants contested those charges and were convicted. Ferrarini was convicted on every count with which he was charged.
At trial, Ferrarini was represented by assigned counsel. After that attorney had been sent a draft presentence report prepared by the Probation Department and had filed a memorandum of law in support of downward departures at sentence based on Ferrarini's age, family circumstances, and a combination of those grounds, on April 6, Mr. Christopher Chan filed a notice of appearance on behalf of Ferrarini.
Many of the submissions thereafter made by Mr. Chan attacked the verdict rendered at trial. Mr. Chan also provided materials, however, in support of the motions for departure made by prior counsel and in opposition to the amount of restitution computed by the Probation Department. In a letter of April 12, he made detailed objections to the Presentence Report. Mr. Chan also requested adjournments of the sentencing date so that he could become more familiar with the trial record. Those requests were denied. At the sentencing proceeding, held on April 23, 1999, Mr. Chan renewed his request for an adjournment, stating that he was "incompetent" because he had "not been given an opportunity to review the entire record." The renewed motion was denied.
Ferrarini was sentenced on April 23, principally to 145 months' imprisonment. An offense level of thirty-four was computed as follows: level six was chosen as the base offense level (§ 2F.1); 16 levels were added for an aggregate loss of $27.5 million, that is, a loss in excess of $20 million (§ 2F1.1(b)(1)(Q)); two levels were added for more than minimal planning (§ 2F1.1(b)(2)); four levels were added because the offenses jeopardized the safety and soundness of a financial institution (§ 2F1.1(b)(7)(A)); four levels were added for Ferrarini's role as an organizer or leader of criminal activity involving five or more participants (§ 3B1.1(a)); and two levels were added for abuse of trust (§ 3B1.3). The Court then departed one level, to level thirty-three, due to Ferrarini's age.
Ferrarini was also represented by Mr. Chan on appeal. The conviction was affirmed on July 18, 2000. Rehearing en banc was denied on September 6, 2000. Certiorari was denied on petitions filed by two co-defendants on May 21, 2001. This petition was filed by newly retained counsel on July 18, 2001.
I. "Apprendi" Challenge
While Ferrarini's appeal was pending, the Supreme Court issued its decision in Apprendi v. New Jersey, 530 U.S. 466 (2000). Since this Court made no factual finding that increased the statutory maximum sentence to which Ferrarini is subject, his sentence does not implicate the teaching in Apprendi. "`Apprendi is inapplicable to Guidelines calculations that do not result in a sentence on a single count above the statutory maximum for that count.'" Santana-Madera v. United States, 260 F.3d 133, 141 (2d Cir. 2001), cert. denied, 122 S.Ct. 817 (2002) (quoting United States v. McLeod, 251 F.3d 78, 82 (2d Cir.), cert. denied, 122 S.Ct. 304 (2001)); see also United States v. Garcia, 240 F.3d 180, 184 (2d Cir.), cert. denied, 533 U.S. 960 (2001); United States v. White, 240 F.3d 127, 136 (2d Cir. 2001).
II. Computation of Offense Level Under the Sentencing Guidelines
Ferrarini alleges that Mr. Chan provided ineffective assistance of counsel at sentence by failing to argue that two separate adjustments resulted in double counting and by not being prepared to challenge the 16 level enhancement for the amount of loss. These arguments are without merit. To prevail on a claim of ineffective assistance of counsel, a habeas petitioner must show: (1) that his attorney's performance fell below an objective standard of reasonableness, and (2) that there is a "reasonable probability" that the outcome would have been different but for counsel's error. United States v. Davis, 239 F.3d 283, 286 (2d Cir. 2001). A "reasonable probability" is one "`sufficient to undermine confidence in the outcome.'" Flores v. Demskie, 215 F.3d 293, 304 (2d Cir.), cert. denied, 531 U.S. 1029 (2000) (quoting Strickland v. Washington, 466 U.S. 668, 694 (1984)). There is a strong presumption that counsel's conduct falls within the "`wide range of reasonable professional assistance.'" Clark v. Stinson, 214 F.3d 315, 321 (2d Cir. 2000), cert. denied, 531 U.S. 1116 (2001) (quoting Strickland, 466 U.S. at 689). "[A] defendant to a criminal prosecution has a Sixth Amendment right to the effective assistance of counsel at all critical stages of the prosecution where his substantial rights may be affected, and . . . sentencing is one such stage." Janvier v. United States, 793 F.2d 449, 451 (2d Cir. 1986) (citing Mempa v. Rhay, 389 U.S. 128, 134 (1967)).
1. Enhancements for both role in the offense and more than minimal planning
Ferrarini argues that Mr. Chan should have objected to the simultaneous imposition of enhancements for his role in the offense (§ 3B1.1(a)) and the more than minimal planning involved in the offenses (§ 2F1.1(b)(2)(A)), since these two enhancements rely, according to Ferrarini, on the same factors and the same facets of a defendant's conduct and constitute impermissible double counting. Ferrarini argues that both enhancements were based on his involvement in and preparation for the offenses, and are therefore, enhancements aimed at the same and not different harms.
There was no double counting in the inclusion of these two enhancements. Double counting occurs when "one part of the guidelines is applied to increase a defendant's sentence to reflect the kind of harm that has already been fully accounted for by another part of the guidelines." United States v. Volpe, 224 F.3d 72, 76 (2d Cir. 2000) (citation omitted). Accordingly, "multiple adjustments may properly be imposed when they aim at different harms emanating from the same conduct." Id. In United States v. Greenfield, 44 F.3d 1141 (2d Cir. 1995), the Second Circuit noted that the application of enhancements for both a leadership role in the offense and more than minimal planning "does not necessarily amount to impermissible double counting." Id. at 1146 n. 3. Only when a role enhancement is "premised solely upon the extensiveness of the defendant's preparations and planning" would a sentencing court be "impermissibly relying upon the same facet of the defendant's conduct to justify two enhancements." Id. (emphasis in original). Because "leading and planning are disparate aspects of criminal conduct," the role in offense and more than minimal planning enhancements do not ordinarily reflect the same facet of a defendant's conduct. United States v. Rappaport, 999 F.2d 57, 61 (2d Cir. 1993).
At sentence, counsel for the defendants argued about the applicability of both of these adjustments, although no one argued that it was improper to impose both of them together. One of Ferrarini's co-defendants argued that there should be no adjustment for more than minimal planning. That adjustment was made for all four defendants convicted at trial. After reciting the legal standards applicable to such an adjustment, the Court found that the adjustment for more than minimal planning was appropriate. Noting that more than minimal planning is present in any case involving "repeated acts over a period of time unless it is clear that each instance was purely opportune," the Court observed that the crime in this case was a massive fraud scheme that spanned two years and involved "repeated well-planned" acts of fraud, including the creation of false customer authorizations, forgeries of signatures, constant internal meetings to plan the next steps in the scheme, secret alterations in mailroom procedures and efforts to conceal the fraud.
While the adjustment for more than minimal planning was made for all defendants, only Ferrarini received a role adjustment as an organizer and leader of the criminal activity. Mr. Chan objected to an adjustment of four levels for Ferrarini's role in the offense. That argument was also rejected after a description of the pertinent legal standard and its application to the facts established at trial. The Court found that the scheme of which Ferrarini was convicted involved more than five persons, and that Ferrarini "led the fraud" and was a "clear decision-maker" throughout its existence. Specifically, the Court found that Ferrarini dictated the false income figures to be used in the SEC filings and dispatched subordinates to execute the filings, presided over the planning and execution of the premium finance scheme, directed others to "explain away" the frauds with lies, and orchestrated the insurance premium embezzlement scheme by directing others to carry it out and by identifying appropriate premiums to be taken into income.
The reasons given by the sentencing court for these enhancements demonstrate that the two adjustments were not aimed at the same harms, nor were they based on the same conduct.
Accordingly, because the two adjustments do not constitute double counting under the law, Ferrarini has not shown that he suffered any prejudice by his counsel's failure to object to them.
2. Enhancements for both role in the offense and abuse of trust
Ferrarini argues that Mr. Chan should have objected to the simultaneous imposition of enhancements for his role in the offenses and the abuse of trust (§ 3B1.3), since this also amounted to a double counting. Ferrarini contends that the positions of trust that were abused were Ferrarini's positions as Chairman of the Board of Directors and President of UFG, the same positions from which he managed the others involved in the schemes. Ferrarini argues that a leader in an offense necessarily occupies a position of trust over the individuals whom he leads. Ferrarini also argues that an adjustment for abuse of trust cannot be based solely on his fiduciary relationship to UFG's shareholders.
The Presentence Report computed an adjustment for abuse of trust based on Ferrarini's fiduciary relationship to UFG shareholders and to its customers who sent UFG insurance premium payments to be forwarded to their insurance carriers. Through an order of April 19, the Court ordered the parties to address as well the application of this adjustment based on Ferrarini's relationship with insurance companies that UFG had defrauded. Through a letter of April 21, 1999, Mr. Chan opposed any adjustment for abuse of trust. He argued that UFG had no fiduciary relationship with insurance companies and that any abuse of its relationship with any other entity did not involve a "difficult-to-detect wrong." He also joined in arguments made by co-counsel regarding this adjustment.
At sentencing, the Court found that UFG owed a fiduciary duty to the insureds who were its customers, to the insurance companies from whom they obtained insurance on behalf of the customers, in both instances relying on New York case law, and to the UFG shareholders. The Court found that the abuse of trust embodied in the fraudulent SEC filing was included within the base offense level for the securities fraud counts, however, and that the adjustment for abuse of trust could not be based on any duty owed to the shareholders.
With respect to the customers, the Court found that the embezzlement by UFG of the insurance premiums paid by the customers could be the basis for an adjustment even though the embezzlement also bore a relationship to the abuse of trust involved in committing the crime. The Court reasoned,
it was the special trust placed in them by their customers and the accompanying discretion to collect, to hold, to remit customers' payments and credits that allowed [a co-defendant] and Ferrarini to embezzle these funds for so many years and in such large amounts. They cultivated this trust over a decade of work in the business of insurance brokerage. That work and the trust it engendered gave them [the] wherewithal and confidence to embezzle customer credits without fear of detection. The abuse of trust is not an element of the offenses for which they were convicted and is sufficiently separate from these offenses to warrant adjustment.
With respect to the insurance companies, the Court also found that the adjustment was appropriate on the basis of the embezzlement of insurance premiums owed to the insurers. The Court reasoned, "[t]his is a classic case in which the discretion conferred upon the brokers by their customers and the insurance companies made it possible for them to commit the frauds and to make the detection of the criminal acts difficult." Citing United States v. Ntshona, 156 F.3d 318, 321 (2d Cir. 1998), the sentencing court held that the abuse of trust need not be entirely unrelated to the commission of the offense. See also United States v. Carrozzella, 105 F.3d 796, 800-01 (2d Cir. 1997), rejected as dicta on other grounds by United States v. Kennedy, 233 F.3d 157, 160 (2d Cir. 2000).
Ferrarini is simply wrong in arguing that Mr. Chan did not oppose the abuse of trust adjustment. Mr. Chan did oppose the abuse of trust adjustment, albeit on different grounds than the ones urged here. Ferrarini is also incorrect in his belief that the adjustment was based solely on the securities fraud. As explained during the sentencing proceeding, it was explicitly not based on the securities fraud. Finally, Ferrarini is incorrect when he argues that the adjustments for Ferrarini's leadership role and for the abuse of trust are duplicative since they are aimed at the same harms and were both made possible because of the positions that he held at UFG. There was no duplication in imposing the two adjustments. Ferrarini's adjustment for his management role among the UFG schemers addressed an issue quite separate from the fiduciary relationship between UFG and some of its victims. For this very reason, the abuse of trust adjustment was made not only for Ferrarini, but also for one of his co-defendants, even though no role adjustment for supervision or management of others was made for that other defendant. At heart, Ferrarini's argument misconstrues the basis for an adjustment based on an abuse of trust. The focus of this adjustment is not on the degree of trust between a manager and his associates in crime, but between the criminal and the victim.
3. Amount of Loss
Ferrarini argues that Mr. Chan was ineffective because he was unprepared to challenge the 16 level enhancement for a loss greater than $20 million. Ferrarini has not shown in this petition, however, that there was any error in the loss computation. He relies entirely on Mr. Chan's statement at the sentence that he was unprepared to proceed. Since Ferrarini does not now identify any specific error in the loss computation, there is no basis to find any prejudice to him at sentence on this ground.
Ferrarini argues that he received ineffective assistance at the time of sentence because his attorney was not sufficiently prepared to argue against the imposition of an order of restitution in an amount of over $6 million on the ground that Ferrarini had no assets and was unable to pay restitution. This argument is without merit.
Restitution in this case is governed by Sections 3663 and 3664 of Title 18, United States Code. Section 3663 allows a court to impose an order of restitution when imposing sentence for offenses under Title 18 and certain other enumerated crimes.
In determining whether to order restitution, the sentencing court shall consider:
(I) the amount of the loss sustained by each victim as a result of the offense; and (II) the financial resources of the defendant, the financial needs and earning ability of the defendant and the defendant's dependents, and such other factors as the court deems appropriate.18 U.S.C. § 3663(a)(1)(B)(i). If a court decides to award restitution, the order of restitution must be in the full amount of the victim's loss. Section 3664 provides "[i]n each order of restitution, the court shall order restitution to each victim in the full amount of each victim's losses as determined by the court and without consideration of the economic circumstances of the defendant." 18 U.S.C. § 3664(f)(1)(A) (emphasis supplied).
While the amount of restitution ordered cannot be reduced because of a defendant's financial circumstances, those circumstances should be considered in setting the payment schedule, 18 U.S.C. § 3664(f)(2)(A)-(C), and may even permit the court to order a defendant to pay only a nominal amount in restitution, 18 U.S.C. § 3664(f)(3)(B). See United States v. Cummings, 189 F. Supp.2d 67, 72 n. 5 (S.D.N.Y. 2002) (DLC) (discussing interplay of Sections 3663 and 3664).
The purpose of Sections 3663 and 3664 is "to require full restitution wherever possible." United States v. Mattice, 186 F.3d 219, 231 (2d Cir. 1999) (citation omitted). Even under the restitution statutes as they existed prior to their amendment in 1996, indigent defendants were subject to the duty to pay restitution "when and if" funds were eventually acquired. United States v. Mortimer, 52 F.3d 429, 436 (2d Cir. 1995). Restitution orders are enforceable as if they were civil judgments, so the statutory protections afforded judgment debtors insulate defendants from "overly draconian ramifications." United States v. Porter, 90 F.3d 64, 69-70 (2d Cir. 1996); see also United States v. Giwah, 84 F.3d 109, 115 (2d Cir. 1996).
The Presentence Report computed the loss attributed to the UFG frauds at over $27 million, and recommended that Ferrarini and one of his co-defendants be ordered to pay restitution in the amount of approximately $16 million. It described Ferrarini as having worked for 49 years, but as having reported essentially no assets. The figure of $16 million was based on losses of $6,836,776 to identified victims — $4,692,000 for CPF Premium Funding, Inc., $234,456 for Imperial Premium Funding, Inc., $1,620,776 for various insurance companies, $20,000 for Rotocast International, Inc. — and other general categories of loss.
While Mr. Chan did not raise at sentence Ferrarini's inability to pay any amount of restitution ordered by the Court, he did dispute the inclusion of certain items in the amount of the award. Accepting Mr. Chan's argument about an item of $316,214, and excluding sua sponte the millions of dollars of losses for which a victim had not been identified, the Court determined that the amount Ferrarini owed in restitution was $6,520,562. Ferrarini does not now dispute this calculation of the restitution owed the victims of the frauds. The Court imposed restitution to be paid during Ferrarini's incarceration from prison earnings at the rate provided by the applicable federal regulation, and following release from prison at the rate of ten percent of Ferrarini's gross monthly income. Because of the order of restitution, the Court declined to impose a fine.
As the record of the sentencing proceeding indicates, Mr. Chan did focus on the issue of restitution at the time of sentence. He presented written submissions addressing restitution issues in advance of sentence and argued regarding certain items at the sentencing itself. Rather than neglecting to raise the issue of Ferrarini's ability to pay, Mr. Chan may have made a tactical decision at sentence not to contend that his client was without the means to pay any restitution. Although Ferrarini was not then working, and had reported to the Probation Department that he possessed essentially no assets, he was at the same time the sole support of his wife and child. Ferrarini and his attorney may well have decided not to invite an inquiry into whether Ferrarini had accumulated any assets during his 49 years of employment and whether any of those assets were available to satisfy immediately an order of restitution. Actions or omissions by counsel that "might be considered sound trial strategy do not constitute ineffective assistance." United States v. Best, 219 F.3d 192, 201 (2d Cir. 2000), cert. denied, 532 U.S. 1007 (2001) (citation omitted); see also Pavel v. Hollins, 261 F.3d 210, 217 (2d Cir. 2001). Moreover, they may well have decided that Ferrarini was not harmed by the order of restitution actually imposed. The order of restitution did not reach any assets that Ferrarini may have accumulated, but only required modest payments from any gross monthly income he may have following his release from prison. Ferrarini has not shown that the decision he criticizes fell below an objective standard of reasonableness.
IV. Evidentiary Hearing
Finally, Ferrarini requests an evidentiary hearing and submits that the resolution of the issues raised in his petition will require an examination of evidence beyond the scope of the record. Ferrarini has not specified the evidence beyond the record that is necessary to resolve his petition. Because there are no disputed factual issues requiring a hearing, an evidentiary hearing is not warranted. Chang v. United States, 250 F.3d 79, 85-86 (2d Cir. 2001).
For the foregoing reasons, the petition is denied.