1999 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

3-9-1999

USA v. Morelli

Precedential or Non-Precedential:

Docket 96-5144,96-5389

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Recommended Citation

"USA v. Morelli" (1999). 1999 Decisions. Paper 59.

http://digitalcommons.law.villanova.edu/thirdcircuit_1999/59
Filed March 9, 1999 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

NOS. 96-5144 and 96-5389 

UNITED STATES OF AMERICA 

v. 

MORELLI, ANTHONY 

(D.C. Crim. No. 93-cr-00210-1) 

Appellant in No. 96-5144 

(Amended per Clerk's order of 7/8/98) 

UNITED STATES OF AMERICA 

v. 

IGOR ROIZMAN, a/k/a Little Igor 

(D.C. Crim. No. 93-cr-00210-10) 

IGOR ROIZMAN, Appellant in No. 96-5389 

On Appeal From the United States District Court 

For the District of New Jersey 

District Judge: Honorable William G. Bassler 

Argued: June 5, 1997 

Reargued: September 8, 1998 

Before: BECKER, Chief Judge, SCIRICA, Circuit Judge, 

and KELLY, District Judge.* 

(Filed March 9, 1999) 

_________________________________________________________________ 

*Honorable James McGirr Kelly, United States District Judge for the 

Eastern District of Pennsylvania, sitting by designation. 
 JUDD BURSTEIN, ESQUIRE 

 (ARGUED) 

 MARC FERNICH, ESQUIRE 

 Burstein & Fass LLP 

 1790 Broadway 

 New York, NY 10019 

 Counsel for Appellant 

 Igor Roizman 

 MICHAEL S. VOGEL, ESQUIRE 

 Allegaert, Berger & Vogel LLP 

 111 Broadway 

 New York, NY 10006 

 NICHOLAS A. GRAVANTE, JR., 

 ESQUIRE (ARGUED) 

 Barrett, Gravante, Carpinello & 

 Stern LLP 

 1585 Broadway 

 New York, NY 10036 

 RICHARD A. REHBOCK, ESQUIRE 

 Law Office of Richard A. Rehbock 

 One Maple Run Drive 

 Jericho, NY 11753 

 Counsel for Appellant 

 Anthony Morelli 

 FAITH S. HOCHBERG, ESQUIRE 

 United States Attorney 

 GEORGE S. LEONE, ESQUIRE 

 Assistant United States Attorney 

 ELIZABETH S. FERGUSON, 

 ESQUIRE (ARGUED) 

 Assistant United States Attorney 

 970 Broad Street - Room 700 

 Newark, NJ 07102 

 Counsel for Appellee 

 United States of America 

 2 
OPINION OF THE COURT 

BECKER, Chief Judge. 

These appeals by defendants Anthony Morelli and Igor 

Roizman from judgments in a criminal case raise two

issues of criminal law and procedure. Morelli's appeal 

centers on the interpretation of the federal money 

laundering statute, 18 U.S.C. S 1956, in the context of wire 

fraud. Roizman's appeal involves the question of ineffective 

assistance of counsel where the defendant's attorney faces 

a possible conflict of interest. 

The scheme in which Morelli and Roizman were involved 

engaged in a series of transactions that resulted in the 

embezzlement of excise taxes from fuel sales. Each series 

included a number of wire transfers, each of which 

occurred after the money involved came into the possession 

of those who controlled the scheme. At trial, the 

government proved only that specific transfers had 

occurred before the point at which the taxes should have 

been collected for transmittal to the government. Morelli 

argues that these series of transactions did not constitute 

money laundering. 

He claims initially that the government failed to prove 

that any of the transactions involved proceeds of fraud, 

since the government offered no proof of wire transfers 

occurring after the point at which the taxes should have 

been collected. He contends that the money did not become 

the proceeds of fraud until after it should have been 

collected for the government but was not. We reject this 

conclusion because we believe that the money became the 

proceeds of fraud as soon as it entered the hands of 

members of the scheme. Alternatively, Morelli submits that 

the money was not the proceeds of wire fraud because the 

money came into the possession of the scheme as a result 

of fraud before any of the wirings involving the money 

occurred. But he ignores the fact that the scheme 

succeeded as a result of each and every wiring within each 

and every series of transactions. Accordingly, the money 

within each series of transactions was the proceeds of wire 

 3 
fraud because the fraud from which it resulted was 

promoted by the wire transfers within the preceding series 

of transactions. 

Morelli also contends that the District Court erred in not 

granting him a downward departure from the money 

laundering guideline, U.S.S.G. S 2S1.1, because his conduct 

did not fall within the "heartland" of money laundering. We 

disagree, and dispose of this contention summarily in note 

13 infra. 

Roizman's appeal alleges that his attorney provided

inadequate assistance because of a conflict of interest. 

Roizman's attorney represented both him and an individual 

whose statements were introduced at trial as hearsay 

evidence against him. Roizman first argues that his lawyer's 

conduct was deficient since he faced an actual conflict of 

interest to the extent that his ability to impeach the 

witness's hearsay statements conflicted with his duties to 

the witness as his client. The District Court rejected this 

claim because it found that impeachment of the witness 

was not a "plausible alternative defense strategy" for 

Roizman. Because we agree with the District Court's

conclusion, and because such impeachment would not 

have adversely affected the witness's interests, we reject 

Roizman's argument. 

Roizman also contends that his conviction should be

reversed on a potential conflict-of-interest theory. He claims 

that the prosecutor, as well as his own attorney, knew of 

the conflict his attorney faced and, thus, violated his 

constitutional rights by not bringing it to the attention of 

the District Court. We can only grant a reversal for a 

potential conflict of interest, however, if the District Court 

itself was or should have been aware of the conflict and 

failed to address it. Since Roizman does not contend that 

the District Court should have been aware of the conflict, 

we reject his claim. We will therefore affirm the judgments 

of the District Court. 

I. Procedural History 

Morelli, Roizman and a number of coconspirators 

participated in a "daisy chain" scheme to evade excise taxes 

 4 
on the sale of certain kinds of fuel. The elements of such 

schemes have been detailed sufficiently elsewhere. See, e.g., 

United States v. Sertich, 95 F.3d 520, 522 (7th Cir. 1996), 

cert. denied, 519 U.S. 1113 (1997); United States v. Veksler, 

62 F.3d 544, 547 (3d Cir. 1995); United States v. Macchia, 

35 F.3d 662, 665-66 (2d Cir. 1994); United States v. 

Victoria-21, 3 F.3d 571, 573 (2d Cir. 1993); In re Assets of 

Martin, 1 F.3d 1351, 1353 (3d Cir. 1993); United States v. 

Tarricone, 996 F.2d 1414, 1416-17 (2d Cir. 1993); United 

States v. Aracri, 968 F.2d 1512, 1514-17 (2d Cir. 1992); 

United States v. Musacchia, 900 F.2d 493, 495-96 (2d Cir. 

1990), vacated, 955 F.2d 3 (2d Cir. 1991). We will set forth 

any relevant facts in our discussion of particular 

substantive issues. 

As a result of their activities, Morelli and Roizman were 

charged in a forty four-count indictment, tried, and 

convicted of some of the counts. Several other 

coconspirators pleaded guilty at different times. Morelli was 

convicted of a RICO conspiracy, racketeering, an extortion 

conspiracy, extortion, mail fraud, and general conspiracy. 

With respect to the RICO conspiracy, the jury found that 

the government had proven money laundering as one of 

many predicate acts. With respect to the general conspiracy 

conviction, the jury found that one of the objects of the 

conspiracy, among others, was money laundering. Morelli 

was not named in any of the racketeering acts alleging 

money laundering. However, he was sentenced under the 

money laundering guideline, which provided the highest 

offense level. He received a three-point enhancement 

because he acted as a manager or supervisor of the money 

laundering conspiracy. The District Court then departed 

downward three levels, finding that the value of the funds 

laundered detailed in the Presentence Investigation Report 

overrepresented the crime. Morelli was sentenced to 240 

months in prison. Roizman was convicted of RICO 

conspiracy, mail fraud, and extortion, and was sentenced to 

90 months in prison. These timely appeals followed. 1 

_________________________________________________________________ 

1. The District Court properly exercised jurisdiction over the matter 

under 18 U.S.C. S 3231. We exercise appellate jurisdiction over the final 

judgment of the District Court under 18 U.S.C. S 3742 and 28 U.S.C. 

S 1291. 

 5 
In addition to the arguments outlined in the introduction, 

the defendants each make a number of arguments that are 

patently without merit; hence we identify them and dispose 

of them summarily in the margin. Morelli contends that the 

District Court erred in applying his Role in the Offense 

adjustment to all of his offense groupings for sentencing 

purposes.2 He also claims that he should not have been 

convicted of RICO conspiracy because he did not commit or 

agree to commit two predicate acts.3 Finally, Morelli insists 

that his Sixth Amendment right to counsel was violated 

because two cooperating witnesses, Dougherty and Zummo, 

had previously participated in a joint defense agreement.4 

Roizman adopts by reference those of Morelli's claims that 

are relevant to him.5 

Following the initial oral argument in this case in June of 

1997, we placed it in abeyance pending the Supreme 

Court's decision in Salinas v. United States, 522 U.S. 52 

_________________________________________________________________ 

2. Morelli submits that the Sentencing GuidelineS 3B1.1 enhancement 

for "Role in the Offense" should have been applied only to the extortion 

group of crimes, and not the money laundering or fraud groups. The 

District Court concluded otherwise, and we see no error in its 

conclusion. The evidence supports the conclusion that Morelli was a 

"supervisor or manager" with respect to the fraud and money laundering, 

as well as the extortion. 

3. Morelli's appeal on this point rested on his argument that we should 

reverse our decision in United States v. Adams, 759 F.2d 1099 (3d Cir. 

1985). However, the Supreme Court has held that our conclusion in 

Adams was correct. See Salinas v. United States, 522 U.S. 52 (1997). 

4. The District Court found no such violation of Morelli's Sixth 

Amendment rights. United States v. Morelli, Opinion & Order, Crim. No. 

93-210 (D.N.J. Jan. 26, 1998). It concluded that"[t]here was no evidence 

that either Dougherty or Zummo revealed any confidential defense 

strategy or any other prejudicial information to the Government." Slip 

op. at 7. We see no clear error in its finding, and accordingly affirm its 

conclusion that Morelli's Sixth Amendment rights were not violated. 

Morelli also argued that the government should have been directed to 

produce its notes of its meetings with Dougherty and Zummo for 

Morelli's inspection. Based on our in camera inspection of these notes we 

agree with the District Court that they contained no information 

pertinent to his claim. 

5. Since we affirm the District Court's conclusions on all points, we need 

not determine precisely which of Morelli's arguments Roizman adopts. 

 6 
(1997). See supra note 3; see also United States v. Morelli, 

Order, Nos. 96-5144 & 96-5389 (3d Cir. June 23, 1997). In 

the meantime, we remanded certain issues to the District 

Court for further factual findings. The Supreme Court has 

now decided Salinas, see supra note 3, and the District 

Court has certified its findings on the issues to which we 

directed its attention, see supra note 4 & infra Part III. 

Accordingly, the appeal is now ripe for decision. 

II. Morelli's Appeal 

A. Preservation of Issue for Review 

We first take up Morelli's argument that the District 

Court erred in calculating his sentence based primarily on 

the money laundering guideline, U.S.S.G. S 2S1.1. He 

contends that, as a matter of law, the facts do not support 

the conclusion that money laundering occurred. Although 

Morelli frames this submission as a challenge to his 

sentence, it is in actuality a sufficiency of the evidence 

argument. Morelli did not raise this in a Rule 29 motion, 

which would ordinarily be required of a sufficiency claim. 

See United States v. Powell, 113 F.3d 464, 466-67 (3d Cir. 

1997) ("If a defendant fails to file a timely motion for 

judgment of acquittal, we review sufficiency of evidence for 

plain error." (citing United States v. Gaydos, 108 F.3d 505, 

509 (3d Cir.1997))), cert. denied, 118 S. Ct. 454 (1997). 

Nevertheless we find that it is properly before us on the 

conventional direct appeal standard of review because of 

the unusual procedural posture, i.e., that this issue is only 

relevant for sentencing purposes. 

Morelli was convicted of a multiple-object general 

conspiracy and a RICO conspiracy with numerous predicate 

acts. The jury found that these conspiracies had objects or 

predicate acts other than money laundering that Morelli 

does not challenge on appeal. Thus, even if he presented a 

successful challenge to the money laundering allegations, 

we would not reverse Morelli's conviction on the conspiracy 

count because, as he concedes, he was involved in a

criminal conspiracy, albeit one to commit mail and wire 

fraud and extortion. See Griffin v. United States, 502 U.S. 

 7 
46 (1991); United States v. Conley (Conley II), 92 F.3d 157, 

163 (3d Cir. 1996) ("It is clear that when a jury returns a 

general verdict of guilty on a multi-object conspiracy count, 

the conviction will stand over Fifth Amendment due process 

objections so long as there is sufficient evidence to support 

any one of the objects of the conspiracy."), cert. denied, 520 

U.S. 1115 (1997). Likewise, he cannot challenge his RICO 

conspiracy conviction, as he concedes numerous predicate 

acts, including those same crimes, which are sufficient to 

support the conviction. See United States v. Vastola, 989 

F.2d 1318, 1330 (3d Cir. 1993) (applying the reasoning of 

Griffin and concluding that the dismissal of one predicate 

act did not require reversal of a racketeering conviction 

where a sufficient number of other predicate acts on which 

the jury's verdict could have rested remained). 

Furthermore, determining the objects of a conspiracy and 

the predicate acts of a RICO conspiracy for sentencing 

purposes is the duty of the trial judge, not the jury. See 

Conley II, 92 F.3d at 169 ("[T]he district court's 

determination of the object of the conspiracy is wholly 

independent of the jury's determination of the object of the 

conspiracy."). Since this decision on the part of the District 

Court is not bound up with the jury's verdict, it need not be 

challenged in a Rule 29 motion for acquittal 

notwithstanding the jury's verdict.6 Rather, a defendant 

need only challenge the district court's findings as to the 

objects of the conspiracy and the RICO predicate acts at 

sentencing in order to preserve the issue for review. 

Because Morelli raised his present claim in his sentencing 

hearing, we conclude that it is appropriately before us. 

"When [as here] the essential facts are not in dispute, our 

review of the district court's interpretation of the 

Guidelines, like our review of a statute's interpretation, is 

plenary." United States v. Bogusz, 43 F.3d 82, 85 (3d Cir. 

1994) (citing United States v. Rosen, 896 F.2d 789, 790-91 

(3d Cir.1990)). 

_________________________________________________________________ 

6. Unlike the verdict in Conley II, the jury in this case returned a 

special 

verdict concerning the objects of the conspiracy and the predicate acts 

of the RICO conspiracy. Accordingly, the District Court's conclusion that 

money laundering occurred is buttressed by the jury's special verdicts to 

similar effect. 

 8 
B. Money Laundering -- Facts and Legal Background 

Because the facts of this case are somewhat complicated, 

we will briefly review those revolving around the alleged 

money laundering. The particular scheme in which the 

defendants participated was termed "the Association." The 

Association organized a group of companies, all of which it 

controlled, into a "daisy chain," for the purpose of 

embezzling the excise taxes on the sale of certain kinds of 

fuel. Typically, the companies would sell oil down the chain 

in a series of paper transactions, through what was referred 

to as the "burn company." Eventually, the company at the 

bottom of the chain, the "street company," would sell the oil 

to a legitimate retailer, i.e., a particular gas station, for a 

price slightly below the tax-included market price. This 

retailer would pay money to the street company, which 

would send money back up the chain in a series of wire 

transfers.7 

This scheme was illegal because it was set up as a means 

to avoid excise taxes. The daisy chain was established so 

that the burn company was the one legally responsible for 

collecting the excise taxes on the fuel sales and 

transmitting them to the government. In the Association's 

scheme, the burn company would collect the taxes for a 

time, and then disappear without ever paying the taxes to 

the government. As a result, the Association could keep the 

money representing the excise taxes without the 

government being able to determine where it had gone. The 

indictment charged, and the jury found, that this conduct 

constituted both wire fraud and money laundering. It 

charged the first wire transfer, from the street company to 

the next company above it in the chain, as wire fraud. It 

charged the second and subsequent wire transfers as

money laundering. 

_________________________________________________________________ 

7. The money was not always wired back up the chain via each 

individual company. Occasionally, a wire transfer would skip some 

companies. In addition, the wire transfers apparently almost always 

skipped the burn company. As the discussion below demonstrates, 

however, these details need not concern us, because it is sufficient that 

the money was wired at least once. 

 9 
The money laundering statute, 18 U.S.C. S 1956(a)(1), 

provides: 

 Whoever, knowing that the property involved in a 

 financial transaction represents the proceeds of some 

 form of unlawful activity, conducts or attempts to 

 conduct such a financial transaction which in fact 

 involves the proceeds of specified unlawful activity -- 

 (A)(i) with the intent to promote the carrying on of 

 specified unlawful activity; or . . . (B) knowing that the 

 transaction is designed in whole or in part -- (i) to 

 conceal or disguise the nature, the location, the source, 

 the ownership, or the control of the proceeds of 

 specified unlawful activity . . . [is guilty of money 

 laundering]. 

The statute, in pertinent part, sets forth four elements of 

the crime: (1) an actual or attempted financial transaction 

(2) involving the proceeds of specified unlawful activity; (3) 

knowledge that the transaction involves the proceeds of 

some unlawful activity; and (4) either (a) an intent to 

promote the carrying on of specified unlawful activity, or (b) 

knowledge that the transaction is designed to promote the 

underlying specified unlawful activity or "to conceal or 

disguise the nature [or] the source . . . of the proceeds of 

specified unlawful activity." 18 U.S.C. S 1956(a)(1). Morelli 

does not contest the first and third elements. He also does 

not contest the intent element of money laundering.8 

The term "specified unlawful activity" is defined, in 

pertinent part, by reference to those acts that constitute 

"racketeering acts" under RICO. See 18 U.S.C. 

S 1956(c)(7)(A) ("[T]he term `specified unlawful activity' 

means any act or activity constituting an offense listed in 

section 1961(1) of this title . . . ."). UnderS 1961(1), wire 

_________________________________________________________________ 

8. He does complain, however, that it is unfair for the government to 

charge both promotion and concealment with respect to the same 

transactions. See United States v. Paramo, 998 F.2d 1212, 1218 (3d Cir. 

1993) (noting that another court has observed that"conduct punishable 

[as concealment] typically would not also be punishable [as promotion, 

and vice versa]"). We have noted, however, that these two motivations are 

not necessarily inconsistent, as "a finding of guilt [for concealment] is 

not a defense to a prosecution [for promotion]." 998 F.2d at 1218 n.3. 

 10 
fraud is a "specified unlawful activity," but tax fraud 

simpliciter is not. See 18 U.S.C. S 1961(1)(B). 

We have interpreted the money laundering statute several 

times. See, e.g., United States v. Conley (Conley I), 37 F.3d 

970 (3d Cir. 1994); United States v. Paramo, 998 F.2d 1212 

(3d Cir. 1993). Paramo focused solely on the fourth element 

of the statute -- whether the defendant's actions 

constituted sufficient evidence of the appropriate intent. 

See 998 F.2d at 1216-18. In Conley I, we focused both on 

this intent element and on the second element -- whether 

the funds at issue were the "proceeds of a specified 

unlawful activity." 37 F.3d at 977-81. Whether certain 

money constitutes "proceeds of specified unlawful activity" 

is the sole contested question presented in this case. 

In Conley I, we held that "[a]lthough the money 

laundering statute does not define when money becomes 

`proceeds,' it is obvious to us that proceeds are derived from 

an already completed offense, or a completed phase of an 

ongoing offense . . . ." 37 F.3d at 980. This is true even if 

the money laundering transaction can also be considered a 

part of the continuing specified unlawful activity. In Conley 

I, the defendant was charged with conspiracy to conduct an 

illegal gambling business and to commit money laundering. 

The conspiracy revolved around the distribution and use of 

illegal video poker machines. The money laundering aspect 

of the scheme derived from the retrieval and distribution of 

the money deposited in the machines. We concluded that, 

since the distribution and use of the machines alone 

constituted an illegal gambling business, the specified 

unlawful activity had been completed at the time the 

conspiracy's activities resulted in proceeds. Accordingly, the 

money retrieved from the machines was proceeds of the 

illegal gambling business, even though the retrieval of the 

money was also chargeable as part of the crime of 

conducting the business. See 37 F.3d at 980. 

This case forces us to decide the question we partially 

(and tangentially) addressed in Conley I: whether the funds 

involved in the alleged money laundering transaction were 

"proceeds of specified unlawful activity." Morelli makes two 

arguments. First, he contends that the money did not 

become proceeds until after it passed through the burn 

 11 
company. He alleges that this is significant because the 

government offered no evidence as to how much money was 

wired after it passed through the burn company, thus 

failing to prove that money laundering occurred. In the 

alternative, he claims that, if the money became proceeds 

before it passed through the burn company, it did so as 

soon as it came into the Association's control. Thus, it 

cannot have been the proceeds of wire fraud, since the wire 

fraud was predicated on the money being wired after it 

entered the control of the Association. We address these 

points in turn. 

C. Did the Transactions Involve the Proceeds 

 of the Fraud? 

The government only proved financial transactions, i.e., 

wirings of money up the daisy chain, occurring before the 

money reached the burn company. Accordingly, if the

money did not become proceeds until after it passed

through the burn company, as Morelli contends, the 

government's proof of money laundering would have failed 

because it would not have proved a financial transaction 

involving proceeds. 

Morelli argues that the money did not become proceeds 

until it moved past the burn company. In essence, he 

contends that since the duty to pay the taxes lay with the 

burn company, no fraud occurred until the burn company 

itself failed to collect and pay the taxes. Hence, before the 

burn company failed to do so, the money was entirely 

legitimate. But the taxes were not, as Morelli claims, 

collected and passed on, and then diverted. They were 

never collected. The paperwork that indicated that the taxes 

had been collected was falsified. The transactions going 

down the chain --purporting to represent sales of fuel -- 

were fraudulent, and the payments going back up the chain 

were proceeds of that fraud. 

In our view, the key point is that the entire chain of 

companies was operated by the Association; it was all part 

of the conspiracy. Once the money entered the control of 

the street company, it entered the control of the 

Association. The Association never had any intention of 

 12 
paying the taxes. It organized the chain precisely to avoid 

having to do so. Although in a paperwork sense the taxes 

were not embezzled until they passed the burn company, 

the reality is that the taxes were embezzled as soon as the 

funds entered the chain. The fact that the Association 

organized the daisy chain to make it appear that distinct 

companies were buying and selling the gas and that the tax 

was collected at each step prior to the burn company does 

not alter our conclusion. We conclude that the fraud was 

completed when the money entered the control of the

Association acting through the street company, since at 

that time it had no present intent to pay the taxes. Under 

these circumstances, the taxing authorities were defrauded 

out of their funds at the time the money entered the chain. 

In sum, we find no reason to set aside the judge's and 

jury's implicit conclusion that the money derived from this 

scheme became proceeds for the Association as soon as it 

entered the street company's hands. Legally, the money 

was the proceeds of fraud as soon as it entered the hands 

of the street company. 

D. Was the Money the Proceeds of Wire Fraud? 

We also think that the money was the proceeds of wire 

fraud, and not simply tax fraud, which is not a specified 

RICO predicate act and therefore not a specified unlawful 

activity under S 1956. Morelli contends that, even if the 

money became proceeds of some illegal activity at the time 

it came into the possession of the street company, it was 

only the proceeds of tax fraud. He argues that, at the time 

the money entered the hands of the street company, no 

wire fraud had occurred. Before it was wired, he says, the 

money was the proceeds of tax fraud. After it was wired, the 

argument continues, although a wire fraud may have been 

committed, the money was not the proceeds of a wire fraud, 

because the wiring itself had nothing to do with the 

Association's coming into possession of the money. 

As an initial matter, we think that Morelli would be 

correct that the the money would not be the proceeds of 

wire fraud if only one of these daisy chain series of 

transactions had occurred. Proceeds are "[t]hat which 

 13 
results, proceeds, or accrues from some possession or 

transaction." Black's Law Dictionary 1204 (6th ed. 1990). 

The transaction series in question here is the single series 

of wirings of the funds from the street company up the 

chain through the burn company to the top. We think it is 

obvious that the money that the Association fraudulently 

obtained does not "result, proceed, or accrue" from this 

single series of wirings, and therefore the money is not the 

proceeds of wire fraud. Within the individual series of 

transactions, the money is the proceeds of fraud simpliciter 

at the time it enters the Association's hands. The later 

wirings do not change its character into the proceeds of 

wire fraud.9 

_________________________________________________________________ 

9. Accordingly, we disagree with the opinion of the Seventh Circuit in 

United States v. Mankarious, 151 F.3d 694 (7th Cir.), cert. denied, 119 

S. Ct. 621 (1998). That court, relying on inter alia Schmuck v. United 

States, 489 U.S. 705 (1989), concluded that, unlike bank and wire fraud, 

"[a] mail fraud scheme . . . can create proceeds long before the mailing 

ever takes place." 151 F.3d at 705. We think that that court misreads 

Schmuck. In Schmuck, the defendant created an ongoing fraudulent 

scheme that involved a group of independent series of fraudulent 

transactions. Each of these series ended with a mailing, which the 

Supreme Court held could provide a basis for mail fraud convictions. 

The Seventh Circuit apparently reads Schmuck as meaning that the 

mailings rendered the individual series of transactions with which they 

were associated mail fraud nunc pro tunc. 

We disagree. As discussed in more detail below, the key in Schmuck 

was not that the mailings increased the likelihood of success of the 

individual fraudulent series of transactions. Rather, each individual 

mailing contributed to the future success of the entire scheme. See 489 

U.S. at 711-12 (although the mailings may not have contributed to the 

success of the individual already-completed series of transactions, they 

were "essential to the perpetuation of Schmuck's scheme"). Thus, we 

think that Schmuck does not support the Seventh Circuit's 

understanding of the term "proceeds" in the money laundering statute. 

We also note that the court in Mankarious drew a false distinction 

between wire and mail fraud. See Mankarious, 151 F.3d at 705. As we 

have noted, the wire fraud and mail fraud statutes differ only in form, 

not in substance, and cases such as Schmuck interpreting one govern 

the other as well. See United States v. Frey, 42 F.3d 795, 797 & n.2 (3d 

Cir. 1994) (citing United States v. Tarnopol, 561 F.2d 466, 475 (3d Cir. 

1977) ("[T]he cases interpreting the mail fraud statute are applicable to 

 14 
This does not get Morelli off the hook, however. We

believe that the money wired up from the street company 

was, in fact, the proceeds of wire fraud, just not in the way 

Morelli thinks it might have been. In order to understand 

this, we must engage in a close reading of the wire fraud 

statute, which reads as follows: 

 Whoever, having devised or intending to devise any 

 scheme or artifice to defraud, or for obtaining money or 

 property by means of false or fraudulent pretenses, 

 representations, or promises, transmits or causes to be 

 transmitted by means of wire, radio, or television 

 communication in interstate or foreign commerce, any 

 writings, signs, signals, pictures, or sounds for the 

 purpose of executing such scheme or artifice, shall be 

 fined under this title or imprisoned for not more than 

 five years, or both. 

18 U.S.C. S 1343. Wire fraud consists of (1) a scheme to 

defraud and (2) a use of a wire transmission for the 

purpose of executing, or attempting to execute, the scheme. 

See Frey, 42 F.3d at 797. Morelli concedes that the daisy 

chain was a scheme to defraud. Furthermore, as discussed 

above, the scheme produced proceeds. The question is, was 

the scheme a wire fraud scheme in such a way that its 

proceeds were the proceeds of wire fraud at the time the 

Association conducted a financial transaction involving 

them? 

_________________________________________________________________ 

the wire fraud statute as well.")). Thus, the Seventh Circuit's conclusion 

would -- if correct -- apply equally to cases involving wire fraud. 

Finally, we observe that none of this implies that Morelli did not 

conspire to commit wire fraud. A wiring could constitute wire fraud even 

though it involved money that had already been obtained as a result of 

fraud. See United States v. Allen, 76 F.3d 1348, 1362 (5th Cir. 1996) 

(holding that "acts occurring after the defrauding defendant already 

controls the proceeds of the fraud may . . . further the fraud" and 

accordingly constitute wire fraud); cf. Schmuck, 489 U.S. at 712 (holding 

that mail fraud occurs so long as the mailing is "incident to an essential 

part of the scheme" (internal quotations omitted)). Clearly, the wirings 

in 

this case were "incident to an essential part of the scheme," the 

transmittal of the money in a useable form to the members of the 

Association. 

 15 
We think the money was the proceeds of the entire 

ongoing fraudulent venture in which the Association

engaged in creating the daisy chain scheme, and that this 

venture was a wire fraud scheme. This ongoing venture 

consisted of all the individual series of transactions upon 

which Morelli focuses, not the discrete series of 

transactions individually. Although each series may have 

included discrete acts of wire fraud that followed the 

creation of the proceeds related to that series, the fact is 

that the entire program, encompassing all of the acts 

charged in the indictment, constituted one large, ongoing 

wire fraud scheme. Each wiring in each series furthered the 

execution of each and every individual act of tax fraud, and 

helped to create the proceeds involved in each succeeding 

series of transactions. This is primarily because each 

wiring, whether it occurred before or after a given act of tax 

fraud, served to promote and conceal each individual 

embezzlement of taxes, either ex ante or ex post. More 

precisely, each wiring, including those that occurred before 

a particular transaction, made it more difficult for the 

government to detect the entire fraudulent scheme or any 

particular fraudulent transaction or series of transactions. 

In sum, the money gained in each series of transactions 

(save the initial one) was the proceeds of wire fraud because 

the money was the proceeds of a fraud that was furthered 

by the prior wirings.10 

This case is similar to Schmuck v. United States, 489 U.S. 

705 (1989). In Schmuck, the Supreme Court upheld the 

defendant's conviction for mail fraud. The defendant had 

_________________________________________________________________ 

10. We note that this means that the funds acquired in the first series 

of transactions were not the proceeds of wire fraud. This is immaterial, 

however, since the first series, as noted above, would still constitute 

wire 

fraud, and the aggregate amount of proceeds would not be reduced 

significantly enough to reduce Morelli's sentence. No individual series of 

transactions involved more than a few hundred thousand dollars, 

whereas the ongoing scheme involved tens of millions of dollars. The 

largest single wire transfer listed in the indictment was for $780,000. 

Subtracting this amount from the total amount upon which Morelli's 

sentence was based would not change the specific offense characteristic 

category for the amount laundered. See U.S.S.G. S 2S1.1(b)(2). 

Accordingly, any error in including the funds from the first series of 

transactions was harmless. 

 16 
created a scheme in which he would roll back the 

odometers on cars and sell them as new to car dealers. As 

with any car sale, each unwitting dealer would mail a titleapplication form to the state government. The Court

concluded that this mailing was sufficient to support a mail 

fraud conviction. In particular, the Court found that: 

 Schmuck's was not a "one-shot" operation in which he 

 sold a single car to an isolated dealer. His was an 

 ongoing fraudulent venture. A rational jury could have 

 concluded that the success of Schmuck's venture 

 depended upon his continued harmonious relationship 

 with, and good reputation among, retail dealers, which 

 in turn required the smooth flow of cars from the 

 dealers to their Wisconsin customers. 

 Under these circumstances, we believe that a rational 

 jury could have found that the title-registration 

 mailings were part of the execution of the fraudulent 

 scheme . . . . [A]lthough the registration-form mailings 

 may not have contributed directly to the duping of 

 either the retail dealers or the customers, they were 

 necessary to the passage of title, which in turn was 

 essential to the perpetuation of Schmuck's scheme. 

489 U.S. at 711-12. In Schmuck, the Court recognized that, 

even though each individual fraudulent transaction series 

involved a mailing only after the fraud had already been 

completed, each mailing contributed to the entire scheme 

and made each other individual fraudulent transaction 

series, particularly those occurring later, more likely to be 

successful.11 

_________________________________________________________________ 

11. We recently distinguished Schmuck, although not in a way that is 

relevant here. In United States v. Cross, 128 F.3d 145 (3d Cir. 1997), 

cert. denied, 118 S. Ct. 1519 (1998), we reversed mail fraud convictions 

based on the fact that, although the mailing at issue aided the success 

of the fraud, the mailing would have occurred whether the fraud had 

taken place or not. The alleged fraud involved fixing traffic court cases. 

The mailings at issue were the routine transmissions of case dispositions 

to the parties. We distinguished Schmuck on the ground that "the court 

regularly mailed notices to parties and the DOT in every case, whether 

or not the defendants had attempted to influence the result." 128 F.3d 

at 152 n.4. There was no causal nexus between the fraud and the 

mailings in Cross. Here, by contrast, the wirings, like the mailings in 

Schmuck, would not have been made but for the existence of the 

fraudulent scheme. Morelli's case is much more like Schmuck than 

Cross. 

 17 
This case is controlled by Schmuck. Each wiring 

concealed and promoted each and every fraudulent series 

of transactions by making the entire scheme less 

detectable. Without the wirings to make it appear as if a 

series of distinct transactions between independent

companies had occurred, the taxing authorities would have 

had a much easier time tracking down the perpetrators of 

the tax fraud scheme. Each wiring "was essential to the 

perpetuation of [the Association]'s scheme." Schmuck, 489 

U.S. at 712. Since each individual fraudulent series of 

transactions other than the initial one was preceded by a 

wiring that promoted it, we think that, within each

transaction series, the money was the proceeds of wire 

fraud at the time it came into the hands of the Association 

in the form of the street company. As soon as one wiring 

took place, the entire tax fraud scheme became a wire fraud 

scheme. Since the very first series of transactions involved 

a wiring of the funds, every fraudulent acquisition of funds 

thereafter was an acquisition of funds through wire fraud. 

This conclusion is entirely consistent with Conley I. See 

37 F.3d at 980 (requiring that proceeds be "derived from an 

already completed offense, or a completed phase of an 

ongoing offense"). The entire daisy chain was an ongoing 

fraudulent venture. Each series of transactions within it 

was a "completed phase" of the ongoing scheme. As we 

discussed above, the phases were completed as soon as one 

wiring occurred as part of the entire venture and the money 

from the individual series of transactions came into the 

possession of the street company aspect of the Association. 

Morelli's case also resembles United States v. Massey, 48 

F.3d 1560 (10th Cir. 1995). In Massey, the defendants 

convinced a number of people to invest in their fraudulent 

loan scheme. When some of the participants became 

concerned that they had not received their loans, the 

defendants sent them letters encouraging them not to 

withdraw their money. Later, one of the defendants wired 

some of the money to another defendant. The defendants 

were convicted of mail fraud and money laundering. See 48 

F.3d at 1565. The defendants claimed that none of the 

money involved in the wiring came from victims who 

received the mailings. Accordingly, the defendants argued 

 18 
that the money wired could not have been the proceeds of 

mail fraud. 

The court of appeals upheld the conviction. While noting 

that the defendants' assessment of the facts was correct, as 

far as it went, it observed that at least two mailings had 

been sent to victims prior to the wiring, albeit not to victims 

whose money was transferred in the wiring. See 48 F.3d at 

1566. The court concluded that these mailings not only 

contributed to the success of the fraud with respect to the 

victims who received them but also to the overall success of 

the entire fraudulent loan program. See 48 F.3d at 1567 

("[T]he letters protected the plan to defraud all of the 

victims and not just the victim to whom the letter was 

sent."). In particular, if the letters had not been sent to the 

other victims, the fraud with respect to the victims whose 

money was wire transferred might not have been 

successful. See 48 F.3d at 1566-67. Accordingly, 

 the jury could reasonably find that the fees deposited 

 in the bank account from which the wire transfer was 

 sent were derived from the fraudulent scheme that was 

 furthered by the lulling letters. The "proceeds" of mail 

 fraud are derived from the success of a fraudulent 

 scheme that has been facilitated through the use of the 

 mails. . . . Accordingly, we conclude that the jury had 

 sufficient evidence to conclude that the government 

 met all of the elements of money laundering . . . . 

48 F.3d at 1567 (citations omitted). 

We find Massey persuasive. Moreover, Morelli's case is 

indistinguishable from Massey. Had some or all of the 

wirings not occurred, some of the daisy chain transaction 

series might have been detected by the taxing authorities 

and the entire scheme would have been discovered sooner. 

Each of the wirings made before each individual fraudulent 

series of transactions contributed to the success of those 

transactions. As in Massey, the money resulting from these 

transactions was the proceeds of wire fraud at the time of 

the wire transfers. Accordingly, we conclude that the jury 

and the District Court had sufficient evidence to conclude 

that the government met all of the elements of money 

laundering under S 1956.12 Therefore, we think the District 

_________________________________________________________________ 

12. Both parties in this case cite a number of other cases that they 

believe are relevant to the issue before us. See, e.g., United States v. 

 19 
Court properly sentenced Morelli under the money 

laundering guideline.13 

_________________________________________________________________ 

Christo, 129 F.3d 578 (11th Cir. 1997); United States v. Allen, 76 F.3d 

1348 (5th Cir. 1996); United States v. Savage, 67 F.3d 1435 (9th Cir. 

1995); United States v. Kennedy, 64 F.3d 1465 (10th Cir. 1995); United 

States v. Johnson, 971 F.2d 562 (10th Cir. 1992). We do not believe 

these cases aid us in deciding the issue before us. They all involved the 

temporal question whether, at the time the alleged money laundering 

transaction occurred, the money involved in the transaction was 

proceeds. See, e.g., Allen, 76 F.3d at 1362 ("In this case, the consultant 

fees and loans left the control of First City Bank and reached the 

accounts of the conspirators before the wire transfers occurred. The 

charged transactions distributed the proceeds among the various 

defendants and helped hide the fraud from First City auditors and 

federal regulators."); Kennedy, 64 F.3d at 1478 ("[T]he illegal mailings 

in 

this case involved discrete, earlier mailings by Kennedy, rather than the 

receipt of funds by Kennedy from his victims. It was the subsequent and 

distinct transfers of funds that were alleged as the separate transactions 

involving `proceeds of specified unlawful activity' which constituted the 

alleged money laundering under S 1956."). This is the question we 

addressed in Conley I, 37 F.3d at 980 (proceeds must be "derived from 

an already completed offense, or a completed phase of an ongoing 

offense"). The question before us today, on the other hand, is the more 

abstract question whether the money was the proceeds of wire fraud. 

These cases do not help us answer that question. 

13. Morelli also contends that the District Court erred in failing to 

grant 

him a downward departure because, even if the conspiracy involved 

money laundering, it was not within the "heartland" of money 

laundering. He relies on proposed amendments to the money laundering 

guidelines, which Congress rejected in 1995, that would have tied money 

laundering sentences to the offense level of the underlying specified 

unlawful activity. He also contends that he is entitled to a downward 

departure because the government charged him, unlike others who 

engaged in similar schemes but were prosecuted separately, with money 

laundering. Morelli claims that this constitutes unfair sentence 

manipulation. 

The District Court did grant Morelli a downward departure on the 

ground that the "value of the funds" adjustment under U.S.S.G. 

S 2S1.1(b)(2) overstated the seriousness of the money laundering that 

occurred. See United States v. Morelli, Opinion, Crim. No. 93-210, at 16- 

19 (D.N.J. Feb. 26, 1996). If the District Court refused to grant a larger 

downward departure in an exercise of its discretion, we have no 

 20 
III. Roizman's Appeal 

Roizman argues that his conviction should be reversed 

because of an actual or potential conflict in his attorney's 

representation of both him and one Igor Porotsky. Porotsky 

was neither a codefendant nor a witness at trial, but his 

statements were admitted as hearsay statements through 

the testimony of other witnesses. In particular, various 

witnesses testified that Porotsky had been involved in the 

fuel business before the Association was created, and that 

he had been involved with Morelli and other alleged

members of the Italian Mafia. At the time of trial, Larry 

Silverman, who was then Roizman's attorney, was also 

representing Porotsky in a separate matter.14 Roizman 

_________________________________________________________________ 

jurisdiction to consider Morelli's claim. See United States v. Khalil, 132 

F.3d 897 (3d Cir. 1997); United States v. Miele, 989 F.2d 659, 668 n.11 

(3d Cir. 1993); United States v. Parker, 902 F.2d 221, 222 (3d Cir. 1990). 

On the other hand, if the sentencing court denied a larger downward 

departure because it erroneously concluded it lacked legal authority to 

consider a separate ground for departure, we have jurisdiction to review 

the sentence. See United States v. Spiropoulos, 976 F.2d 155, 160 n.2 

(3d Cir. 1992). 

In this case, however, the District Court committed no error. Despite 

Morelli's repeated and vociferous arguments, proposed amendments to 

the Sentencing Guidelines do not provide independent legal authority for 

a downward departure. See United States v. Anderson, 82 F.3d 436 (D.C. 

Cir. 1996) (explaining persuasively why proposed crack cocaine 

amendments did not provide independent authority for a downward 

departure). Furthermore, Morelli's invocation of United States v. 

Lieberman, 971 F.2d 989, 994-96 (3d Cir. 1992), in which we affirmed a 

district court's grant of a downward departure for manipulation of the 

indictment, does not help him since in that case the district court had 

decided in its discretion that a downward departure was appropriate and 

the question on appeal was whether the district court had authority to 

do so. Here, by contrast, the District Court considered both of Morelli's 

proposed grounds for departure and exercised its discretion to reject 

them. Accordingly, since Morelli's argument is essentially a challenge to 

the District Court's exercise of its discretion in denying him an 

additional downward departure, we have no jurisdiction to consider his 

claim. 

14. We need not consider the much-debated issue of the precise scope of 

this representation, however, since we conclude that, regardless of the 

scope of the representation, cross-examining Porotsky was not a useful 

alternative strategy and, at all events, doing so would not have 

conflicted 

with Silverman's duties to Porotsky. 

 21 
argues that, as a result of this representation, Silverman 

suffered a conflict and was unable to impeach Porotsky as 

a hearsay declarant adequately. See Fed. R. Evid. 806 

(permitting impeachment of the declarant of statements 

admitted as hearsay). Roizman also contends that, even if 

this was only a potential conflict, it merits a reversal 

because counsel for the government should have been

aware of it at trial. 

After we remanded Roizman's claims to the District 

Court, the Court heard arguments and considered the

documentary evidence. For the reasons set forth infra, the 

District Court rejected all of Roizman's claims regarding 

Silverman's representation and alleged conflict of interest. 

"We apply plenary review to the district court's application 

of legal precepts, and clearly erroneous review to its factual 

findings." United States v. Brink, 39 F.3d 419, 421 (3d Cir. 

1994) (citations omitted). 

A. Actual Conflict of Interest 

An actual conflict claim arises after trial upon the 

discovery of a previously unnoticed conflict of interest on 

the part of trial counsel. "[A] defendant who raised no 

objection at trial must demonstrate that an actual conflict 

of interest adversely affected his lawyer's performance." 

Cuyler v. Sullivan, 446 U.S. 335, 348 (1980). We have 

elaborated on this as follows: "An actual conflict of interest 

`is evidenced if, during the course of the representation, the 

defendants' interests diverge with respect to a material 

factual or legal issue or to a course of action.' " United 

States v. Gambino, 864 F.2d 1064, 1070 (3d Cir. 1988) 

(quoting Sullivan v. Cuyler, 723 F.2d 1077, 1086 (3d Cir. 

1983)). In addition, we have noted that an actual conflict is 

more likely to be found where "an attorney takes positive 

steps on behalf of one client prejudicial to another" as 

opposed to cases where "the attorney's actions are based on 

inaction and are passive." Gambino, 864 F.2d at 1070. 

Similarly, an actual conflict is more likely to occur in 

cases of joint representation -- representation of more than 

one defendant at the same trial -- rather than simply 

multiple representation -- representation of defendants in 

 22 
different trials -- as occurred here. In cases involving 

multiple but not joint representation, and when an attorney 

has in some way failed to act, we have adopted the 

following standard: 

 In order to establish an actual conflict the petitioner 

 must show two elements. First, he must demonstrate 

 that some plausible alternative defense strategy or 

 tactic might have been pursued. He need not show that 

 the defense would necessarily have been successful if 

 it had been used, but that it possessed sufficient 

 substance to be a viable alternative. Second, he must 

 establish that the alternative defense was inherently in 

 conflict with or not undertaken due to the attorney's 

 other loyalties or interests. 

Gambino, 864 F.2d at 1070 (quoting United States v. Fahey, 

769 F.2d 829, 836 (1st Cir. 1985)); see also Hess v. 

Mazurkiewicz, 135 F.3d 905, 910 (3d Cir. 1998). When an 

actual conflict with an adverse effect, of the sort described 

above, is demonstrated, the defendant is entitled to a 

reversal for inadequate assistance of counsel without 

demonstrating prejudice. See Strickland v. Washington, 466 

U.S. 668, 692 (1984).15 

The District Court found no actual conflict in Silverman's 

representation of both Porotsky and Roizman. In particular, 

the court found that Silverman's decision not to attempt to 

impeach Porotsky was a reasonable strategic decision: 

 In this case, it is abundantly clear from an 

 examination of Mr. Roizman's claim in the larger 

 context of the trial that cross-examination of Mr. 

 Porotsky was not a plausible defense strategy that 

 "possessed sufficient substance" to raise a claim of 

 constitutional dimension. . . . 

 The Court's observations during the lengthy trial 

 confirm that Mr. Roizman's attorney pursued a 

 "wallflower" defense -- that is, that Mr. Roizman was 

_________________________________________________________________ 

15. Of course, if the defendant cannot prevail on an actual conflict 

theory, the defendant can still bring a conventional ineffective 

assistance 

claim under Strickland, but the defendant must then show prejudice. See 

Hess, 135 F.3d at 910. 

 23 
 an innocent operator who was a victim of intimidation 

 from other organized crime figures. To have vigorously 

 cross-examined Porotsky, a witness whose hearsay 

 testimony was cumulative and peripheral, and to 

 therefore have risked creating in the jurors' minds a 

 connection between Porotsky and Roizman, would have 

 been asinine in light of the strategy Mr. Roizman 

 pursued. The Court, drawing on its observation of the 

 strategy employed during the trial, as well as Mr. 

 Silverman's affidavit submitted herewith, concludes 

 that the decision not to cross-examine Mr. Porotsky's 

 hearsay statements was not tainted by a conflict of 

 interest. Rather, it was a sound decision, based on an 

 experienced trial lawyer's strategic considerations. 

United States v. Morelli, Opinion & Order, Crim. No. 93- 

210, at 7-8 (D.N.J. Oct. 16, 1997). As the District Court 

also noted, this strategy was quite successful: "Of the 

eighteen counts in the indictment against Mr. Roizman, he 

was acquitted of 13, including the global conspiracy 

charge." Id. at 7 n.5. 

Roizman alleges that Porotsky's hearsay statements 

incriminated him in several ways. The District Court 

rejected this argument, finding that impeaching Porotsky 

would have made Roizman's "wallflower defense" less

successful. See id. at 7. It also concluded that Porotsky's 

statements were "so cumulative and peripheral" that

impeaching them would have at best made no difference. 

Based on our review of the record, we find that the District 

Court's conclusions were probably correct, and certainly 

not clearly erroneous. Based on these facts, we agree with 

the District Court's conclusion that cross-examination of 

Porotsky was not an alternative strategy with "sufficient 

substance to be a viable alternative." Gambino, 864 F.2d at 

1070. 

Even if we were to conclude that the District Court did 

clearly err in its conclusions on the previous point, we 

would still affirm its rejection of Roizman's claim. We do not 

believe that the alleged alternative strategy of impeaching 

Porotsky created a conflict between Silverman's duties to 

Roizman and Porotsky. The key point, and one only 

recognized in Gambino as far as we can tell, is that we 

 24 
must look at the attorney's duties to both clients. An actual 

conflict exists only if the proposed alternative strategy (a) 

could benefit the instant defendant and (b) would violate 

the attorney's duties to the other client. See Gambino, 864 

F.2d at 1070. 

In Gambino, the court rejected the defendant's actual 

conflict claim because it found that the proposed strategy 

would not have hurt the attorney's other client. Gambino 

involved a drug distribution charge. The defendant 

(Gambino) claimed that his attorney could have argued that 

another of the attorney's clients, Mazzarra, might have 

committed the crime with which Gambino was charged. But 

Mazzarra was not a codefendant, and the proposed 

argument would not have rendered Mazzarra directly liable 

to punishment. Furthermore, the information Gambino

contended would have supported the strategy came from 

the government's files. Exposing this evidence at trial would 

not have given the government any new information that 

would have made it more likely to charge Mazzarra. The 

court concluded that no actual conflict existed because 

"Mazzara would not have been prejudiced if Evseroff [the 

attorney] had [tried to show he was the source of the 

heroin] and thus it follows that appellant and Mazzara did 

not have conflicting interests in Evseroff's performance at 

trial." Gambino, 864 F.2d at 1071. 

We think that this case is analogous to Gambino. 

Porotsky was not a defendant in Roizman's case. While 

Porotsky probably would not have wanted to be impeached 

as a criminal, he had been convicted of various crimes, and 

numerous other witnesses at trial had discussed his

criminal activities. (In fact, the impeachment would have 

involved almost exclusively the evidence of these 

convictions.) Furthermore, the evidence Silverman would 

have used to impeach Porotsky's statements -- including 

Porotsky's prior convictions and present indictments-- 

would most likely have come from the government. We do 

not see how exposing such information, already in the 

possession of the government, could have harmed 

Porotsky's interests.16 

_________________________________________________________________ 

16. Roizman also suggests that Silverman should have used information 

he acquired from Porotsky during his representation of him to impeach 

 25 
B. Potential Conflict of Interest 

Roizman also claims that his conviction should be 

reversed under a potential conflict theory. We reject this 

claim as well. 

When a district court is aware, or should be aware, of a 

potential conflict of interest on the part of the defendant's 

attorney, the court must inquire as to whether the 

defendant is aware of and waives this conflict. See Wheat v. 

United States, 486 U.S. 153 (1988); Wood v. Georgia, 450 

U.S. 261, 272 (1981); United States v. Pungitore, 910 F.2d 

1084, 1143 (3d Cir. 1990). Roizman argues that reversal is 

required not only when the trial court is aware of such a 

conflict and fails to act but also when the prosecutor and 

defense attorney are aware of one. Although Roizman cites 

several cases from courts within the Second Circuit in 

support of this claim, see, e.g., United States v. Rahman, 

861 F. Supp. 266, 278 (S.D.N.Y. 1994), the court of appeals 

in that circuit has at most only exhorted prosecutors to 

advise the trial courts when they are aware of conflicts, see 

United States v. Stantini, 85 F.3d 9, 13 (2d Cir. 1996). See 

also Cerro v. United States 872 F.2d 780, 787 (7th Cir. 

1989) ("We do not disagree with the propriety of such a 

recommendation under like circumstances, but we 

conclude that it is not a constitutional requirement. In the 

present case, the prosecutor was under no constitutional 

duty to advise the trial court of a potential conflict based on 

the information available to him."). They have not held, and 

we do not hold, that a prosecutor's -- or a defense

attorney's -- failure in this respect is grounds for reversal. 

Since Roizman makes no claim that the District Court was 

or should have been aware of Silverman's potential conflict, 

he is not entitled to a reversal on these grounds. 17 

_________________________________________________________________ 

Porotsky. We reject this contention. If Silverman had not represented 

Porotsky and thus created the alleged conflict of interest in this case, 

he 

would not have had access to this information. Roizman cannot prevail 

on the argument that his interests were harmed by Silverman's failure to 

use information he acquired in confidence from Porotsky to impeach 

Porotsky. Accordingly, we conclude that no actual conflict with 

Silverman's duties to Porotsky affected his representation of Roizman. 

17. Finally, Roizman argues that we should reverse the District Court's 

decision because it failed to conduct an evidentiary hearing on his 

 26 
For all these reasons, the judgments of the District Court 

with respect to both Morelli and Roizman will be affirmed. 

A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

_________________________________________________________________ 

claims. Because we conclude that the District Court did not err in 

rejecting Roizman's claims based on the documentary evidence before it, 

we see no need for the court to have conducted further evidentiary 

proceedings. 

 27