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United States v. Pelullo

February 25, 2005; as amended March 8, 2005

UNITED STATES OF AMERICA, APPELLANT AT NO. 02-2710
v.
LEONARD A. PELULLO, CROSS-APPELLANT AT NO. 02-2808
UNITED STATES OF AMERICA
v.
LEONARD A. PELULLO APPELLANT AT NO. 02-2957



On Appeal from the United States District Court for the District of New Jersey (Crim. No. 94-276/Civ. No. 01-124) District Judge: Honorable Dickinson R. Debevoise

Before: Roth, Barry and Garth, Circuit Judges

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

PRECEDENTIAL

Argued: September 28, 2004

OPINION

Leonard A. Pelullo was indicted on December 9, 1994. He was convicted by a jury on November 8, 1996, following a six-week trial in the United States District Court for the District of New Jersey, of all 54 counts of the indictment, which charged conspiracy and substantive counts to embezzle funds belonging to an employee benefit plan and to launder the proceeds of that embezzlement. The District Court denied a host of post-trial motions, and imposed a prison sentence of 210 months for each of the money-laundering counts and 60 months for the conspiracy and embezzlement counts, to be served concurrently with the twenty-four year prison sentence previously imposed against Pelullo for prior racketeering and wire fraud convictions in the District Court for the Eastern District of Pennsylvania. The District Court also ordered Pelullo to make restitution in the amount of $898,688 and to forfeit $3,562,987 to the United States.

After the judgment in this case was affirmed by this Court on direct appeal, 185 F.3d 863 (3d Cir. 1999) (table decision),*fn1 Pelullo filed a series of motions for a new trial pursuant to Federal Rule of Criminal Procedure 33. Pelullo essentially argued that the government failed to disclose exculpatory evidence at the time of trial, in violation of its obligations under Brady v. Maryland, 373 U.S. 83 (1963), thus rendering his conviction constitutionally infirm. Additionally, Pelullo filed a motion for collateral relief pursuant to 28 U.S.C. § 2255, contending, inter alia, that the District Court failed to provide the jury with specific unanimity instructions in violation of his rights under the Sixth Amendment.

On May 17, 2002, after consolidating the new trial motions and the § 2255 motion, the District Court granted Pelullo a new trial, concluding that the government had in fact suppressed material information, in contravention of its Brady obligations. The District Court denied Pelullo's request for § 2255 relief, but granted a certificate of appealability with respect to one issue: whether the Court's failure to provide the jury with specific unanimity instructions violated Pelullo's Sixth Amendment rights.

The government has appealed from the grant of a new trial, and Pelullo has appealed from the denial of collateral relief.*fn2

Because we conclude that the District Court erred in the threshold suppression determination prescribed by the Brady analysis, we will reverse the District Court's grant of a new trial. We also conclude that Pelullo's challenge to the jury instructions is procedurally barred by United States v. Frady, 456 U.S. 152, 167 (1982), and we will thus affirm the District Court's denial of his request for collateral relief. Accordingly, we will direct the District Court to reinstate the judgment of Pelullo's conviction and his sentence. In addition, we will remand to the District Court for resolution of the remaining issues raised by Pelullo in his § 2255 motion,*fn3 and direct that the District Court, as a priority matter, give serious consideration to vacating its Order of January 29, 2002, which had released Pelullo on bail.

I.

Pelullo has been the subject of federal criminal prosecutions in the Eastern District of Pennsylvania, the Middle District of Florida, and the District of New Jersey. He has, moreover, been persistent in challenging his various convictions, filing numerous notices of appeal with this Court from both the Pennsylvania and New Jersey prosecutions.*fn4 In this appeal, however, which concerns only the New Jersey proceedings, it is the government that is appealing the District Court's grant of a new trial based on the government's purported failure to abide by its Brady obligations. We are thus called upon to revisit the parameters of prosecutorial obligations under Brady. In doing so, and for reasons which will later become apparent, we are mindful of the well-established principle that "the government is not obliged under Brady to furnish a defendant with information which he already has or, with any reasonable diligence, he can obtain himself." United States v. Starusko, 729 F.2d 256, 262 (3d Cir. 1984) (citation omitted).

II.

We have jurisdiction over the government's appeal under 18 U.S.C. § 3731 and Pelullo's appeal under 28 U.S.C. §§ 2253, 2255. Pelullo, however, raised a number of issues in his § 2255 motion for collateral relief, only one of which was certified by the District Court for interlocutory appeal under 28 U.S.C. § 1292(b). We granted Pelullo permission to appeal under § 1292(b), thereby establishing appellate jurisdiction only as to that one issue. We express no opinion as to the validity of Pelullo's remaining contentions, which will need to be addressed in the first instance by the District Court upon remand.

We ordinarily review a district court's ruling on a motion for a new trial on the basis of newly discovered evidence for abuse of discretion. See, e.g., Government of Virgin Islands v. Lima, 774 F.2d 1245, 1250 (3d Cir. 1985). However, where, as here, the motion for a new trial is based on a Brady claim, which presents questions of law as well as questions of fact, we "will conduct a de novo review of the district court's conclusions of law as well as a 'clearly erroneous' review of any findings of fact." United States v. Perdomo, 929 F.2d 967, 969 (3d Cir. 1991) (citing Carter v. Rafferty, 826 F.2d 1299, 1306 (3d Cir. 1987)). Further, we exercise plenary review over the District Court's denial of collateral relief. United States v. Lloyd, 188 F.3d 184, 186 (3d Cir. 1999).

III.

A thorough review of the trial evidence is set forth in the District Court's opinion denying various post-trial claims submitted by Pelullo before his direct appeal in this case, and thus need not be recounted in detail here. See United States v. Pelullo, 961 F. Supp. 736, 744-50 (D.N.J. 1997), aff'd, 185 F.3d 863. As such, we begin our background discussion by only briefly recapitulating the salient facts of that factual summary so as to contextualize the Brady issues raised in this appeal.

Pelullo's indictment and subsequent conviction arose from the government's investigation of Pelullo's management of Compton Press, Inc. ("Compton Press"), the Compton Press, Inc. Retirement Plan, and the Compton Press, Inc. Thrift Plan (collectively, the "benefit plans"). At all relevant times, Pelullo controlled Compton Press and, concomitantly, the benefit plans. Through his long-time associate, David Hellhake, and a number of other employees and associates, Pelullo systematically diverted benefit plan assets for his own business and personal uses. Pelullo's modus operandi was to use a complex series of wire transfers, which can be classified in three principal sets of transactions.

1.

In the first of these transactions, Pelullo withdrew over $1.15 million from various brokerage accounts owned by the benefit plans in order to finance an attempted corporate takeover of DWG Corp. (a holding company for Arby's and Royal Crown Cola), as well as to pay for certain personal expenses. He transferred that money to two separate accounts, hiding the true nature of the transactions from the plan Trustees. Pelullo transferred $750,000 to a corporate bank account of Granada Investments, Inc., the company Pelullo used to effect the contemplated takeover. Of these funds, some $70,000 were subsequently filtered into various accounts owned by Pelullo and his family members. Pelullo then transferred $400,000 to Paribas, an investment broker retained by Pelullo to handle the DWG takeover.

2.

The second set of transactions involved efforts to finance the purchase of Ambassador Travel, a bankrupt company, through a Pelullo-controlled entity called Away to Travel South ("ATTS"). Pelullo caused $1.326 million to be transferred from the benefit plans' brokerage accounts, with the bulk of funds going toward the purchase of Ambassador Travel. Much of the money remaining after the ATTS purchase eventually filtered down to Pelullo and his family. Pelullo accomplished this transaction by disguising the transfers as a loan to ATTS.

3.

The third set of transactions focused on the transfer of monies from an annuity contract, the assets of which belonged to the Compton Press, Inc. Retirement Plan. Pelullo, through his subordinates, terminated the contract. He then appropriated the proceeds from the annuity, which totaled $1.4 million, to finance other acquisition projects and personal endeavors.

At issue in this appeal are documents obtained after trial from two distinct sources. The first set of documents was drawn from the hundreds of thousands of business records Pelullo had stored in a Miami warehouse (the "warehouse documents"). These documents had been seized by the FBI in connection with an investigation of Pelullo (unrelated to this case) in the Middle District of Florida ("MDFLA"). Pelullo's lawyers claimed to have received the documents from the United States Attorney's Office ("USAO") in the MDFLA after the completion of the trial in this case. Discovery had produced these documents in the criminal prosecution against Pelullo in Florida.

The second set of documents were generated in a civil lawsuit against Pelullo and others regarding Pelullo's defalcations from the Compton Press benefit plans. Under the Freedom of Information Act ("FOIA"), Pelullo had obtained the documents after the instant trial. He had obtained them from the Pension and Welfare Benefits Administration ("PWBA") of the United States Department of Labor ("DOL") ("PWBA documents").*fn5

As we discuss later in this opinion, this case focuses on the threshold question of whether the government suppressed these documents within the meaning of Brady and its progeny. See discussion infra at 20-22. Without such suppression, there can be no Brady violation, notwithstanding the putative materiality of the subject documents. This suppression determination, moreover, is a highly factual inquiry, which requires us to carefully explore the relevant circumstances surrounding Pelullo's various prosecutions. We do so now, turning first to those events relevant to the warehouse documents.

IV.

A.

While the United States Attorney's Office in New Jersey was investigating the Compton Press matter, the USAO in the MDFLA was investigating allegations of bankruptcy fraud and other related offenses. In October of 1991, the FBI executed a search warrant for a 2400-square foot warehouse in Miami, which contained business records of twenty-five of Pelullo's companies. As Pelullo himself stated, the Florida warehouse included "[e]very document that [he] had generated in the last 20 years." United States v. Pelullo, 917 F. Supp. 1065, 1077 (D.N.J. 1995). These documents were in a "disorganized state and often mislabeled," with some of the boxes bearing numbers but no further identification. Id. The FBI seized 904 boxes, 114 file cabinets, and 10 file cabinet drawers of corporate and financial records, transported them to a secure location in Jacksonville, Florida, identified and retained those documents relevant to the MDFLA investigation, and returned 75,000 pounds of warehouse documents to Pelullo in September of 1992. After returning the 75,000 pounds of documents to Pelullo, the Florida FBI agents retained roughly 160 boxes and 36 file cabinets of warehouse records.

In or around June of 1992, Kathleen O'Malley, an Assistant United States Attorney ("AUSA") from the MDFLA, wrote to one of Pelullo's lawyers, offering to transport the 75,000 pounds of released warehouse documents at the government's expense from Jacksonville to Miami (where Pelullo maintained his principal place of business), and to further transport those documents to Philadelphia (where Pelullo had been indicted) for approximately $8,000. AUSA O'Malley also sent the lawyers a partial index of all of the warehouse documents, though she admitted that the index was "obsolete," as it failed to show all of the items seized or indicate which of the listed items had been retained. Thereafter, the government delivered those 75,000 pounds of documents to Pelullo.

Also in 1992, AUSA O'Malley informed Pelullo's lawyers that the government would retain certain other documents that had been seized in the warehouse, but "would be willing to provide reasonable access to Mr. Pelullo's attorneys, and to permit counsel to copy some or all of the documents."

B.

During a three-day period in 1991, DOL Special Agent Rosario Ruffino (the principal investigator in the District of New Jersey case) and two other agents working on the Compton Press matter traveled to Jacksonville and conferred with the FBI agent in charge of the Florida investigation. Florida FBI agents assisted Agent Ruffino in identifying six boxes of documents from the retained warehouse documents that were relevant to the New Jersey investigation. At a Rule 104 evidentiary hearing*fn6 on May 16, 1995, Agent Ruffino testified that he had conducted only a cursory review of the warehouse files in Florida "to see if they were related to Compton Press and the profit sharing pension plans." Only after the six boxes of documents arrived in Newark did Agent Ruffino review them in more detail.

On December 22, 1994, AUSA Jose P. Sierra advised Pelullo that the government was making available for his inspection and discovery, pursuant to Federal Rule of Criminal Procedure 16,*fn7 "[m]iscellaneous documents obtained pursuant to a search warrant executed on October 23, 1991," referring to the retained warehouse documents. The letter further stated: "[t]he United States is unaware of the existence of any material within the purview of Brady v. Maryland. If I later become aware of any other such material, I will promptly forward the same to you."

One week later, at a hearing on December 29, 1994, Pelullo acknowledged that he knew that the government possessed documents from the Florida warehouse, and that the warehouse documents included some documents involving Compton Press and the benefit plans. Pelullo asked that those documents be made available for his inspection, and represented that he would go to Jacksonville "if I have to, to take a look at those documents." In response, AUSA Sierra stated:

As far as documents in Jacksonville... I do believe there was an investigation there and I believe documents are in Florida. If those documents are in the custody of the Assistant U.S. Attorney or the agents in Florida, I will talk to them, to see what documents bear on this case. They may not bear on this case, and I don't know, your Honor, if it is appropriate for Mr. Pelullo to use this case as a vehicle to go on a fishing expedition as to some other investigation which is currently going on in Florida. I can confer with the Assistant U.S. Attorney in Florida to be sure that that is the case. If she tells me that, in fact, the documents that are in Jacksonville bear on her investigation and do not bear on Compton, I would object and would ask the Court to advise Mr. Pelullo that... he is not entitled to those documents.

Pelullo responded that "there might be other items in those files that are relative to my case," and "[a]ll I want is the availability to see those files in Jacksonville to see what pertains to this case in my defense."

At this point, the District Court observed that "it would appear that there are documents related to this case in Florida," and suggested that the prosecutor "find out and if there are, make them available to the defendant[]." To this the government answered:

Again it is our position that, while I believe all documents that were relevant in Florida we now have and are available to Mr. Pelullo in this case. If there are documents that we don't have that bear on this case, and I doubt that there are, but I will look into it, we'll make them available to Mr. Pelullo.

The District Court then suggested that AUSA Sierra confer with DOL Agent Ruffino, who was present in court. After doing so, AUSA Sierra advised the court that Agent Ruffino intended "to bring all relevant documents up [from Florida], so we believe we have all of the relevant documents relevant to the Compton case, here."

Despite these assurances, Pellulo insisted that, even though the government had "culled" documents from the warehouse that pertained to "[the government's] side of the case," he, Pelullo, had to review all of the warehouse documents to find those which pertained to the defense. AUSA Sierra agreed that Pelullo was entitled access to any such documents, provided that they did not bear on the Florida investigation. The District Court directed the prosecutor to identify for Pelullo those warehouse documents that the government would voluntarily disclose, so that Pelullo could petition the Court if he sought additional material. The prosecution assured Pelullo and the Court that it had previously disclosed all Brady material of which it was aware, and would disclose any additional Brady material of which it subsequently became aware.

After January 27, 1995, Pelullo was incarcerated at FCI Fairton, following his conviction in the Eastern District of Pennsylvania. By letter dated February 28, 1995, Pelullo asked AUSA O'Malley to release "certain original documents seized" from the Miami warehouse in order to prepare for the trial in this case, and to provide him with an "inventory of all original documents seized" from the warehouse. In response, AUSA Mark Rufolo, one of the federal prosecutors in this case, informed Pelullo by letter dated March 2, 1995 that the six boxes of documents already provided to Pelullo "represent all of the documents obtained through the Florida search and seizure, which we believe may be relevant to the case pending in the District of New Jersey." Mr. Rufolo advised Pelullo, however, that he should make arrangements with the authorities in the MDFLA "[s]hould you desire to inspect or copy additional documents taken during the search."

By letter addressed to Edward Plaza, Esq., on March 14, 1995, in response to Pelullo's letter of February 28, 1995, AUSA O'Malley again offered "to have all of the documents in the FBI's possession copied, at Mr. Pelullo's expense." She also offered to obtain an estimate for that cost, and asked Mr. Plaza to advise her ...


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