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United States v. Brennan

April 07, 2003


On Appeal From the United States District Court For the District of New Jersey (Crim. No. 00-cr-490) District Judge: Honorable Garrett E. Brown, Jr.

Before: Scirica, Barry and Smith, Circuit Judges

The opinion of the court was delivered by: Smith, Circuit Judge


Argued January 9, 2003


I. Introduction

A jury convicted appellant Robert E. Brennan of seven counts of money laundering and bankruptcy fraud on April 11, 2001. On appeal, Brennan contends that this conviction should be reversed because of certain trial errors. He also asserts that the District Court made several sentencing errors. For the reasons set forth below, we will affirm.

II. Facts and Procedural History

Robert Brennan has a long history of improper and fraudulent activities in the securities industry. In 1974, he was suspended from selling mutual funds when his improper activities were brought to the attention of the Securities and Exchange Commission ("SEC"). Brennan later founded First Jersey Securities, Inc. ("First Jersey") which served as a brokerage and underwriter. The SEC brought administrative proceedings against Brennan and First Jersey for violation of federal securities laws in 1978 and sought injunctive relief in 1983. These proceedings were settled, but on October 31, 1985 the SEC once again sued Brennan and First Jersey for new fraudulent market activities and stock manipulation. This suit was pending for almost ten years. Finally, on July 14, 1995, the United States District Court for the Southern District of New York entered judgment against Brennan and First Jersey, and ordered that they discharge $22,288,099 in profits gained from their fraudulent activity and pay prejudgment interest in the amount of $52,689,894. SEC v. First Jersey Securities, Inc., 890 F. Supp. 1185 (S.D.N.Y. 1995), aff 'd in part, rev'd in part, 101 F.3d 1450 (2d Cir. 1996).

Just one month before the adverse ruling, in June of 1995, Brennan met in New Jersey with Peter Bond, the Chief Executive of Valmet Group ("Valmet"), a company based in the Isle of Man which advised and assisted individuals in shielding their assets from potential creditors. Brennan delivered to Bond a briefcase full of New York State and New York City bearer bonds with a total face value of $3,975,000.00, and asked him to use the bonds to set up a "dummy" trust which would identify someone other than Brennan as the settlor. Bond flew back to the Isle of Man with the bonds, and upon return, placed them in a cabinet in his office.

On August 7, 1995, a few weeks after the judgment was entered in the Southern District of New York, Brennan filed for bankruptcy protection in the United States Bankruptcy Court for the District of New Jersey under Chapter 11 of the Bankruptcy Code. Brennan failed to disclose his ownership of the bearer bonds in his bankruptcy petition or the attached schedules. On September 4, 1995, while in Las Vegas, Nevada, Brennan cashed in approximately $500,000 in casino gaming chips at the Mirage hotel. Then, in October of 1995, he directed Bond to cash in the bearer bonds. The proceeds from the sale of these bonds were later invested in various entities at Brennan's direction.

As a debtor in possession, *fn1 Brennan had an obligation to file monthly operating reports with the Bankruptcy Court. He failed to disclose the transactions involving the bearer bonds, as well as the casino chips and the cash received in exchange for his casino chips, in reports filed for the months of August, 1995 through June, 1997. Nor did he list these assets in any of the three amended schedules he filed between August and September of 1995.

On July 19, 2000, Brennan was indicted on charges that he concealed from the Bankruptcy Court the approximately $500,000 in casino gaming chips and the cash received in exchange for those gaming chips. The Government brought a first superceding indictment on November 1, 2000, which contained additional counts of bankruptcy fraud charging the concealment of the approximately $4 million in bearer bonds, together with charges of money laundering. A second superceding indictment was filed on December 20, 2000 and a third superceding indictment, containing thirteen counts, was filed on January 24, 2001. Brennan's bankruptcy proceeding was still ongoing at the time this last indictment was filed.

On April 16, 2001, a jury convicted Brennan of seven of the thirteen counts. United States v. Brennan, Crim. No. 00-490 (D.N.J. April 16, 2001). The jury found Brennan guilty of four counts of illegally laundering the proceeds of bearer bonds that he owned, in violation of 18 U.S.C. § 1956(a)(1)(B)(i), two counts of bankruptcy fraud for his failure to declare the bearer bonds in his bankruptcy proceeding, in violation of 18 U.S.C. § 152(1) and (3), and one count of bankruptcy fraud for his failure to include the $500,000 in cash he received for the casino chips in his September financial report, in violation of 18 U.S.C. § 152(3).

Brennan filed a motion for a new trial under Fed. R. Crim. P. 33, which the District Court denied on June 22, 2001. On July 26, 2001, the District Court sentenced Brennan to 110 months imprisonment and a five year term of supervised release. Judgment was entered on July 31, 2001.

On appeal, Brennan asserts that the convictions should be reversed because: (1) there was prosecutorial misconduct during closing arguments; (2) the weight of the evidence failed to support his convictions; and (3) there was a coercive supplemental charge following a report by the jury that it was deadlocked. In addition, Brennan contends that the District Court made three sentencing errors: (1) in calculating the amount of the loss; (2) in applying the fraud enhancement in U.S. Sentencing Guidelines Manual § 2F1.1(b)(4)(B) (Nov. 2000); and (3) in assessing a two-point enhancement for obstruction of justice pursuant to U.S. Sentencing Guidelines Manual § 3C1.1.

III. Jurisdiction

The District Court had jurisdiction pursuant to 18 U.S.C. § 3231. We have jurisdiction over the appeal pursuant to 28 U.S.C. § 1291 and 18 U.S.C. § 3742(a).

IV. Prosecutorial Misconduct in the Closing Statement

Brennan asserts that the prosecution made several improper and prejudicial comments in its closing and that it vouched for the credibility of its key witness, Peter Bond. Brennan also contends that the prosecutor improperly argued that Brennan had an obligation to produce evidence and commented on Brennan's failure to testify.

We review the District Court's ruling on any contemporaneous objections for abuse of discretion. See United States v. Brown, 254 F.3d 454, 458 (3d Cir. 2001), cert. denied, 535 U.S. 944 (2002). A finding of prosecutorial misconduct requires reversal unless the error is harmless. See Fed. R. Crim. P. 52(a); United States v. Zehrbach, 47 F.3d 1252, 1265 (3d Cir. 1995) (en banc). Any non-contemporaneous objections are subject to plain error review. *fn2 See Fed. R. Crim. P. 52(b); United States v. Olano, 507 U.S. 725, 731-32 (1993). "In order to demonstrate prosecutorial misconduct under a plain error standard, the review must reveal 'egregious error or a manifest miscarriage of justice.' " Brown, 254 F.3d at 458 (quoting United States v. Price, 76 F.3d 526, 530 (3d Cir. 1996)).

A. Vouching

In United States v. Young, 470 U.S. 1, 11 (1985), the Supreme Court reiterated that "a criminal conviction is not to be lightly overturned on the basis of a prosecutor's comments standing alone, for the statements or conduct must be viewed in context; only by so doing can it be determined whether the prosecutor's conduct affected the fairness of the trial." The Court explained:

The prosecutor's vouching for the credibility of witnesses and expressing his personal opinion concerning the guilt of the accused pose two dangers: such comments can convey the impression that evidence not presented to the jury, but known to the prosecutor, supports the charges against the defendant and can thus jeopardize the defendant's right to be tried solely on the basis of the evidence presented to the jury; and the prosecutor's opinion carries with it the imprimatur of the Government and may induce the jury to trust the Government's judgment rather than its own view of the evidence. Id. at 18-19 (citing Berger v. United States, 295 U.S. 78, 88-89 (1935)).

In United States v. Walker, 155 F.3d 180 (3d Cir. 1998), we extensively reviewed our caselaw regarding vouching, observing that two criteria must be met [to find vouching]: (1) the prosecutor must assure the jury that the testimony of a Government witness is credible; and (2) this assurance is based on either the prosecutor's personal knowledge, or other information not contained in the record. . . . The defendant must be able to identify as the basis for [the prosecutor's comment on witness credibility] explicit or implicit reference to either the personal knowledge of the prosecuting attorney or information not contained in the record. Id. at 187.

The Walker panel declared that a "prosecutor is engaging in proper argument and is not vouching" when he argues that "a witness is being truthful based on the testimony given at trial, and does not assure the jury [of] the credibility of the witness based on his own personal knowledge[.]" Id. Nor is it improper, according to Walker, for a prosecutor to comment on the "lack of evidence in the record" to support a "defendant's argument that the witness is not credible . . . so long as the comment does not constitute an assurance by the prosecutor that the witness is credible." Id. In other words, a "prosecutor may argue in the negative that the assertions made by defense counsel that a witness is lying are not supported by the testimony in the record." Id.

Since our decision in Walker, we have had several opportunities to revisit the vouching issue. In almost every instance, we have held that the district court did not err in denying a mistrial. See United States v. Milan, 304 F.3d 273, 289-90 (3d Cir. 2002); United States v. Nelson, 284 F.3d 472, 476 n.3 (3d Cir. 2002); United States v. Saada, 212 F.3d 210, 225 (3d Cir. 2000); United States v. Helbling, 209 F.3d 226, 240-41 (3d Cir. 2000) (holding that any vouching by prosecutor was harmless error because the judge informed the jury not to consider the relevant comments, there was a great deal of evidence to support the conviction and defendant was not prejudiced); cf. Lam v. Kelchner, 304 F.3d 256, 271-72 (3d Cir. 2002) (vouching did not so infect the trial with unfairness as to constitute a violation of due process as is required on habeas review); Marshall v. Hendricks, 307 F.3d 36, 65, 70 (3d Cir. 2002) (same); Hartey v. Vaughn, 186 F.3d 367, 372-73 (3d Cir. 1999) (on habeas review, concluding that Pennsylvania Superior Court did not act unreasonably in finding that there had been no improper vouching).

In Milan, the defendant alleged for the first time on appeal that the prosecutor engaged in improper vouching by eliciting testimony on the district court's role in approving wiretaps, the truthfulness of cooperating witnesses, and the prosecution of Government witnesses before they decided to cooperate. Milan, 304 F.3d at 289-90. We held that there was no plain error because the prosecutor was not offering his personal opinion based on facts not before the jury. Id.

Similarly, in Saada, the defendant alleged for the first time on appeal that the prosecution improperly vouched for the credibility of its two informant witnesses by suggesting in closing argument that the two would be entitled to a reduced sentence in exchange for their cooperation only if they were truthful, and that they had numerous other crimes on which to cooperate and no motive to falsely implicate the defendant. Saada, 212 F.3d at 225. Noting that there was evidence introduced at trial that cooperation agreements were in place requiring the witnesses to testify truthfully, and also evidence that they had spent thousands of hours cooperating with the Government on other matters, we held that there was no plain error since the prosecutor was not referring to evidence outside the record. Id.

After Walker, the only case in which we found improper vouching requiring a mistrial was United States v. Dispoz-O-Plastics, Inc., 172 F.3d 275 (3d Cir. 1999). During the closing argument in Dispoz-O-Plastics, the prosecutor stated, "[the Government witnesses] told the Government they fixed prices twice and I can guarantee you the Justice Department doesn't give two for one deals; they had to plead guilty to both price-fixing conspiracies and their sentence reflected that." 172 F.3d at 283. We concluded that this statement was improper vouching because it was intended to convey to the jury that the prosecutor knew the witnesses were telling the truth when they testified about the conspiracies. Id. Moreover, we held that the statement did not constitute harmless error because the testimony from the witnesses was essential to the Government's case, the other evidence against the defendant was not overwhelming, and the judge failed to instruct the jury that the prosecutor's statement could not be considered as evidence. Id. at 286-87.

Here, Brennan contends that the prosecutor vouched for Bond's credibility. To be sure, Peter Bond's credibility was hotly contested and vigorously challenged by the defense. In summation, the prosecutor discussed Bond's credibility at length by pointing out that he was examined for approximately five days on the witness stand and by asserting that Bond "stood by what he had originally told you. He never waivered [sic]. He never flagged. You had a chance to look him in the eye. . . And it comes down to credibility, you have to make the judgment." The prosecutor then reviewed Bond's agreement to cooperate with the Government and addressed the defense's contention that Bond was not believable. In particular, the prosecution referred to a defense attack on Bond's credibility which accused him of laundering money for Russian criminals.

The prosecutor sought to meet this challenge by arguing:

Where's the proof? Where's the evidence? You're going to have a whole lot of documents that were shown to Mr. Bond. Take as long as you need. Pass them around. Read them from top to bottom, backwards to forwards. And if anybody can find anything that indicates Mr. Bond was laundering money for Russian criminal interests, by all means disregard his testimony. The FBI has conducted an investigation of this matter since 1998. The FBI. And as Special Agent Sica told you, there's no evidence that Mr. Bond laundered money for anybody in Russia or anywhere else.

The prosecutor also disputed the defense's contention that Bond was arms dealing with Russians and embezzling Brennan's money. After praising the jury system, the prosecutor then stated:

But one very prominent feature that [sic] about this system, one -- one hallmark of our system is that we don't make accusations without proof. Even if it's against a man who lives in another country. And that's what's happened here.

Peter is not lying to you. You have the proof in the form of corroboration. You have the proof in the form through looking at him for five days and watching him testify. He's not a Russian money launderer. He's not a Russian arms dealer. He's not a thief. Those are accusations and accusations without proof are unacceptable and you can't accept them.

On rebuttal, a second prosecutor told the jury that the evidence demonstrated that Bond committed crimes with Brennan, not that Bond was dealing arms. Again, attempting to blunt the impact of the defense's ...

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