173 F.3d 131 (3rd Cir. 1999), 98-1527, United States v. Pelullo

Docket Nº:98-1527.
Citation:173 F.3d 131
Party Name:UNITED STATES of America, v. Leonard A. PELULLO, Appellant.
Case Date:March 18, 1999
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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173 F.3d 131 (3rd Cir. 1999)

UNITED STATES of America,

v.

Leonard A. PELULLO, Appellant.

No. 98-1527.

United States Court of Appeals, Third Circuit

March 18, 1999

Argued Jan. 27, 1999.

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W. Neil Eggleston, Richard A. Ripley (Argued,) Evan J. Werbel, Julie K. Brof, Jeanne-Marie S. Raymond, Howrey & Simon, Washington, DC, for Appellant Leonard A. Pelullo.

Michael R. Stiles, United States Attorney, Robert E. Courtney, III, Assistant United States Attorney Chief, Organized Crime Strike Force, Walter S. Batty, Jr., Chief of Appeals, William B. Carr, Jr. (Argued), Ronald G. Cole, Frank A. Labor, III, Assistant United States Attorneys, United States Attorney's Office, Philadelphia, PA, for Appellee United States of America.

Before: BECKER, Chief Judge, SCIRICA, and ROSENN, Circuit Judges.

OPINION OF THE COURT

BECKER, Chief Judge.

I. Introduction

This appeal by defendant Leonard Pelullo, arising out of his conviction at his fourth trial in the District Court for wire fraud and civil RICO violations, brings his case before this Court for the fourth time as well. See United States v. Pelullo, 964 F.2d 193 (3d Cir.1992) ("Pelullo I "); United States v. Pelullo, 14 F.3d 881 (3d Cir.1994) ("Pelullo II "); United States v. Pelullo, 105 F.3d 117 (3d Cir.1997) ("Pelullo III "). The appeal follows our remand in Pelullo III for the District Court to determine whether Pelullo would have testified at his first trial regardless of the government's Brady violations, which we identified in Pelullo II and Pelullo III. In remanding, we did not decide the quantum of the government's burden of proving that fact. The District Court concluded the burden was a preponderance of the evidence, though it went on to find by clear and convincing evidence that the government's Brady violation did not cause Pelullo to testify. See United States v. Pelullo, 6 F.Supp.2d 403 (E.D.Pa.1998).

We devote our attention in this appeal to two issues. First, we consider whether the District Court applied the correct standard of proof. Second, if the District Court applied the correct standard, we must decide whether it erred in concluding that the government successfully met its

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burden. We agree with the District Court that the proper standard of proof is preponderance of the evidence and that the government met this standard at the evidentiary hearing. Accordingly, we will affirm on these points. We dispose summarily of Pelullo's remaining contentions: (i) that the District Court should have recused itself; and (ii) that the District Court erred in changing Pelullo's sentence from two-year suspended sentences on forty-eight counts following the first trial to four-year active sentences on those counts following the fourth trial, finding these contentions patently lacking in merit. 1 However, the government does not counter Pelullo's contention that the District Court erred in modifying Pelullo's sentence from a non-committed fine to a committed fine without finding that he had the present ability to pay the fine. We agree. Therefore, when the mandate is returned to the District Court, the District Court shall amend the judgment to reflect that the fine is a non-committed fine.

II. Facts and Procedural History

The facts in this case have been set forth in detail in previous opinions, and hence we only set forth those facts necessary to decide the narrow issues before us. In 1991, Pelullo was indicted on 54 counts of wire fraud and one RICO count. The government alleged in Counts 1-53 that Pelullo, the CEO of a public company called Royale Group, engaged in two schemes to divert for his personal use money loaned to Royale that was to be used to refurbish several art deco hotels it owned in Miami. In Count 54 of the indictment, the government alleged a third, similar scheme: that Pelullo had diverted $114,000 from a Royale subsidiary to pay off part of a $250,000 loan that Anthony DiSalvo, a loan shark with purported ties to the Philadelphia Mafia, had made to him. The government's theory was that Pelullo submitted false documentation, including fabricated financing requests, that allowed Royale to obtain loan money in excess of the expenses it actually incurred and that Pelullo, as CEO, diverted the excess funds for his personal use.

The government's case against Pelullo on Count 54 was based primarily on the testimony of two FBI agents, Randal Wolverton and Michael Leyden, and of an admitted mafia underboss named Philip Leonetti. Wolverton testified that Pelullo, in a June 14, 1990, interview with FBI agents (including Wolverton and Leyden), had admitted using the $114,000 to pay off DiSalvo. Leonetti testified that he met with Pelullo in January 1986 at the Florida home of Nicodemo Scarfo, who was Leonetti's uncle and the reputed boss of the Philadelphia mob, to tell Pelullo that he had to repay DiSalvo. In late February 1986, Pelullo wired $114,000 from a business bank account to his father's company (LRP, Inc.) in Philadelphia. One of Pelullo's brothers (Arthur) allegedly converted the wire transfer to cash and gave the cash to their other brother (Peter) to drop off at DiSalvo's home in Philadelphia.

In response to this testimony, Pelullo took the stand and contradicted Wolverton's claim that Pelullo had admitted to using Royale funds to repay his DiSalvo debt. He claimed that he had not started to pay off the DiSalvo loan until August 1986 and that the $114,000 in question had been used to repay an intercompany debt in February. The jury, apparently unconvinced by that defense, convicted Pelullo of Count 54, 48 other counts of wire fraud, and the RICO count. We vacated this conviction as to every count but Count 54, which we affirmed. See Pelullo I, 964 F.2d at 222. We vacated the other convictions

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because the government had failed to authenticate bank records.

The government subsequently corrected the error, and in 1993, Pelullo was retried and convicted on all counts. Again, we vacated the entire conviction and remanded for retrial. See Pelullo II, 14 F.3d at 907. We concluded that the District Court had erred in instructing the jury that Pelullo's previous conviction on Count 54 conclusively established a RICO violation. See id. at 897. We also noted that the government had committed a Brady violation by failing to turn over an IRS memorandum detailing a meeting between IRS Agent James Kurtz and Leonetti, but we concluded that this violation did not affect the trial's outcome. See id. at 887.

Prior to the third trial, the government gave Pelullo three more pieces of Brady evidence. The first piece was Wolverton's rough notes of the June 14, 1990, interview during which Pelullo discussed the $114,000 transaction. The notes included the words, "repaying intercompany debt." That statement appeared nowhere in the FBI's 302 report, although it ostensibly corroborated Pelullo's defense. The second piece of Brady material was rough notes of Agent Kurtz's interview with Leonetti. Those notes referenced "summer 1986," although that date was not included in Kurtz's final memo. The third piece of material was the FBI surveillance log of Nicodemo Scarfo's Florida residence for January 1986. These logs do not list Pelullo as a visitor to the residence during that month.

In his first two trials, Pelullo had taken the stand, but in his 1994 and 1995 trials he did not. In his 1994 trial, the District Court was forced to declare a mistrial when the jury failed to reach a verdict. In his fourth trial, although Pelullo did not testify in person, the government read a portion of his testimony from the first trial into the record. At the end of the fourth trial, in early 1995, the jury convicted Pelullo on 46 wire fraud counts and the RICO violation.

Pelullo appealed from the judgment in the fourth trial, challenging his convictions on the 46 wire fraud counts and the RICO count, his sentence on those counts, and his earlier conviction on Count 54. With regard to his convictions following the fourth trial, Pelullo claimed that he had been forced to take the stand at the first trial solely because the government had violated his constitutional rights by failing to meet its Brady obligation. Without the subsequently-revealed Brady evidence in hand, Pelullo argued, he had no other way to impeach the three government witnesses. He alleged that his testimony in the first trial was essentially "fruit from a poisonous tree" and that his testimony, read into the record at the fourth trial, tainted the fourth trial as well.

We agreed that there had been a Brady violation relating to Count 54 2 but remanded to the District Court for an evidentiary hearing. See Pelullo III, 105 F.3d at 125. Inter alia, we held that the District Court had erred in allocating to Pelullo the burden of proof on the Brady issue and gave the government the opportunity to establish, in accordance with Harrison v. United States, 392 U.S. 219, 88 S.Ct. 2008, 20 L.Ed.2d 1047 (1968), that Pelullo would have testified in his first trial even if the government had complied with its Brady obligations. See Pelullo III, 105 F.3d at 126. If the government were unable to prove that Pelullo's testimony in his first trial was not prompted by its Brady violation, it would be problematic for the government to have used his testimony from the first trial as evidence in the fourth trial. In other words, the government had to prove that Pelullo's decision to testify at the first trial was not caused by the Brady violation. On remand, the District Court held a hearing and made 69 findings of fact based on the evidence from

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the hearing, its review of the records of the first two trials, its observation of Pelullo's demeanor at all four trials, and its analysis of Pelullo's attorney's...

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