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United States of America v. Neal D. Saferstein

January 26, 2012

UNITED STATES OF AMERICA
v.
NEAL D. SAFERSTEIN, APPELLANT



Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Crim. No. 2:07-00557) District Judge: Honorable Cynthia M. Rufe

The opinion of the court was delivered by: Greenaway, Jr., Circuit Judge.

PRECEDENTIAL

Submitted Under Third Circuit LAR 34.1(a) January 24, 2012

Before: FISHER, GREENAWAY, JR., Circuit Judges, and JONES*fn1 , District Judge.

OPINION

Neal Saferstein ("Saferstein") pled guilty in the United States District Court for the Eastern District of Pennsylvania to four federal criminal charges related to a fraudulent business scheme in which he had engaged. In the plea agreement, Saferstein waived his appellate rights subject to several exceptions, including an exception for "the assertion of constitutional claims that the relevant case law holds cannot be waived." (App. 90.) Following his sentence, Saferstein now argues on appeal that the District Court (1) violated his due process rights by denying him credit he believes he was due under the United States Sentencing Guidelines (the "Guidelines") for acceptance of responsibility; (2) denied him his right of allocution at sentencing; and (3) violated his rights under the ex post facto clause. He contends that his appellate waiver does not foreclose any of these arguments.

We hold, as a result of a statement by the District Court during the plea colloquy, which improvidently expanded Saferstein‟s appellate rights, that Saferstein did not waive his right to raise constitutional claims on appeal. We further find that his ex post facto claim is of constitutional moment and meritorious. We will vacate and remand to the District Court for resentencing.

I. BACKGROUND

From 1997 until 2004, Saferstein was President, Chief Executive Officer, and majority owner of GoInternet, a telemarketing company based in Philadelphia. Beginning in 1997, GoInternet‟s telemarketers cold-called businesses around the country in an attempt to sell them an internet services package, including a web page, dial-up web access, and an email account. GoInternet began charging each business that agreed to receive a "welcome packet" $29.95 per month for these services, a fee which was added to its telephone bill. By the end of 2003, more than 350,000 businesses were "customers" of GoInternet, yielding annual gross revenue in excess of $49 million.

GoInternet‟s implementation of this business model had several fraudulent aspects. First, the telemarketers frequently failed to disclose the full terms of the agreement, including the fact that consenting to receive a welcome packet would result in the $29.95 monthly charge unless the business called GoInternet within fifteen days to cancel services. Second, the welcome packet looked like unsolicited junk mail, so that it was often discarded unopened. Even if a customer did open and read the welcome packet, disclosures related to billing were hidden, so that most customers remained unaware that they were required to cancel services in order to avoid being charged. Third, because the charges appeared only within telephone bills, many customers did not notice the GoInternet charges. Fourth, GoInternet lacked the personnel to handle incoming calls from customers, making it extremely difficult for customers who attempted to cancel to do so successfully.

In addition to these fraudulent practices, the web pages provided to GoInternet customers were not accurate or useful to potential customers. The websites were generic, filled with mistakes, and often appeared at web addresses that were impossible to locate using major search engines.

The Government has estimated the losses to customers associated with the scheme to be approximately $74 million.

In 2000, the Federal Trade Commission ("FTC") brought suit against Saferstein and GoInternet. Federal Trade Commission v. Mercury Marketing of Delaware, Inc., and Neal D. Saferstein, No. 00-CV-3281 (E.D. Pa. filed June 29, 2000). On March 1, 2001, the parties agreed to a stipulated judgment and order for permanent injunction, which contained various prohibitions to protect customers from unauthorized billing and directed GoInternet to send postcards to all of its customers informing them that they were being billed and were paying for GoInternet services. Despite the agreement, Saferstein directed that those postcards be altered or destroyed.

As a result of this and other noncompliant conduct, the FTC sought to hold Saferstein and GoInternet in contempt. In anticipation of a hearing on that matter before the District Court, Saferstein directed GoInternet executive, and ...


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