U.S. v. Diozzi, s. 85-2017

• Citation: 807 F.2d 10
• Decision Date: 16 December 1986
• Docket Number: 85-2018,Nos. 85-2017,s. 85-2017
• Parties: UNITED STATES of America, Appellee, v. Richard A. DIOZZI, Defendant, Appellant. UNITED STATES of America, Appellee, v. Diane M. DIOZZI, Defendant, Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

Page 10

807 F.2d 10

55 USLW 2398

UNITED STATES of America, Appellee, v. Richard A. DIOZZI, Defendant, Appellant.

UNITED STATES of America, Appellee, v. Diane M. DIOZZI, Defendant, Appellant.

Nos. 85-2017, 85-2018.

United States Court of Appeals,

First Circuit.

Argued Sept. 11, 1986.

Decided Dec. 16, 1986.

Carolyn M. Conway, Boston, Mass., for Richard A. Diozzi and Elliot D. Lobel for Diane M. Diozzi, with whom DiMento & Sullivan and Peckham, Lobel, Casey & Tye, Boston, Mass., were on joint brief, for defendants, appellants.

Dennis J. Kelly, Asst. U.S. Atty., with whom William F. Weld, U.S. Atty., Boston, Mass., was on brief, for appellee.

Before CAMPBELL, Chief Judge, WISDOM, ^* Senior Circuit Judge, and COFFIN, Circuit Judge.

COFFIN, Circuit Judge.

Diane and Richard Diozzi were convicted of multiple counts of income tax evasion. They argue on appeal that the pretrial disqualification of their defense attorneys violated their sixth amendment right to counsel of choice. The Diozzis originally brought this argument to our attention in their pretrial petition for a writ of mandamus directing the district court to revoke its disqualification order. Though we found that interlocutory intervention through the extraordinary remedy of mandamus was inappropriate, we suggested that district court judges should exercise caution in disqualifying attorneys, especially if less serious means would adequately protect the government's interests. We specified that "our opinion in United States v. Cortellesso, 663 F.2d 361 (1st Cir.1981), does not necessarily sanction disqualification of counsel whenever the government wishes to call defense counsel as a witness," and we encouraged the district court to take a "hard second look" at its own order in light of the serious consequences of improper disqualification. In re Diozzi, No. 85-1468, Order (1st Cir. June 28, 1985). We now find that the district court's disqualification order violated appellants' qualified right to counsel of choice and that appellants' convictions must therefore be set aside.

FACTUAL BACKGROUND

In January 1982, the Internal Revenue Service began an investigation into Richard and Diane Diozzi's tax liability for the years 1978-80. The investigation focused on unreported income from the Diozzis' unincorporated business, "RAD." The Diozzis retained attorney David P. Twomey in April 1982, and Twomey hired certified public accountant Charles McNally to assist him in researching the case. After meeting with the Diozzis and reviewing their books and records, McNally prepared several memoranda for Twomey. Twomey reviewed these memoranda with McNally and with the Diozzis. On February 1, 1983, pursuant to a power of attorney form authorizing him to represent the Diozzis, Twomey filed with the IRS a fifty-three page document consisting of the memoranda that McNally had prepared and Twomey had reviewed. It contained the Diozzis' description, by their representatives, of their accounting, tax, and other business practices as well as the "taxpayers' representative's analysis and conclusions demonstrating total lack of criminal intent on part of taxpayers." Twomey was also present when McNally made an oral presentation of the Diozzis' position to IRS representatives. Although Twomey temporarily withdrew as counsel for the Diozzis in 1984, he officially reentered the case after the Diozzis were indicted in April 1985.

After Twomey's withdrawal, Richard Diozzi retained attorney Kenneth A. Lehman, who in turn hired certified public accountant Roger Miller to aid him in research and preparation. Lehman and Miller interviewed Twomey, McNally, and the Diozzis; reviewed the documents that they had provided (including the Twomey submission to the IRS); and met briefly with Justice Department representatives. On June 18, 1984, Lehman submitted to the Tax Division of the U.S. Department of Justice, a forty-four page memorandum that he and Miller had prepared. This document contained factual information obtained from the Twomey submission about the Diozzis' business practices as well as legal arguments regarding the Diozzis' defenses and alleged violations of their due process rights. Lehman consulted with Twomey throughout his preparation of the case and ultimately persuaded him to return to the case as co-counsel.

On June 4, 1985, six days before the trial was scheduled to begin, the government filed a motion to disqualify Twomey and Lehman as defense counsel on the ground that the government intended to call them both as material witnesses at trial. Listing sixteen allegedly false or misleading statements made by the Diozzis and contained in the Twomey and Lehman submissions, the government asserted that the attorneys' testimony regarding these statements was material evidence of defendants' consciousness of guilt. Specifically, the government claimed that defense counsel's testimony was the government's best evidence of appellants' "scheme" to conceal their alleged tax fraud by making false and misleading statements through their attorneys to the IRS and the Justice Department.

The district court conducted a hearing on June 6 at which appellants offered to stipulate to those statements contained in the written submissions which the government wished to put before the jury. In a memorandum filed the same day, appellants also agreed to stipulate to the fact that the submissions were made by counsel acting under valid power of attorney. The district court nevertheless allowed the government's motion without findings or opinion.

After our denial of their petition for mandamus, appellants proceeded to file a motion for reconsideration of the disqualification, which the district court denied without hearing or opinion. The district court granted appellants' motion for a continuance, and on July 15 appellants proceeded to trial with substitute counsel. The government did call both attorneys to the stand at trial, but the district court limited the scope of direct examination to counsel's memories of the content of the written submissions and to facts contained in the power of attorney forms. ¹

DISCUSSION

The sixth amendment right to assistance of counsel encompasses a defendant's qualified right to be represented in a criminal prosecution by counsel of his or her own choice. See e.g., Wilson v. Mintzes, 761 F.2d 275, 279 (6th Cir.1985); United States v. Curcio, 694 F.2d 14, 12 (2nd Cir.1982); United States v. Laura, 607 F.2d 52, 53, 55-56 (3rd Cir.1979); United States v. Poulack, 556 F.2d 83, 86 (1st Cir.), cert. denied, 434 U.S. 986, 98 S.Ct. 613, 54 L.Ed.2d 480 (1977). While we have recognized that a district court has some discretion to limit the exercise of the right to counsel of choice when insistence upon it would disproportionately disadvantage the government or interfere with the ethical and orderly administration of justice, United States v. Cortellesso, 663 F.2d at 363, we have also warned that disqualification of defense counsel should be a measure of last resort. In re Diozzi, No. 85-1468, Order (1st Cir. June 28, 1985). In moving to disqualify appellants' chosen counsel, the government bears a heavy burden of establishing that disqualification is justified. United States v. Washington, 797 F.2d 1461, 1465 (9th Cir.1986).

The government asserts three grounds in support of the disqualification order in this case. First, the government claims that defense counsel's testimony was its best evidence of appellants' statements made through counsel to the IRS and the Justice Department, and that ethical rules require the disqualification of defense counsel who appear as sworn government witnesses. Second, the government argues that ethical rules would have dictated the disqualification of defense counsel even if they had not appeared as sworn government witnesses, for they would have been unsworn witnesses whose credibility would have been in issue at trial. Third, the government argues that appellants have not demonstrated that the disqualification of their counsel prejudiced their defense. We consider each of these grounds in turn.

1. Best Evidence

Appellants do not challenge the district court's determination that their attorneys could not serve the dual roles of defense counsel and sworn government witnesses in the same trial. See, e.g., ABA Model Code of Professional Responsibility, Disciplinary Rule 5-102(B) (1982) ²; United States v. Cortellesso, 663 F.2d at 363. Rather, appellants argue that the district court erred in allowing the government to call their defense counsel as sworn witnesses when adequate alternative methods of proof existed. In United States v. Cortellesso we held that the government need not resort to evidence other than defense counsel testimony "if it means that the government must settle for less than its best evidence." 663 F.2d at 363. In that case, we noted that had defense counsel been willing to enter into a stipulation of relevant facts, his testimony would not have been needed, and he would have been free to continue in the case. Appellants argue that in this case, their agreement to stipulate to the contents of the written submissions and power of attorney forms eliminated the need for testimony by their defense counsel without requiring the government to settle for less than its best evidence. ³

We have been unable to find any basis for the government's claim that a stipulation would have been less than its best evidence. Appellants had agreed to stipulate to all of the statements in the written submission that the government elicited from defense counsel on direct examination as well as to the fact that the statements were made under valid power of attorney. The rest of the information obtained through direct examination of defense counsel--the fact that counsel met with their clients and the dates of representation--could easily have been stipulated to as well. ⁴ Defense counsel refused to stipulate to the fact that the...