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D ock e t 98-1527

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. e du/thir dc ir c uit_1999/72Filed March 18, 1999

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

NO. 98-1527

UNITED STATES OF AMERICA

v.

LEONARD A. PELULLO, Appellant

On Appeal From the United States District Court For the Eastern District of Pennsylvania (D.C. Crim. No. 91-cr-00060) District Judge: Honorable Robert F. Kelly

Argued: January 27, 1999

Before: BECKER, Chief Judge, SCIRICA, and ROSENN, Circuit Judges.

(Filed March 18, 1999)

W. NEIL EGGLESTON, ESQUIRE RICHARD A. RIPLEY, ESQUIRE (ARGUED)
EVAN J. WERBEL, ESQUIRE JULIE K. BROF, ESQUIRE JEANNE-MARIE S. RAYMOND,
ESQUIRE Howrey & Simon 1299 Pennsylvania Avenue, NW Washington, DC 20004

Attorneys for Appellant

Leonard A. PelulloMICHAEL R. STILES, ESQUIRE

United States Attorney
ROBERT E. COURTNEY, III,
ESQUIRE Assistant United States Attorney Chief, Organized Crime Strike Force
WALTER S. BATTY, JR., ESQUIRE Chief of Appeals
WILLIAM B. CARR, JR., ESQUIRE (ARGUED)
RONALD G. COLE, ESQUIRE
FRANK A. LABOR, III, ESQUIRE Assistant United States Attorneys United States Attorney's Office

615 Chestnut Street Philadelphia, PA 19106

Attorneys for Appellee
United States of America

OPINION OF THE COURT

BECKER, Chief Judge.

I. Introduction

This appeal by defendant Leonard Pelullo, arising o ut of
his conviction at his fourth trial in the District Court for wire fraud and civil RICO violations, brings his ca se before
this Court for the fourth time as well. See United States v. Pelullo, 964 F.2d 193 (3d Cir. 1992) ("Pelullo I"); United States v. Pelullo, 14 F.3d 881 (3d Cir. 1994) ("Pel ullo II"); United States v. Pelullo, 105 F.3d 117 (3d Cir. 199 7) ("Pelullo III"). The appeal follows our remand in P elullo III for
the District Court to determine whether Pelullo wou ld have testified at his first trial regardless of the gove rnment's Brady violations, which we identified in Pelullo II and Pelullo III. In remanding, we did not decide the quantum of the government's burden of proving that fact. The Distr ict Court concluded the burden was a preponderance of t he evidence, though it went on to find by clear and co nvincing

2evidence that the government's Brady violation did not

cause Pelullo to testify. See United States v. Pelu llo, 6 F. Supp. 2d 403 (E.D. Pa. 1998).

We devote our attention in this appeal to two issue s. First, we consider whether the District Court appli ed the correct standard of proof. Second, if the District Court applied the correct standard, we must decide whethe r it erred in concluding that the government successfull y met its burden. We agree with the District Court that t he proper standard of proof is preponderance of the evidence and that the government met this standard at the evidentiary hearing. Accordingly, we will affirm on these point s. We dispose summarily of Pelullo's remaining contention s: (i) that the District Court should have recused itself; and (ii) that the District Court erred in changing Pelullo's sentence from two-year suspended sentences on forty-eight co unts following the first trial to four-year active sente nces on those counts following the fourth trial, finding th ese contentions patently lacking in merit.1 However, t he government does not counter Pelullo's contention th at the District Court erred in modifying Pelullo's sentenc e from a
non-committed fine to a committed fine withoutfindi ng that he had the present ability to pay the fine. We agree. Therefore, when the mandate is returned to the Dist rict Court, the District Court shall amend the judgment to
reflect that the fine is a non-committed fine.

II. Facts and Procedural History

The facts in this case have been set forth in detai l in previous opinions, and hence we only set forth thos e facts necessary to decide the narrow issues before us. In 1991,
Pelullo was indicted on 54 counts of wire fraud and one RICO count. The government alleged in Counts 1-53 t hat Pelullo, the CEO of a public company called Royale Group,

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1. With regard to the latter point, we note that be cause we are affirming Pelullo's conviction on Counts 1 and 55, which amou nt to a twenty-four year sentence, and because the District Court desig nated the four-year sentences to run concurrently with Counts 1 and 55, the change in the sentence has no practical effect on the time Pelull o will serve, as

Pelullo

now concedes.

3engaged in two schemes to divert for his personal u se

money loaned to Royale that was to be used to refur bish
several art deco hotels it owned in Miami. In Count 54 of the indictment, the government alleged a third, sim ilar scheme: that Pelullo had diverted $114,000 from a R oyale subsidiary to pay off part of a $250,000 loan that Anthony DiSalvo, a loan shark with purported ties to the Philadelphia Mafia, had made to him. The government 's theory was that Pelullo submitted false documentati on, including fabricated financing requests, that allow ed Royale to obtain loan money in excess of the expenses it a ctually incurred and that Pelullo, as CEO, diverted the exc ess funds for his personal use.

The government's case against Pelullo on Count 54 w as based primarily on the testimony of two FBI agents, Randal Wolverton and Michael Leyden, and of an admitted ma fia underboss named Philip Leonetti. Wolverton testifie d that Pelullo, in a June 14, 1990, interview with FBI age nts (including Wolverton and Leyden), had admitted usin g the $114,000 to pay off DiSalvo. Leonetti testified tha t he met with Pelullo in January 1986 at the Florida home of Nicodemo Scarfo, who was Leonetti's uncle and the r eputed boss of the Philadelphia mob, to tell Pelullo that he had to repay DiSalvo. In late February 1986, Pelullo wired $114,000 from a business bank account to his father 's company (LRP, Inc.) in Philadelphia. One of Pelullo 's brothers (Arthur) allegedly converted the wire tran sfer to cash and gave the cash to their other brother (Pete r) to drop off at DiSalvo's home in Philadelphia.

In response to this testimony, Pelullo took the sta nd and
contradicted Wolverton's claim that Pelullo had adm itted to using Royale funds to repay his DiSalvo debt. He cl aimed that he had not started to pay off the DiSalvo loan until August 1986 and that the $114,000 in question had b een used to repay an intercompany debt in February. The jury, apparently unconvinced by that defense, convicted P elullo of Count 54, 48 other counts of wire fraud, and the RICO count. We vacated this conviction as to every count but Count 54, which we affirmed. See Pelullo I, 964 F.2 d at
222. We vacated the other convictions because the government had failed to authenticate bank records.

4The government subsequently corrected the error, an d in

1993, Pelullo was retried and convicted on all coun ts. Again, we vacated the entire conviction and remande d for retrial. See Pelullo II, 14 F.3d at 907. We conclud ed that the District Court had erred in instructing the jury th at Pelullo's previous conviction on Count 54 conclusiv ely
established a RICO violation. See id. at 897. We al so noted that the government had committed a Brady violation by failing to turn over an IRS memorandum detailing a meeting between IRS Agent James Kurtz and Leonetti, but
we concluded that this violation did not affect the trial's
outcome. See id. at 887.

Prior to the third trial, the government gave Pelul lo three more pieces of Brady evidence. The first piece was Wolverton's rough notes of the June 14, 1990, inter view during which Pelullo discussed the $114,000 transac tion. The notes included the words, "repaying intercompan y debt." That statement appeared nowhere in the FBI's 302 report, although it ostensibly corroborated Pelullo 's defense. The second piece of Brady material was rough notes of Agent Kurtz's interview with Leonetti. Those notes referenced "summer 1986," although that date was no t included in Kurtz's final memo. The third piece of material was the FBI surveillance log of Nicodemo Scarfo's F lorida residence for January 1986. These logs do not list Pelullo as a visitor to the residence during that month.

In his first two trials, Pelullo had taken the stan d, but in
his 1994 and 1995 trials he did not. In his 1994 tr ial, the
District Court was forced to declare a mistrial whe n the jury failed to reach a verdict. In his fourth trial , although Pelullo did not testify in person, the government r ead a portion of his testimony from the first trial into the record. At the end of the fourth trial, in early 1995, the jury
convicted Pelullo on 46 wire fraud counts and the R ICO
violation.

Pelullo appealed from the judgment in the fourth tr ial, challenging his convictions on the 46 wire fraud co unts and the RICO count, his sentence on those counts, and h is earlier conviction on Count 54. With regard to his convictions following the fourth trial, Pelullo cla imed that
he had been forced to take the stand at the first t rial solely

5because the government had violated his constitutio nal

rights by failing to meet its Brady obligation. Wit hout the subsequently-revealed Brady evidence in hand, Pelul lo argued, he had no other way to impeach the three government witnesses. He alleged that his testimony in the first trial was essentially "fruit from a poisonous tree" and that his testimony, read into the record at the fou rth trial,
tainted the fourth trial as well.

We agreed that there had been a Brady violation rel ating
to Count 542 but remanded to the District Court for an evidentiary hearing. See Pelullo III, 105 F.3d at 1 25. Inter alia, we held that the District Court had erred in allocating to Pelullo the burden of proof on the Brady issue a nd gave the government the opportunity to establish, in acc ordance with Harrison v. United States, 392 U.S. 219 (1968) , that
Pelullo would have testified in his first trial eve n if the government had complied with its Brady obligations. See Pelullo III, 105 F.3d at 126. If the government wer e unable to prove that Pelullo's testimony in his first tria l was not prompted by its Brady violation, it would be proble matic for the government to have used his testimony from thef irst
trial as evidence in the fourth trial. In other wor ds, the government had to prove that Pelullo's decision to testify at the first trial was not caused by the Brady violati on. On remand, the District Court held a hearing and made 69 findings of fact based on the evidence from the hea ring, its review of the records of the first two trials, its observation of Pelullo's demeanor at all four trials, and its a nalysis of Pelullo's attorney's testimony about strategy at th efirst trial. It concluded that the government met its bur den by clear and convincing evidence (i.e., by more than a preponderance). Pelullo appeals from this decision.

The District Court's legal determination of the government's requisite standard of proof is subject to de
novo review. See Polselli v. Nationwide Mutual Fire Ins. Co., 23 F.3d 747, 750 (3d Cir. 1994). We review its fact ual findings about the effect of the Brady material on Pelullo's

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2. Accordingly, we reversed Pelullo's conviction fr om the first trial on Count 54, and that Count is not presently before us . See 105 F.3d at

127.

6trial strategy for clear error. See Maine v. Taylor , 477 U.S.

131, 145 (1986); Campbell v. United States, 373 U.S . 487, 493 (1963). A finding is " `clearly erroneous' when although there is evidence to support it, the reviewing cour t on the
entire evidence is left with the definite andfirm c onviction
that a mistake has been committed." United States v

. United States Gypsum Co., 333 U.S. 364, 395 (1948). Where there are two permissible views of the eviden ce, the factfinder's choice between them cannot be clearly erroneous. See Anderson v. City of Bessemer City, 4 70 U.S. 564, 574 (1985). Our review of the sufficiency of t he district court's findings of fact on the sentencing issue is plenary. See United States v. Seale, 20 F.3d 1279, 1284 (3d Cir. 1994).

III. Discussion

A. Standard of Proof

We must first decide whether the District Court cor rectly required the government to meet its evidentiary bur den by only a preponderance of the evidence or whether, as Pelullo urges, the Court should have required the governmen t to prove beyond a reasonable doubt that Pelullo would have testified at his first trial even if he possessed a ll of the laterdisclosed Brady material. While we made clear in Pe lullo III that a defendant's testimony may be subject to supp ression if compelled by a Brady violation, we did not direc t the District Court to apply a particular standard of pr oof when we remanded for the evidentiary hearing. Instead, w e stated:

[B]ecause the district court misallocated th e burden of proof under Harrison [v. United States, 392 U.S. 219 (1968)], we vacate the district court's deni al of Pelullo's
Rule 33 motion for a new trial and remand fo r a new hearing on that motion consistent with this opinion. On remand, the government should be afforded an opportunity to demonstrate, consistent with its burden of proof, that Pelullo would have testified during his
first trial even if the withheld material ha d been turned

over.

7Pelullo III, 105 F.3d at 126.

As instructed, the District Court looked to Harriso n for guidance. In Harrison, the Supreme Court decided th at a defendant's trial testimony must be excluded if tha t testimony is "impelled by the prosecution's wrongfu l use of his illegally obtained confessions." 392 U.S. at 22 4. In allocating the burden of proof, the Supreme Court reasoned, "Having `released the spring' by using th e petitioner's unlawfully obtained confessions agains t him, the Government must show that its illegal action di d not induce his testimony." Id. at 225. The Court did no t, however, articulate what standard of proof applies to the government's burden.

At the evidentiary hearing, the government argued-- and the District Court implicitly accepted--that Harris on was an exclusionary rule case and that the proper standard under such an inquiry is a preponderance of the evidence standard. The Court reasoned that the Supreme Court has applied a preponderance standard when the governmen t has the burden of showing that evidence is not tain ted by, or did not flow directly from, a constitutional vio lation and is therefore not subject to suppression under the exclusionary rule. Pelullo disputes the characteriz ation of Harrison as an exclusionary rule case, contending t hat the government should face a "beyond a reasonable doubt " standard because Harrison cites Chapman v. Californ ia, 386 U.S. 18 (1966), which held that "before a federal constitutional error can be held harmless, the cour t must
be able to declare a belief that it was harmless be yond a
reasonable doubt." 386 U.S. at 24. As will be discu ssed below, Pelullo misunderstands the import of Harriso n and the nature of the evidentiary hearing at issue in t his case.

The exclusionary rule mandates that evidence derive d from constitutional violations may not be used at t rial because illegally derived evidence is considered "f ruit of the poisonous tree." Wong Sun v. United States, 371 U.S . 471, 487-88 (1963). The Supreme Court in Wong Sun explai ned that it is important to determine whether the deriv ed evidence came directly from the exploitation of the
constitutional violation or whether the derived evi dence was obtained "by means sufficiently distinguishable to be

8purged of the primary taint." Id. at 488. The exclu sionary

rule serves to deter constitutional violations by d enying the government the benefit of those violations, and acc ordingly, "the application of the rule has been restricted to those areas where its remedial objectives are thought mos t efficaciously served." Segura v. United States, 468 U.S. 796, 804 (1984).

Courts have developed a number of exceptions to the exclusionary rule, including the independent source
, inevitable discovery, and attenuation doctrines, an d a good faith exception. See, e.g., Segura, 468 U.S. at 805 (independent source); Nix v. Williams, 467 U.S. 431 , 441-44 (1984) (inevitable discovery); Nardone v. United St ates, 308 U.S. 338, 341 (1939) (attenuation); Arizona v. Evan s, 514 U.S. 1, 14 (1995) (good faith). The independent sou rce, inevitable discovery, and attenuation doctrines rec ognize
that where the causal link between the constitution al
violation and later-revealed evidence is tenuous or , indeed, non-existent, the later-revealed evidence can be sa id to be untarnished by the constitutional violation and the refore may be admissible.

The Harrison Court recognized the importance of examining that causal link to determine whether the government's use of a defendant's illegal confessio n at trial induced the defendant to take the stand to testify and, in doing so, make a number of admissions that might no t have come out but for that testimony. See Harrison, 392 U.S. at 224-25. While acknowledging that a number o f factors inevitably play a part in a defendant's dec ision to testify, the Court concluded that the government ha d failed to prove that the defendant's testimony was obtaine d by means sufficiently distinguishable from the underly ing
constitutional violation. See id. at 225-26. We bel ieve the Court in Harrison mandated what is essentially an exclusionary rule inquiry where there appears to be a link
between a constitutional violation and a defendant' s subsequent decision to take the stand.

Pelullo presses a "beyond a reasonable doubt" stand ard on us, based on Harrison's citations to Chapman.3 T he

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3. Pelullo also makes much of the fact that Harriso n cited People v. Spencer, 424 P.2d 715 (Cal. 1967). See Harrison, 39 2 U.S. at 225 n.12.

9Chapman Court observed that as "the beneficiary of a

constitutional error," the state must prove "beyond a reasonable doubt that the error complained of did n ot contribute to the verdict obtained." Chapman, 385 U .S. at 24. This language has become commonplace in harmles s error analyses. However, the issue in Harrison, and indeed at the evidentiary hearing, was whether the defenda nt's trial testimony was corrupted by an earlier constit utional violation; at no point had it been determined that the trial testimony itself was a constitutional violation to which a harmless error analysis might be applied. Criticall y, the inquiry in Harrison was a causation inquiry, not an inquiry
into the effect of a constitutional violation on th e verdict.

In light of Harrison's exclusionary rule framework, and by virtue of the fact that Harrison did not explicitly set out the government's standard of proof, we look to other exclusionary rule cases for guidance on the proper standard of proof. Courts almost invariably have re quired the government to prove only by a preponderance of the
evidence that the causal link between the constitut ional
violation and the later-revealed evidence is suffic iently weak
or remote to merit admission of that evidence. For example, in Nix, the Supreme Court determined that the gover nment must prove by a preponderance that the police would have inevitably discovered the victim's body without the help of an illegally obtained confession. See Nix, 467 U.S. at 444 n.5. The Court was unwilling to impose a higher sta ndard of proof because a higher standard would impose "ad ded burdens on the already difficult task of proving gu ilt in criminal cases by enlarging the barrier to placing evidence of unquestioned truth before juries." See id.; see generally United States v. Matlock, 415 U.S. 164, 177 n.14 (1 974)

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In Spencer, the Supreme Court of California held th at the government had to prove beyond a reasonable doubt that the def endant did not take the stand as a result of the government's use of an improper confession
in court. See 424 P.2d at 724. But the Harrison Cou rt gave no indication that it wished to adopt Spencer's standard of proof analysis, citing Spencer only for the proposition that the governmen t bears the burden of disproving causation. We refuse to read more int o the Court's decision to cite Spencer.

10("[T]he controlling burden of proof at suppression hearings

should impose no greater burden than proof by a preponderance of the evidence."); Lego v. Twomey, 4 04 U.S. 477, 488 (1972) ("[N]o substantial evidence has accumulated that federal rights have suffered from determining admissibility by a preponderance of the evidence.").

Lower courts have followed the Supreme Court's lead
, expanding the preponderance standard to the indepen dent
source doctrine and attenuation cases. The Tenth Ci rcuit in United States v. Lin Lyn Trading, Ltd., 149 F.3d 11 12, 1116 (10th Cir. 1998), held that the government had to p rove by a preponderance that the evidence in question came from an independent source or that the discovery of the evidence
was so attenuated from the constitutional violation as to escape the violation's taint. Likewise, in United S tates v. Dudden, 65 F.3d 1461 (9th Cir. 1995), the Ninth Cir cuit concluded that if the government wished to use evid ence against a defendant to whom it had granted statutor y immunity without violating the Fifth Amendment, it had to prove by a preponderance that it had obtained that evidence from a source independent from the defenda nt's own testimony. See id. at 1468; see also United Sta tes v. Vasquez De Reyes, 149 F.3d 192, 195 (3d Cir. 1998) (requiring government to prove inevitable discovery by a preponderance);4 United States v. Griffin, 48 F.3d 1147,

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4. In Vasquez, we expressed concern about applying the inevitable discovery exception to testimonial evidence. Howeve r, in Vasquez, the defendant was illegally stopped by an INS agent who suspected that she was an illegal alien. After producing papers showin g that she was married to a resident of the Virgin Islands, but af ter failing to show a visa, she was taken to a correctional facility. Her husband arrived at the facility and, after being questioned, revealed that their marriage was a sham. As a result, Mrs. Vasquez De Reyes confessed to the sham. She later filed a motion to suppress her statement base d on the illegal nature of the original stop, but the district court found that the sham nature of the marriage would have inevitably been discovered through an INS investigation of her marriage when she applied to l ive in the U.S. On appeal, Vasquez De Reyes argued that there were too many variables to find that a routine INS investigation would have in evitably disclosed the sham. We agreed, noting that the statement that the government sought

111151 (10th Cir. 1995) (requiring government to prov e by a

preponderance its independent source and inevitable discovery theories); United States v. Bartel, 19 F. 3d 1105, 1112 (6th Cir. 1994) (requiring proof of independen t source by preponderance).

The purpose of the evidentiary hearing in the Distr ict Court was much like an exclusionary rule inquiry in which the government argues that it would have obtained t he evidence anyway under the inevitable discovery or independent source doctrines. The government was gi ven the chance to prove that Pelullo would have testifi ed at the first trial--and the government would have thus "ob tained" his testimony therefrom--even if Pelullo possessed all of the Brady material before the first trial. For the fore going reasons, we agree with the District Court's conclus ion that the government had to meet its burden by a preponde rance of the evidence.

B. The Government's Proof

In light of our conclusion that the District Court held the government to the correct standard of proof at the evidentiary hearing, we must decide whether the Dis trict Court clearly erred in finding that the government had met its burden at the hearing. We hold that the Distric t Court did not clearly err in concluding that the governme nt established by a preponderance "that Pelullo's test imony at the first trial was obtained by means sufficiently distinguishable from the Brady violation to be purg ed of any taint arising from that violation." See Pelullo , 6 F. Supp. 2d at 413. We first review the general scheme of
Count 54 and then address in detail the seven factu al findings explicitly contested by Pelullo.

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to have admitted under the exception was a "stateme nt not yet made," which by nature is not capable of ready verificatio n. 149 F.3d at 195-96. In Pelullo's case, however, the issue is not what P elullo would or would not have testified to, which clearly would require speculation, but whether he would have testified, which is a less sp eculative and more easily verifiable determination.

12Count 54 of the indictment was based on a wire tran sfer

made on February 26, 1986. Pelullo transferred $114 ,000 from the account of Palm Beach Heights, a Royale subsidiary, to LRP, Inc., a company owned by Pelull o's father. The government alleged that Pelullo perform ed the wire transfer and used the transferred corporate fu nds to repay the money he had borrowed from DiSalvo.

As proof of this diversion for personal use, the government relied first on Leonetti's testimony and IRS Agent Kurtz's notes from an interview with Leonetti

. Leonetti testified that at the end of December 1985 , DiSalvo asked him to help collect DiSalvo's loan to Pelullo . Leonetti then stated that he told Scarfo, his "boss," about DiSalvo's request, whereupon they contacted Pelullo in Florid a. Leonetti testified that Pelullo came to Scarfo's ho use in Florida in January 1986, at which time they pressur ed him to repay the DiSalvo loan.5 The government sought t o connect the timing of this meeting with the Februar y wire transfer. The government also relied on Agents Wolv erton's and Leyden's testimony. Both agents testified that Pelullo admitted, during the June 1990 interview with them, that he had used the $114,000 belonging to Palm Beach He ights to repay the DiSalvo debt.

During his testimony about Count 54 at the first tr ial, Pelullo admitted that DiSalvo had lent him money, b ut denied that the $114,000 had been used to repay DiS alvo, or that he had told the agents that it had. Pelullo also denied ever meeting Leonetti, although he acknowled ged that he knew who Leonetti was. He admitted going to Scarfo's house, but claimed that he went there to c onsult with a friend who was doing construction for Scarfo

. Finally, Pelullo testified that he only began to re pay the DiSalvo debt in August or September 1986, and that the loan was not fully paid off until 1987. The Distric t Court made 69 findings of fact; we discuss only the seven contested findings, which provide the primary ratio nales for

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5. The third piece of Brady material, the FBI surve illance logs of

Scarfo's house, did not list Pelullo as a visitor to the hou se in January. However, the logs only covered twelve days in January, see P elullo III, 105 F.3d at 123 n.3, and thus appear to be of little help to Pe lullo's case.

13the District Court's conclusion that Pelullo would have

testified even in the absence of a Brady violation.

1. Propensity to Testify

The District Court concluded that Pelullo's prior c ourse of conduct established "a long history of voluntarily waiving his fifth amendment privilege." See United States v . Pelullo, 6 F. Supp. 2d 403, 414 (E.D. Pa. 1998). The Court r eferred
to a number of instances in which Pelullo had testi fied under oath or had voluntarily given interviews to t he FBI about the subject matter of various indictments, in cluding
this one. While we are hesitant to conclude that so meone has a "propensity" to testify, the District Court d raws a number of valid inferences. From the situations in which Pelullo had waived his Fifth Amendment privilege, i ncluding an example where Pelullo testified and was acquitte d, the
Court inferred that "Mr. Pelullo believed he could persuade the jury that he was telling the truth." See id. Th e District Court also hypothesized that after testifying in hi s own defense in the first two trials and being convicted both times, Pelullo may have decided to change tactics i n the
third trial. See id. Pelullo tries to refute this c onclusion by arguing that his behavior in the third and fourth t rials (i.e., his decision not to testify there) shows that he do es not have a propensity to testify. However, this is an a rea in which we will defer to the District Court, which ha s observed Pelullo's demeanor and conduct over the co urse of

seven years.

2. Entitlement Defense

At the evidentiary hearing, the government attempte d to
show that Pelullo's entire defense--to each of the three discrete schemes that underlay the various counts-- was a defense of entitlement; that is, Pelullo's response to the government's accusation that he had embezzled money was that he was entitled to the money. If the governmen t succeeded in showing that Pelullo needed to testify about each scheme in order to proffer his entitlement def ense, then it would be clear that the Brady information w as neither especially useful to Pelullo nor relevant t o his

14decision to testify. The District Court, adopting t he

government's theory, placed great weight on this fa ctor. Specifically, it stated:

I find that the government has established b y clear and convincing evidence that Mr. Pelullo waived his fifth amendment privilege and voluntarily agreed t o testify
at the first trial so that Mr. Pelullo could present a defense to the jury by explaining that he wa s entitled to use the Royale corporate funds in the man ner that he did, and therefore, he did not commit fra ud as charged in the indictment. I further find th at the Brady
material does not and cannot establish or ev en support the `entitlement' defense Mr. Pelullo sought to establish through his direct testimony.

6 F. Supp. 2d at 412; see also id. at 421.

In response, Pelullo points to trials three and fou r. If it really were necessary for him personally to take th e stand to present his entitlement defense, Pelullo argues, then he would have had to testify in the third and fourth t rials. Noting that the government's case on Counts 1-53 di d not materially change throughout the four trials, Pelul lo
submits that his silence in the third and fourth tr ials shows
that he had no need to take the stand in his own de fense once he had the Brady material.

While this is a compelling argument, we cannot hold that it was clearly erroneous for the District Court to give weight to Pelullo's defense strategy in his first two tria ls. The reason Pelullo did not testify in the third trial w as most likely a combination of factors: his testimony in t he first and second trials had not convinced the jury; his a ttorney
felt that Pelullo could set forth his entitlement d efense well enough using just his father's (and others') testim ony; and the Brady material gave extra support to his defens e. That is, it is highly probable that Pelullo learned cert ain things about his case as the first two trials played out, and that some of that knowledge played a role in his decisio n not to testify at the third trial. While the District Cour t did not make specific findings about Pelullo's defense stra tegy at his third trial, we cannot conclude that it was cle arly erroneous to give weight to Pelullo's strategy in t he first

15trial, even though that strategy had obviously chan ged

slightly by the third trial.

3. Counts 1-53

The District Court found that each count of wire fr aud would expose Pelullo to five years imprisonment; th at Scheme One alleged that Pelullo diverted $1.6 milli on in loan proceeds; that Scheme Two alleged that Pelullo diverted $471,000 of corporate funds; but that Sche me Three (which encompassed Count 54 only) alleged a diversion of $114,000. See 6 F. Supp. 2d at 409. Th e District Court also noted that the government had a strong case against Pelullo on Counts 1-53; the prosecutio n introduced approximately thirty witnesses, in addit ion to voluminous documentary evidence, to prove Pelullo's guilt on those counts. See id. Highlighting the fact that only six of Pelullo's 116 pages of direct testimony related to Count 54, the Court concluded, "[T]he vast majority of Mr

. Pelullo's testimony was dedicated to providing a de fense to the heart of the government's case, namely the two fraudulent schemes charging Mr. Pelullo with defrau ding [his companies] of over $2 million." See id. at 411

.

In sum, the District Court found that the governmen t clearly established that Pelullo had stonewalled Ro yale's accountants to conceal his diversion of corporate f unds, and that absent an explanation justifying that dive rsion, the jury would easily have returned guilty verdicts on Counts 1-53. See id. at 412. In light of this findi ng, the Court concluded that the Brady material would not h ave deterred Pelullo from testifying about his entitlem ent defenses to the weightier charges of diversion in C ounts 1- 53. Therefore, the Court found, Pelullo's testimony at the first trial was "obtained by means sufficiently distinguishable from the Brady violation to be purg ed of any taint arising from that violation." See id. at 413. The Court then inferred that Pelullo, having decided to testify about Counts 1-53, knew he would be subject to cros sexamination about Count 54 and testified about Coun t 54 issues on direct examination to diffuse their poten cy. See
id.

16The Court drew support for its conclusion from anot her

situation at the first trial. Well into the first t rial, one of Pelullo's attorneys, Dennis Richard, told the Court that the
defense would call two more witnesses before it dec ided whether to put Pelullo on the stand. After calling those two witnesses, neither of whom testified about anything related to the DiSalvo loan or the $114,000 wire transfer, the
defense decided to call Pelullo as a witness. The D istrict Court found that this decision supported the govern ment's position that Pelullo would have testified even if the Brady
material had been disclosed. See id. at 417-18. The Court apparently reasoned that the decision whether to ca ll Pelullo hung on what those two witnesses managed to convey; that the defense knew at that point that th ose witnesses would have nothing to say about the $114, 000; and that Pelullo had to take the stand to convey ad ditional information that the two witnesses had not imparted
, information unrelated to the DiSalvo loan. See id. at 418. While this is not the only inference that the Distr ict Court could have drawn from these facts, it is a viable i nference,
and thus we cannot find clear error.

4. Whitaker

Although Pelullo did not bear the burden of proving the causal connection between the Brady violation and h is testimony, he nevertheless introduced the testimony of Glenn Whitaker, his attorney from the first trial. Whitaker
testified as follows:

Q: What were the determining factors in that decis ion to have [Pelullo] testify [at the first tria l]?

W: Well, primarily that we had two F.B.I. ag ents testifying about a meeting at which Mr. Pelu llo was present, and their testimony needed to be re butted about a particular reference that's containe d in this 302 [report] . . . .

Q: Is that the reference that is at Page JA- 774, t he last
four lines?

W: Yes. The reference is that a $114,000 wir e tran sfer from the debtor-in-possession account to LRP , Inc.,

17was used to repay Tony DiSalvo. We felt it e ssential

that we call Mr. Pelullo to respond to that, because, quite frankly, there was no other way to dea l with that issue. In addition, we felt that we were req uired to respond to the testimony of Mr. Leonetti abo ut his contacts with Mr. Pelullo, and, again, there was no one else available to deal with that, and there was no effective cross-examination material to deal with those
witnesses.

6 F. Supp. 2d at 408. Whitaker further stated that Pelullo was put on the stand to deny that he made the state ment alleged in the 302 report and to deny that he had h ad
direct contact with Leonetti. See id. at 408-09. In addition, Whitaker noted that he felt that they had "adequate defenses and adequate presentation as to the other counts. Count 54 was the one [they were] most concerned abo ut."
See id. at 409.

The Court considered five factors in weighing Whita ker's credibility: (i) Whitaker spoke with Pelullo after we remanded for an evidentiary hearing; (ii) Whitaker reviewed our opinion in Pelullo III; (iii) Whitaker reviewed the Brady material before testifying at the evidentiary heari ng; (iv) Whitaker understood the purpose of the remand heari ng; and (v) Whitaker testified that the law firm he wor ked for when he represented Pelullo was owed over $100,000 in legal fees. See id. at 419. Coupled with the Court' s incredulity that, counter to Whitaker's testimony, Pelullo would not have defended himself against Counts 1-53 in person using his entitlement defense, the Court fou nd these factors rendered Whitaker's testimony unbelie vable. However, as Pelullo points out on appeal, most prep ared witnesses would meet factors (i)-(iv). It is also d oubtful that Whitaker would feel an obligation to help his oldfi rm obtain outstanding fees. Had the District Court rel ied on factors (i)-(v) alone in questioning Whitaker's cre dibility, we might well have found clear error. But the District Court made further findings about Whitaker that affect th e calculus.

For instance, Whitaker's closing argument troubled the
District Court. The Court observed that Whitaker's closing
at the first trial did not mention the evidence Pel ullo now

18claims was the sole reason he testified. See id. at 416. In

fact, in closing, Whitaker conceded for the sake of argument that the $114,000 may have been used to re pay DiSalvo, as the government had contended. Whitaker then argued that Pelullo was nevertheless entitled to us e the money for that purpose:

[L]et's assume that Peter Pelullo used that money to repay Tony DiSalvo. Let's assume that what t he Government has said is correct, and we deny it, and the evidence doesn't establish that that hap pened in any way, shape [or] form. But let's assume h e did that. . . . Because again, Peter Pelullo was entit led to the money as compensation and he could use that money any way that he wanted to use it. And if he wanted to use it to repay a debt of his son, if he wan ted to use [it]
to take to the racetrack . . . whatever it w as that he wanted to do with it, it was his business.

Id. at 417.

In the District Court's view, the quoted language c alled into question the asserted reason that Pelullo test ified, since Whitaker did not mention Pelullo's testimony rebutting Leonetti and Wolverton. Second, it illust rated the importance of the entitlement defense to Pelullo's case and
bolstered the District Court's conclusion that Pelu llo would have testified anyway to set forth that defense.

The District Court was troubled by yet another of Whitaker's trial strategies. The Court thought that when Pelullo reviewed Wolverton's formal report and saw that the report included an "admission" that the $114,000 we nt to pay off DiSalvo, Whitaker should have requested Wolverton's rough notes of the interview to see whe ther those notes correlated with the formal report. See id. at 419. Instead, Whitaker merely filed a pretrial moti on asking that the rough notes be preserved so that they woul d be
available for use at trial. Whitaker did not ask to see the rough notes after Wolverton and Leyden testified.

The District Court found a final reason to disbelie ve Whitaker. It properly noted the "questionable" impe achment value of the surveillance logs, see Pelullo III, 10 5 F.3d at 123 n.3 (noting that the logs only covered twelve d ays in

19January), and therefore found unpersuasive Whitaker 's

testimony that having the logs available would have influenced Pelullo's decision to testify in thefirs t trial. See
id. at 421.

Pelullo strongly opposes the District Court's (and the government's) supposed intimations that Whitaker's conduct was less than impeccable and objects to the ir putative slur on his professional reputation. We do not find such supposed aspersions to have been made; indeed, it appears to us that Whitaker is a highly reputable ( and capable) lawyer. We also acknowledge the force of P elullo's response to the District Court's (and the governmen t's) arguments on this point. However, taking as a whole the Court's findings about Whitaker, we cannot conclude that it clearly erred in choosing not to credit Whitaker 's testimony about the reasons Pelullo testified in th e first trial.6

5. Ambiguous Testimony at the First Trial

The District Court devoted a number of its findings to a comparison between Whitaker's testimony about why Pelullo took the stand and what Pelullo actually te stified to on the stand at the first trial. Finding that Pelul lo did not testify unambiguously about the things he had purpo rtedly planned to testify to, the District Court inferred that Whitaker's testimony was not entirely believable an d appeared to be an "after-the-fact" explanation of w hy
Pelullo took the stand. See id. at 414-15.

___________________________________________________ ______________

6. The District Court was mistaken when it faulted Whitaker for failing to cross-examine Wolverton and Leyden about the con tent of their notes. The Court concluded, "Mr. Whitaker's failure to eve n broach this subject during the cross-examination of Agents Wolverton an d Leyden at the first trial raises a significant doubt that Mr. Pelullo t old Mr. Whitaker before the first trial that he had made the statement`repa ying intercompany debt' during his interview with the agents." See 6 F. Supp. 2d at 420. However, as Pelullo points out, Whitaker had nothin g with which to confront the agents, in light of the Brady violatio n. Whitaker did crossexamine the agents on other issues, but he can hard ly be faulted for believing he had nothing to cross-examine the agent s with on the $114,000 question. This fact does not, however, alt er our ultimate
conclusion.

20Specifically, Whitaker stated that Pelullo wanted t o tell

the jury his version of events; with regard to the FBI interview, the Court perceived that version to be a clear statement that Pelullo used the $114,000 to "repay company debt." But the Court found that Pelullo nev er explicitly offered this explanation. See id. at 415 . Instead, the Court noted that Pelullo testified at trial, "I said I don't remember the $114,000 going to pay Tony DiSalvo, bu t I do have or did have a loan with Tony DiSalvo." See id. The
Court concluded that the "two versions of what Mr. Pelullo supposedly told the FBI agents are irreconcilable." See id.

We disagree. The District Court apparently wanted Pelullo to testify verbatim about what he ostensibl y told the FBI agents, but that was not within its power to re quire. At all events, the two versions are not irreconcilable . The District Court ignored the segment of Pelullo's tes timony that came just before the above-quoted language. In response to a question about the circumstances of t he February wire transfer, Pelullo stated, "That trans fer was a transfer that I made to authorize to LRP for moneys that my dad was owed by the company." Since Pelullo had just testified that the February wire transfer went to p ay off an intercompany debt, it is overly formalistic to requ ire that he reiterate that point a few questions later in prede termined language. In sum, the District Court clearly erred on this set of findings, but this does not render its overa ll conclusion clearly erroneous.

The District Court found similar problems with Pelu llo's testimony about Leonetti. While acknowledging that Pelullo denied meeting Leonetti, the Court noted that Pelul lo
admitted that he had been to Scarfo's house on two occasions, and that he did not deny that these visi ts had occurred in January 1986. The Court then faulted Pe lullo for failing to deny that "he met with Mr. Scarfo an d Mr.
Leonetti on either or both of those occasions." See id. at 416. But Pelullo had already testified, when asked if Leonetti ever contacted him about the DiSalvo loan, that Leonetti never had contacted him. Perhaps his lawye r should have made sure to ask Pelullo whether he vis ited Scarfo's house in January; it appears that Pelullo did not deny that his visits to Scarfo's house were in Janu ary

21because he was never asked when those visits occurr ed.

The District Court declared, "It is inconceivable t o me under these circumstances that Mr. Pelullo would ha ve given up his constitutional privilege only for the purpose of providing such vague and ambiguous testimony." See id. While it would be unfair to require Pelullo to lay out his defense in specific words, we do not think the Dist rict Court erred in inferring that Pelullo would have se t forth a clearer defense if he truly had decided to testify solely to rebut the government's case on Count 54.

6. Testimony in the Second Trial

At his second trial, Pelullo again testified in his own defense, setting out his entitlement theory much as he had
in the first trial. The District Court found that t he only significant difference between his testimony at the two trials was that he did not testify about the $114,0 00 in the second trial. The Court found that this was "powerf ul and compelling evidence that his reason for waiving his fifth amendment privilege and testifying at the first tri al had nothing to do with the information contained in the Brady material, because the information contained in the Brady material was relevant only to the $114,000 transact ion with
Mr. DiSalvo and was not relevant to the other count s about which Mr. Pelullo freely testified." See id. at 413

.

Pelullo correctly points out that the District Cour t had (erroneously) ruled at the beginning of the second trial that the jury would be instructed that it had to find as a matter
of law that Pelullo had committed the acts set fort h in Count 54. Pelullo argues that he had no choice but to take the stand in an attempt to mitigate the explosive i mpact of that error, though he fails to explain precisely wh y he felt that taking the stand to discuss Counts 1-53 would mitigate the error. Thus, he would have us conclude , the trial was so fraught with error that it cannot be u sed as evidence of anything.

However, with regard to trial two, either of two assumptions could be correct. While it might be tru e that Pelullo had to get on the stand in order to combat the District Court's erroneous use of collateral estopp el, it also

22could be true that taking the stand when Count 54 w as not

in issue indicates that the role of Pelullo's testi mony in his own defense encompassed more than just a response t o Count 54. Since either inference is viable, we disc ern no clear error in the District Court's finding.

7. Pelullo's Other Evidence in Defense Against Cou nt 54

The District Court found that Pelullo had a signifi cant amount of evidence that he could use in mounting a
defense to Count 54. This evidence included his fat her's testimony that Royale owed his company money for th e hotel renovation project; that the $114,000 transfe r in February was partial payment of that debt; that he used the $114,000 for personal reasons; and that he did not use the money to repay DiSalvo on his son's behalf. See id. at

411.

Beyond refuting the accusations against Pelullo, Pe lullo's family offered an affirmative explanation for the e vents at issue. See id. His father testified that in August 1986,
Leonard's brother Arthur told him that Leonard had borrowed money from DiSalvo and that Scarfo and Leo netti had advised the Pelullos to repay DiSalvo. Leonard' s brother Peter testified that he helped Leonard repa y DiSalvo by borrowing money from a bank in September 1986; P eter stated that he then gave that money to Arthur to gi ve DiSalvo. Leonard introduced bank documents supporti ng this story, including a $55,000 bank check drawn on his brother's account, made payable to DiSalvo. The Dis trict Court did not clearly err in concluding that, based on this evidence list, Pelullo could have mounted a defense to Count 54 without taking the stand himself.

The Court also found that Pelullo had a number of w ays to impeach Leonetti's testimony, only one of which was taking the stand. As we noted in Pelullo II, "Leone tti was subject to extensive cross-examination and impeachm ent. The defense attacked Leonetti's credibility by brin ging to light the accounts of his murders and his desperate deals with the government in order to get out of prison s ooner." Pelullo II, 14 F.3d at 887. The District Court also found that Pelullo, in a motion after the second trial, had de scribed

23Leonetti's trial testimony as having "minuscule rel evance."

See 6 F. Supp. 2d at 420. From that language, the D istrict Court inferred that Leonetti's testimony had little effect on Pelullo's decision to waive his Fifth Amendment rig hts. While an alternate reading--that Pelullo simply was downplaying to the court the significance of an adv erse witness's testimony--is possible, the District Cour t's reading is plausible too.

In sum, based on the whole of the District Court's findings of fact, we cannot say that the District C ourt clearly erred when it found that the government pro ved by a preponderance of the evidence that Pelullo would have testified during his first trial even if the withhe ld material
had been made available to him. While the District Court's findings of fact were not uniformly correct, we are not left
with a "definite and firm conviction that a mistake has been committed." See United States Gypsum, 333 U.S. at 3 95. The judgment of the District Court will be affirmed

. However, upon return of the mandate to the District Court, the Court shall amend the judgment to reflect that the fine
is a non-committed fine.

A True Copy:

Teste:

Clerk of the United States Court of Appeals
for the Third Circuit

24