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UNITED STATES v. CANNISTRARO

May 12, 1992

UNITED STATES OF AMERICA, Plaintiff,
v.
RICHARD S. CANNISTRARO and RICHARD O. BERTOLI, Defendants.



The opinion of the court was delivered by: LECHNER

 LECHNER, District Judge

 This is a criminal action which originated on 16 June 1989 when an indictment (the "Indictment") was returned. Defendants Richard O. Bertoli ("Bertoli"), Leo M. Eisenberg ("Eisenberg") and Richard S. Cannistraro ("Cannistraro") (collectively the "Defendants") were named in the Indictment. *fn1" On 29 September 1989 a six count superseding indictment (the "Superseding Indictment") *fn2" was returned against the Defendants. *fn3" On 21 January 1992 the Government returned an eight count second superseding indictment (the "Second Superseding Indictment") against Bertoli and Cannistraro. Count One of the Second Superseding Indictment charges Bertoli and Cannistraro with racketeering activities in violation of the Racketeer Influenced and Corrupt Organization Act ("RICO"), 18 U.S.C. § 1961, et seq. Count Two charges Bertoli and Cannistraro with conspiracy to commit racketeering in violation of RICO. Count Three charges Bertoli and Cannistraro with conspiracy to obstruct justice. Counts Four through Seven charge Bertoli with obstruction of justice in violation of 18 U.S.C. § 1503. Count Eight charges Bertoli and Cannistraro with conspiracy to commit securities fraud in violation of 18 U.S.C. § 371. *fn4" Eisenberg is not a defendant in the Second Superseding Indictment although he is listed as a co-conspirator. *fn5"

 Currently before the court is the motion of the Government to disqualify Michael B. Pollack, Esq. ("Pollack"), counsel to Cannistraro, (the "Motion to Disqualify") on the grounds that Pollack may be a potential witness at trial, Pollack previously represented a potential witness at trial and Pollack is the target of an unrelated grand jury investigation. *fn6" For the reasons set forth below, the Motion to Disqualify is granted.

 Facts

 On 6 November 1989 Cannistraro was arraigned under the initial indictment in this matter. At the arraignment, Patricia Cody, Esq., Assistant Federal Public Defender, appeared as standby counsel to Cannistraro who was then proceeding pro se. Minutes of Proceedings, dated 6 November 1989. On 25 January 1990 Pollack, on behalf of Cannistraro, filed a motion on short notice. Notice of Motion, filed 25 January 1990. Since that time, Pollack has continued to represent Cannistraro to date.

 The factual basis upon which the Government relies for the Motion to Disqualify comes in large part from the evidence obtained from the Cayman Islands and from a proffer of testimony made by Joseph Lugo ("Lugo"), an individual who has been associated with Bertoli since the early 1970s and who has most recently worked with Bertoli in the offices of International 800 in Nanuet, New York. Government's Ex. 2, Affidavit of Michael J. Cahill, dated 24 February 1992 (the "1st Cahill Aff."), P2(c). The Government asserts that Pollack has knowledge of facts relating to the proceeds of the RICO and securities fraud charged in the Second Superseding Indictment because of the following events.

 The Government states Bertoli, Cannistraro and Eisenberg deposited in Cayman Islands banks millions of dollars in proceeds obtained through fraudulent trading of securities of Astrosystems, Inc., Nature's Bounty, Inc., Liquidation Control, Inc., Toxic Waste Containment, Inc., High Technology Capital Corp. and Solar Age Manufacturing Corp. 1st Cahill Aff., P4. The Government states in 1984 Bertoli hired Sidney Coleman ("Coleman") of Paget-Brown & Co. Ltd. ("Paget-Brown") to administer and manage this money. Id. It contends that in 1987 or 1988 Coleman formed three individual corporations: Beecham Enterprises Corp. ("Beecham") which was owned by Bertoli; Centurion Enterprises Corp. ("Centurion") which was owned by Cannistraro and Eastern Funds Corp. ("Eastern") which was owned by Eisenberg. Id. Subsequently, Coleman opened bank accounts for Beecham, Centurion and Eastern at Morgan Grenfell (Cayman) Ltd. ("Morgan Grenfell") in the Cayman Islands, which accounts had in total over eight million dollars. Id.

 The Government states Lugo has proffered the following information regarding the management and transfer of eight million dollars from the Cayman Islands to Andorra. Lugo stated during 1989 he worked daily with Bertoli in New York and that Bertoli asked him to assist in the transfer of the money from the Cayman Islands to Andorra. Id., P5. Lugo stated Bertoli indicated he was having trouble with Coleman because Coleman would not transfer monies to pay for Cannistraro's legal fees in this case. Id., P7. Lugo stated Bertoli subsequently replaced Coleman with Ernest Foster ("Foster"), a money manager at Business Services International, Ltd. in the Cayman Islands. Id.

 Lugo proffered that in November 1989 he attended a breakfast meeting with Bertoli and Foster in New York at which Bertoli stated he wanted Foster to transfer the money to Andorra. Id., P9. Lugo stated at this meeting Bertoli directed Lugo to obtain Eisenberg's signature on a release which would cause the money to be transferred. Id., P10. Lugo also submitted Bertoli signed Richard Cannistraro's name on a document in Lugo's presence and told Lugo the signature needed to be witnessed. *fn7" Id. Lugo stated Bertoli told him to sign any name in the telephone book as a witness; however, Lugo instead took the document to Pollack who signed as the witness of Cannistraro's signature. Id.

 Lugo stated that when Pollack learned the document he had signed as a witness was sent to the Cayman Islands to be used for the transfer of funds, Pollack told Bertoli that the document was dangerous. Government's Ex. 3, Affidavit of Michael Cahill, dated 23 March 1992 (the "2d Cahill Aff."), P4. Lugo stated Bertoli told Pollack not to worry because there would probably be a fire and Pollack said good. Id.

 The Government states that in December 1989 an account was set up in the name of Fosca at the Bank Agricoli Comerical D'Andorra in Andorra. 1st Cahill Aff., P15. The Government further states that in February and April 1990 Morgan Grenfell transferred the balance of the Centurion, Beecham and Eastern accounts to the Fosca account. Id., P18. Lugo stated after the money was in the Fosca account, Bertoli instructed Jose Camprubi ("Camprubi"),the man hired to manage the Fosca account, to wire transfer between $ 400,000 and $ 750,000 from Fosca to a Swiss bank account. 2d Cahill Aff., P5. Lugo stated Bertoli advised him that the money was to pay Pollack for legal fees incurred in representing Cannistraro. Id. Lugo stated in April or May 1990 he attended a meeting with Bertoli and Pollack in New York during which Bertoli informed Pollack that the money had been wired to the Swiss bank account. Id.

 The Government states it has also received evidence that Pollack and Foster were in Andorra in November 1991. Id., P6. This evidence was obtained from Foster in February 1992 when he was arrested by the Federal Bureau of Investigations (the "FBI") in Florida on money laundering charges. Id. The Government states when Foster was arrested he was in possession of two bills, dated 7 November 1991, from the Andorra Park Hotel, one of which was made out to Pollack. Id. In addition, Foster had Pollack's credit card invoices and Pollack's name and work, home and vacation addresses and telephone numbers on the minicomputer Foster had with him at the time of his arrest. Id., PP6-7.

 Pollack's Prior Representation of Potential Witnesses

 Prior to the indictment of Cannistraro, Pollack represented Lugo in his bankruptcy proceedings in the United States District Court for the Southern District of New York. Moving Brief at 6. Pollack also represented Lugo in a criminal investigation of stock manipulation charges brought by the Manhattan District Attorney's office. Id. Lugo stated he provided Pollack with privileged information during his representation of the criminal investigation. 2d Cahill Aff., P8. Lugo indicated if he is a witness at trial, he will invoke the attorney-client privilege with respect to any communications made to Pollack. Id.

 Pollack is currently representing Steven Cloyes ("Cloyes") in the related civil action, SEC v. Monarch Funding Corp., No. 85-7072 (S.D.N.Y.), now pending in the Southern District of New York. Moving Brief at 6 n.2. Cloyes is another potential witness of the Government who has not decided whether he will waive the attorney-client privilege if Pollack cross-examines him at trial in this matter. Id.

 Grand Jury Investigation

 On 21 January 1992 Pollack received a letter informing him he was the target of a grand jury investigation with respect to a conspiracy to file a false income tax return. Moving Brief at 6. This grand jury investigation is unrelated to the facts underlying the Second Superseding Indictment. Id.

 Discussion

 In addition, the Government argues if Lugo is a witness for the Government, Pollack would have a conflict of interest and could not effectively cross-examine Lugo. Moving Brief at 14-17; Reply Brief at 15-17. The Government also argues because Pollack is the subject of a grand jury investigation, Pollack may seek to curry favor with the Government which could possibly result in an ineffective assistance of counsel claim, Moving Brief at 18-20; Reply Brief at 18-21, and, at the least, raises the appearance of impropriety.

 Pollack argues if he is called as a witness it would be in Bertoli's case, not Cannistraro's. Opp. Brief at 5-19. Pollack further argues the Government has not definitely stated it intends to call Lugo as a witness. Id. at 20; Oral Arg. Tr. at 7. Pollack further argues his representation of Lugo involved a completely unrelated matter and even if there were a conflict of interest another counsel could cross-examine Lugo. Opp. Brief at 20-29. Pollack states that the Government has made a plea offer to Cannistraro; therefore, even assuming Pollack sought to curry favor with the Government, it would not be inconsistent with the Government's desires. Id. at 29-30. Pollack argues severance of the trial and Cannistraro's waiver of any conflict of interest are viable alternatives to disqualification. Id. at 31-33.

 A. Disqualification of Counsel

 "The Sixth Amendment to the Constitution guarantees that 'in all criminal prosecutions, the accused shall enjoy the right . . . to have the Assistance of Counsel for his defence.'" Wheat v. United States, 486 U.S. 153, 158, 100 L. Ed. 2d 140, 108 S. Ct. 1692 (1988), reh'g denied, 487 U.S. 2306. The Sixth Amendment right to counsel "was designed to assure fairness in the adversary criminal process." Id. (citing United States v. Morrison, 449 U.S. 361, 364, 66 L. Ed. 2d 564, 101 S. Ct. 665 (1981)); Government of Virgin Islands v. Zepp, 748 F.2d 125, 131 (3d Cir. 1984) (quoting Strickland v. Washington, 466 U.S. 668, 80 L. Ed. 2d 674, 104 S. Ct. 2052, reh'g denied, 467 U.S. 1267, 82 L. Ed. 2d 864, 104 S. Ct. 3562 (1984)). The focus of Sixth Amendment claims, therefore, is on the "adversarial process, not on the accused's relationship with his lawyer as such." United States v. Cronic, 466 U.S. 648, 657, 80 L. Ed. 2d 657, 104 S. Ct. 2039 n.21 (1984); accord Wheat, 486 U.S. at 159.

 The Sixth Amendment right to effective assistance of counsel has been construed to include the right to secure counsel of choice. Powell v. Alabama, 287 U.S. 45, 53, 77 L. Ed. 158, 53 S. Ct. 55 (1932); see also Caplin & Drysdale v. United States, 491 U.S. 617, 624, 105 L. Ed. 2d 528, 109 S. Ct. 2646 (1989). The right to counsel of choice is founded in the right of a criminal defendant to control the conduct of his defense because "it is he who suffers the consequences if the defense fails." Faretta v. California, 422 U.S. 806, 820, 45 L. Ed. 2d 562, 95 S. Ct. 2525 (1975). Although there is a presumptive right to counsel of choice, it is not an absolute right. Wheat, 486 U.S. at 164; Morris v. Slappy, 461 U.S. 1, 13-14, 75 L. Ed. 2d 610, 103 S. Ct. 1610 (1983). As observed by the Supreme Court: S

 While the right to select and be represented by one's preferred attorney is comprehended by the Sixth Amendment, the essential aim of the Amendment is to guarantee an effective advocate for each criminal defendant rather than to ensure that a defendant will inexorably be represented by the lawyer whom he prefers.I

 Wheat, 486 U.S. at 159 (citing Jones v. Barnes, 463 U.S. 745, 77 L. Ed. 2d 987, 103 S. Ct. 3308 (1983); Morris, 461 U.S. at 13-14).

  The Court recognized that conflict of interest is one situation which may rebut the presumption of a defendant's counsel of choice. Wheat, 486 U.S. at 159-60; see also Wood v. Georgia, 450 U.S. 261, 271, 67 L. Ed. 2d 220, 101 S. Ct. 1097 (1981); Cuyler v. Sullivan, 446 U.S. 335, 64 L. Ed. 2d 333, 100 S. Ct. 1708 (1980); Holloway v. Arkansas, 435 U.S. 475, 481, 55 L. Ed. 2d 426, 98 S. Ct. 1173 (1978). The Wheat Court observed although a defendant may waive his or her counsel's conflict of interest, such waive does not necessarily cure the problems indicative to conflicts of interest. 486 U.S. at 160.

 The Wheat court explained the dilemma facing a trial court confronted with a potential conflict of interest. "Trial courts confronted with multiple representations face the prospect of being 'whipsawed' by assertions of error no matter which way they rule." Id. at 161. Where multiple representations are allowed, advocacy of counsel is impaired and the defendant may assert a claim for ineffective assistance of counsel regardless of whether the defendant waived his or her right to conflict-free representation. Id. at 161-62. If multiple representation is prohibited, the defendant may raise a Sixth Amendment violation. Id. at 161. The independent interest of the trial court "in ensuring that criminal trials are conducted within the ethical standards of the profession and that legal proceedings appear fair to all who observe them," id. at 160, the "institutional interest in the rendition of just verdicts in criminal cases," id., as well as the "interest of a criminal defendant," id., require flexibility in the trial court to decline a proffer of waiver if it justifiably finds an actual or potential conflict. Id. at 162-63.

 The Court explained the driving force behind the latitude given to the trial court in accepting ...


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