Opinion ID: 739683
Heading Depth: 3
Heading Rank: 2

Heading: Herzog's Assertions of Error

Text: 78
79 Appellant Herzog asserts that the trial judge improperly denied his post-trial motion to dismiss Counts Twenty-Seven, Twenty-Eight, and corresponding Racketeering Act Twenty for insufficient evidence. The Government asserts the following facts: 80 In July 1990, Herzog and attorney John Zagari met with engineers employed by CHMR to discuss CHMR's performing of sampling and testing operations at the Matamoras site. Herzog and Zagari falsely told the CHMR engineers that PADER had approved the previous dumping at Matamoras. Herzog and Zagari then insisted that a CHMR report conclude that more fill should be brought into the site and that nothing needed to be removed from the site. 81 When CHMR began sampling by trenching at the Matamoras site in August 1990, heavy concentrations of hydrogen sulfide gas emerged from the ground. Because such explosive gas presented a danger to workers and the community, the trenching was immediately terminated and CHMR began to use test borings as a safer sampling method. PADER continued to insist that the site be cleared and emptied and that CHMR's report address and evaluate removal remedies. 82 Despite Zagari's efforts to dictate the contents of CHMR's report by threatening the CHMR employee responsible for preparing the report, CHMR's draft December 1990 report indicated that the debris at Matamoras reflected a very high percentage of wood in the material; that decomposition of the structural lumber in the debris had caused the high levels of hydrogen sulfide gas detected at the site; and that one recommended corrective measure was removal of the existing waste. The draft report did not propose the addition of more C & D debris. After receiving this draft report, Zagari sent CHMR his redraft of the text of CHMR's recommendations, making them consistent with Herzog's earlier demands. Then, in a series of meetings and conversations with CHMR representatives, Zagari made it clear that CHMR would not be paid unless the report included the proposals that Zagari and Herzog demanded. Herzog and Zagari also told CHMR they would be paid only after filling operations recommenced. 83 Thereafter, a final report was provided to Zagari in which no conclusions were contained in the text of the report (instead, conclusions were in a separate cover letter); the wood content of the fill was reported to be within a falsely understated range; a reason offered for not removing the fill was the explosive nature of the hydrogen sulfide gas; the addition of more fill material was listed as the preferred remediation proposal; and removal of the offending debris was not addressed or evaluated in any way as a corrective option. After defendants received this final report, they stopped making payments to CHMR. 84 The prosecution alleged in counts Twenty-Seven and Twenty-Eight that Herzog schemed to obtain a favorable report on the Matamoras landfill by falsely promising to pay CHMR for that report. Three former CHMR employees testified in support of these charges: Robert Clarke, Donald Barshter and Michael Poe. After trial, Herzog moved to dismiss Counts Twenty-Seven and Twenty-Eight as well as RICO Act 20, asserting that no evidence was presented from which a rational jury could infer that defendants made false promises to pay CHMR. The undisputed testimony, according to Herzog, is that CHMR's bill had been paid in full, and that the company had undertaken a subsequent project for the defendants. 85 In denying Herzog's motion, the district court stated that defense counsel made a tactical decision [at trial] to omit ... proof of the purported post-1990 payments to CHMR. That decision ... cannot be a basis now to overturn an otherwise proper conviction by a trial jury. Herzog argues that the court thereby impermissibly shifted the burden of proof: It was the Government's burden to show that CHMR had not been paid, not Herzog's burden to show that it had. He states that, because no rational jury could conclude from the evidence in the record that CHMR had not been paid, the two Counts and the Act must be dismissed. 86 A challenge to the sufficiency of the evidence supporting conviction by jury trial is viewed in the light most favorable to the Government. See Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 469, 86 L.Ed. 680 (1942); United States v. Amiel, 95 F.3d 135, 141 (2d Cir.1996) (quoting United States v. Badalamenti, 794 F.2d 821, 828 (2d Cir.1986)). The verdict will be sustained unless no rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 2789, 61 L.Ed.2d 560 (1979). Count Twenty-Seven charged wire fraud; Count Twenty-Eight charged mail fraud.  ' [T]he essential elements of a mail [or wire] fraud violation are (1) a scheme to defraud, (2) money or property [as the object of the scheme], and (3) use of the mails [or wires] to further the scheme. '  United States v. Dinome, 86 F.3d 277, 283 (2d Cir.1996) (quoting United States v. Miller, 997 F.2d 1010, 1017 (2d Cir.1993) (quoting United States v. Wallach, 935 F.2d 445, 461 (2d Cir.1991))) (alterations in original, some alterations in Miller ). See also Amiel, 95 F.3d at 142 (mail fraud only). 87 Herzog's argument misses the mark, because it is based on the erroneous assumption that the Government needed to prove that CHMR had not been paid. In fact, it needed only to present evidence from which a juror could rationally infer that Herzog had intended to defraud CHMR. To establish the existence of a scheme to defraud, the government must present proof that the defendants possessed a fraudulent intent.... [T]he government is not required to show that the intended victim was actually defrauded[, but] need only show that the defendants contemplated some actual harm or injury. Wallach, 935 F.2d at 461 (citations omitted) (discussing mail fraud); see United States v. Gelb, 700 F.2d 875, 879 (2d Cir.1983) (same); Dinome, 86 F.3d at 283 (discussing mail and wire fraud). The evidence at trial was sufficient to show intent to defraud CHMR. See Gelb, 700 F.2d at 880 ([P]roof need only be sufficient to establish a specific intent [to defraud, which] need not necessarily be proved by direct evidence, but may also be inferred from the defendant's actions and other circumstantial evidence.). The trial court thus properly denied Herzog's Rule 29(c) motion to dismiss those counts. 88
89 Herzog next asserts that the district court improperly applied three different sentencing guideline increases to his sentence, and that his sentence should therefore be vacated and remanded. 19 1) Obstruction of Justice 90 Section 3C1.1 of the November 1995 Guidelines provides: If the defendant willfully obstructed or impeded, or attempted to obstruct or impede, the administration of justice during the investigation, prosecution, or sentencing of the instant offense a two-level increase is warranted. In imposing this increase to Herzog's sentence, the court relied heavily upon the Presentence Report (PSR). The PSR reported PADER's 1990 civil enforcement action against, inter alia, Herzog, and described his related January 16, 1991, deposition as being replete with fraudulent statements with regard to virtually every aspect of the Matamoras site. The PSR stated that, while Herzog was not charged with perjury, it is our position that his offering of counterfeit statements was indeed purposeful, and as such, constitutes the obstruction of justice. 91 In finding that there were indications of Herzog's significant guilty knowledge which led him to perjure himself in the civil case, the sentencing court stated that the activities of the PADER lawsuit, which while they required an indictment, occurred after the FBI was investigating the matter and probably at the incentive or instance and request of PADER, among others. It is adequate to support an adjustment for intentional efforts to impede an ongoing investigation. The court thus found that Herzog was aware of the federal investigation and that his knowledge of it was the motivation for his perjury in the state deposition. 92 Herzog counters, however, that even if the judge believed that perjury occurred in the related state civil regulatory suit, that should not constitute a basis for an obstruction of justice enhancement in this criminal federal action. Certainly, there are circumstances in which perjury in a state civil action would be utterly irrelevant to a federal criminal matter, even if the same defendant were involved. Here, however, the connection between the two cases is quite close. We agree with the district court's conclusion that, here, perjury in the civil action could constitute obstruction of justice in the instant federal offense. 93 In order for the court to properly reach the conclusion that Herzog's statements in the state deposition did actually warrant imposition of the § 3C1.1 obstruction of justice enhancement, the court was required to make certain findings. Application of § 3C1.1 generally requires findings of willfulness and materiality. See U.S.S.G. § C1.1 comment. (n.3(d),(f)-(h)). The willfulness requirement means that the enhancement is appropriate only upon a finding that the defendant had the 'specific intent to obstruct justice, i.e., that the defendant consciously acted with the purpose of obstructing justice.'  United States v. Defeo, 36 F.3d 272, 276 (2d Cir.1994) (citation omitted); see also United States v. Reed, 49 F.3d 895, 900 (2d Cir.1995) ([T]he term 'willfully' implies a mens rea requirement.), aff'd after remand, 88 F.3d 174 (2d Cir.1996). 94 An enhancement for obstruction of justice may therefore be granted if the court finds that the defendant willfully and materially impeded the search for justice in the instant offense. Such obstruction can be accomplished in many ways, one of which is the giving of perjured testimony. If a court chooses to rely upon allegedly perjured testimony as a basis for application of the enhancement, however, it must make specific findings which indicate that the judge has considered all of the elements of perjury, including materiality, and has found that they have all been met. United States v. Dunnigan, 507 U.S. 87, 92-95, 113 S.Ct. 1111, 1115-17, 122 L.Ed.2d 445 (1993) required that, before applying this enhancement on the basis of apparent perjury, a sentencing court must explicitly find that the defendant gave false testimony concerning a material matter with the willful intent to provide false testimony, rather than as a result of confusion, mistake or faulty memory--i.e., that the defendant committed perjury rather than simply providing false testimony. Id. at 94, 113 S.Ct. at 1116. Dunnigan went on to hold that this requirement could be met if the court makes a finding of obstruction of justice which encompasses all of the factual predicates for perjury, though noting that distinct findings on each element of the alleged perjury were preferable. We have held that a finding of perjury must include findings that the witness gave false testimony concerning a material matter with the willful intent to provide false testimony. See United States v. Catano-Alzate, 62 F.3d 41, 43 (2d Cir.1995) (per curiam); see also, United States v. Williams, 79 F.3d 334, 337-38 (2d Cir.1996) (sentencing court must make finding of willful perjury even if defendant's testimony was so inherently untruthful that factual predicates to perjury were obvious); United States v. Cox, 985 F.2d 427, 432-33 (8th Cir.1993). 95 Our law to date, therefore, provides that in order to base a § 3C1.1 enhancement upon the giving of perjured testimony, a sentencing court must find that the defendant 1) willfully 2) and materially 3) committed perjury, which is (a) the intentional (b) giving of false testimony (c) as to a material matter. 96 Judge Brieant's express finding that Herzog committed perjury and was motivated to do so by the existence of the federal investigation is adequate to meet the willfulness requirement, as well as elements a and b of the third perjury finding. We do not believe, however, that the court addressed the second element of materiality nor the third materiality prong of the perjury element. 97 We understand the materiality element to mean ordinarily that the intentional giving of false testimony must be material to the proceeding in which it is given. In other words, Herzog can be found to have committed perjury in the state proceeding only if the sentencing court finds that he intentionally gave false testimony which was material to the state civil action. Dunnigan requires this finding prior to application of the enhancement based on perjury. 98 This case presents an additional twist. Where, as here, the enhancement is applied based upon perjury made not in the instant judicial proceeding, but, rather, in a related but separate state action, we must assume that the element of materiality which is required by the Guidelines (as opposed to that required for a finding of perjury) must refer to a finding that the false testimony is material to the instant action. Just because perjured testimony is given in a related action, and simply because that testimony is found to have been material to the related proceeding, does not mean that the statements are material to the instant proceeding. We believe that, even if the court finds that Herzog's statements constituted perjury because they were material to the state proceeding, it must also find that the perjury was material to the instant federal offense before applying that state perjury as the basis for a § 3C1.1 enhancement of his federal sentence. We thus hold that, when false testimony in a related but separate judicial proceeding is raised as the basis for a § 3C1.1 obstruction of justice enhancement, a sentencing court may only apply the enhancement upon making specific findings that the defendant intentionally gave false testimony which was material to the proceeding in which it was given, that the testimony was made willfully, i.e., with the specific purpose of obstructing justice, 20 and that the testimony was material to the instant offense. 99 The sentencing court did not make findings with respect to either aspect of materiality. Although Judge Brieant found that the false state deposition was motivated by the instant federal offense, motivation alone does not equate to materiality. We therefore vacate Herzog's sentence and remand for additional findings. 2) Duress/Aggravating Role 100 Herzog argued at sentencing that the real manager and supervisor of the criminal activity was Alphonse D'Arco, a high-ranking member of the Luchese Crime Family with an alleged hidden interest in the Matamoras landfill. He insists that his own apparent authority derived from D'Arco's duress, coercion and blackmail. On appeal, he argues that the court violated his Due Process rights by failing to subpoena D'Arco to testify in an evidentiary hearing on this matter, and that the court thereby erroneously applied a four-level increase, pursuant to § 3B1.1(a), as a result of Herzog's leadership role in the crimes charged. Both his argument at sentencing and his appeal to us seem to blend two issues: whether a downward departure should be granted on the basis of duress pursuant to § 5K2.12, and whether an upward departure should be applied on the basis of aggravating role pursuant to § 3B1.1(a). Although [g]enerally ... a failure to depart downwardly is not appealable[,] .... if the due process right asserted by appellants exists and the denial of a departure violated that right, the constitutional aspects of the denial would be appealable. Gigante, 94 F.3d at 56 n. 2 (citing United States v. Colon, 905 F.2d 580 (2d Cir.1990)). We thus will address both issues, as did the district court. 101 Section 5K2.12 provides that the court may depart downwardly [i]f the defendant committed the offense because of serious coercion, blackmail or duress, which [O]rdinarily ... will be sufficiently serious to warrant departure only when it involves a threat of physical injury, substantial damage to property or similar injury resulting from the unlawful action of a third party.... Section 3B1.1(a) provides for an increase of four levels [i]f the defendant was an organizer or leader of a criminal activity that involved five or more participants or was otherwise extensive.... U.S.S.G. § 3B1.1(a) (1995). The sentencing court is entitled to broad discretion in resolving disputed factual issues, including an assessment of the credibility of witnesses. E.g., United States v. Beverly, 5 F.3d 633, 642 (2d Cir.1993). The court also enjoys broad discretion on the decision of whether an evidentiary hearing is necessary, see Ibanez, 924 F.2d at 430, and the Due Process Clause does not mandate that the court conduct a full-blown evidentiary hearing, United States v. Olvera, 954 F.2d 788, 792 (2d Cir.1992). 102 The district court found Herzog's assertion that he was coerced into his conduct to be almost ... frivolous in light of Herzog's close dealings with the Luchese Family. 21 The court's determination that Herzog was not subjected to duress and corresponding refusal to subpoena D'Arco was not erroneous and did not constitute a violation of due process. After reviewing the trial transcript, we agree that [h]ardly have we ever known anyone who was so willingly duressed. We find no error in the trial court's refusal to depart downwardly on the basis of duress. 103 Likewise, we believe that the court correctly disregarded Herzog's allegation that D'Arco was the true leader of the Matamoras scheme, and held that Herzog's sentence should be enhanced based upon his leadership role. This circuit, however, requires a sentencing court to make two specific findings prior to imposing any offense-role enhancement: (i) that the defendant was 'an organizer or leader,' and (ii) that the criminal activity either 'involved five or more participants' or 'was otherwise extensive.'  United States v. Patasnik, 89 F.3d 63, 68 (2d Cir.1996); see United States v. Fermin, 32 F.3d 674, 682 (2d Cir.1994) (remanding because district court failed to make finding as to whether defendant was manager or supervisor), cert. denied, 513 U.S. 1170, 115 S.Ct. 1145, 130 L.Ed.2d 1104 (1995). While the court expressly found that Herzog acted as a manager, it failed to make findings with respect to the issues of whether five or more persons were involved in the criminal activity or whether the activity was otherwise extensive. 22 Without this finding, the more appropriate enhancement would be the two-level increase permitted by § 3B1.1(c), which applies to organizers or leaders of non-extensive criminal activities. See United States v. Carrozzella, 105 F.3d 796, 802-05 (2d Cir.1997). We therefore remand for additional fact-finding on this second necessary finding. 104 3) Enhancement for $500,000 in Laundered Monies 105 Finally, Herzog argues that the district court improperly added three points, pursuant to U.S.S.G. § 2S1.1(b)(2)(D), for his having laundered over $500,000. Herzog asserts that this figure represents the total amount of allegedly laundered funds charged in all 28 money laundering counts and 14 related racketeering acts, despite the fact that he was acquitted of all but six of the money laundering counts and three of the related racketeering acts. Because the amount of laundered money corresponding to those charges and acts is only $70,000, Herzog argues that he should have received no increase, per § 2S1.1(b)(2)(A). 106 Herzog first again makes the argument relating to the district court's refusal to subpoena D'Arco, which we have already rejected. Because, he asserts, D'Arco's testimony would possibly have provided more information as to the amount of money actually laundered, his due process rights are violated by the imposition of this enhancement without issuance of a subpoena for an evidentiary hearing. For the reasons enunciated supra, we reject this argument. 107 Second, Herzog raises the issue which we have already dealt with in our discussion of Shay's sentencing enhancements--the use of the preponderance of the evidence standard of review on unconvicted conduct. We have already declined Appellant's invitation to re-visit this matter. In light of the pre-sentence report findings, we find that the district court properly applied the lower preponderance standard to enhance Herzog's sentence in accordance with the entire $500,000 laundered amount. We therefore affirm the court's sentence in this regard.