900 F.2d 512 (2nd Cir. 1990), 583, United States v. Jones

Docket Nº:583, Docket 89-1425.
Citation:900 F.2d 512
Party Name:UNITED STATES of America, Appellee, v. Lisa JONES, Defendant-Appellant.
Case Date:March 30, 1990
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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900 F.2d 512 (2nd Cir. 1990)

UNITED STATES of America, Appellee,


Lisa JONES, Defendant-Appellant.

No. 583, Docket 89-1425.

United States Court of Appeals, Second Circuit

March 30, 1990

Argued Jan. 22, 1990.

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Helen Gredd, Asst. U.S. Atty., New York City (Louis J. Freeh, Acting U.S. Atty., S.D.N.Y., Mark C. Hansen, Asst. U.S. Atty., Peter G.A. Safirstein, Sp. Asst. U.S. Atty., of counsel), for appellee.

Daniel H. Bookin, San Francisco, Cal. (Douglas W. Sortino, Farella, Braun & Martel, of counsel), for defendant-appellant.

Before KEARSE, MINER, and WALKER, Circuit Judges.

MINER, Circuit Judge:

Defendant-appellant Lisa Jones appeals from a judgment of conviction entered August 23, 1989, after a jury trial, in the United States District Court for the Southern District of New York (Sand, J.). Jones was convicted of five counts of making false declarations before a grand jury in violation of 18 U.S.C. Sec. 1623 (1988) and two counts of obstruction of justice in violation of 18 U.S.C. Sec. 1503, based on her testimony before a federal grand jury investigating a "securities parking" scheme involving her employer, the investment firm of Drexel Burnham Lambert, Inc. After increasing the base offense level under Sentencing Guidelines Sec. 2J1.3(b)(2) because Jones had "substantially interfered with the administration of justice," the district court sentenced Jones to concurrent terms of imprisonment for 18 months on each count. The court also imposed a fine of $50,000 and a special assessment of $350.

On appeal, Jones asserts her trial counsel was burdened by conflicts of interest, rendering his assistance ineffective. These conflicts are said to arise from the prosecutor's threat of disciplinary charges against

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Jones' attorney relating to a letter that the attorney had sent to the government in her behalf, and the attorney's concurrent representation of other Drexel employees. The government contends that the district court properly determined after a hearing that no actual conflicts of interest existed.

Jones contends also that the district court erred in allowing cross-examination into her history of making false statements, because this evidence was used, in violation of Fed.R.Evid. 404(b), to prove she acted in conformity with a character for untruthfulness. The government argues that this line of questioning was permissible under Fed.R.Evid. 608(b) and was relevant to her credibility as a witness.

In light of a post-trial revelation that one of the jurors was related to an Assistant United States Attorney for the District of New Jersey, Jones asserts that the district court abused its discretion by refusing to ask specifically whether any jurors had relatives who were government attorneys. The government responds that the court's broad inquiry into possible bias on voir dire provided Jones with adequate information to exercise peremptory challenges.

Finally, Jones assigns as error the district court's increase of her base offense level on the ground that she "substantially interfered with the administration of justice" within the meaning of Sentencing Guidelines Sec. 2J1.3(b)(2). Jones contests as unsupported by any evidence the government's assertion that her conduct resulted in "the unnecessary expenditure of substantial governmental or court resources." Guidelines Sec. 2J1.3 application note 1. The government argues that unnecessary expenditures could be inferred from the complex nature of its investigation and the information known to Jones.

For the reasons that follow, we affirm the convictions for making false statements before a grand jury and obstruction of justice. However, we find the record insufficient to support the district court's increase of the base offense level under the Sentencing Guidelines and, therefore, we vacate the sentence and remand for resentencing.


Lisa Ann Jones ran away from home in New Jersey at the age of 14 to seek her fortune in California. By misstating her age, she found employment initially at a bank and ultimately found success at the California offices of Drexel Burnham Lambert, where she was hired as an assistant trader. At Drexel her income soared from approximately $20,000 in 1981 to $100,000 in 1988. She dealt with traders and their assistants at other investment firms around the country, working on transactions involving millions of dollars.

On December 17, 1987, Jones was served with a subpoena to testify before a grand jury in the Southern District of New York investigating "securities parking" transactions between her employer and another investment firm with which she dealt, Princeton/Newport Partners, L.P. "Securities parking" essentially involves a purported transfer of ownership in securities combined with a secret agreement providing the "seller" with the right to repurchase them at a later date. The "seller" receives the tax benefits of a loss realized by the "sale"; the "buyer" is compensated for the "cost of carrying" the securities. Since the agreement to resell ensures that the "seller" never loses control of the securities, the government considers "parking" a form of tax and securities fraud. The government investigator who served Jones with the subpoena asked if she knew of any "parking" deals involving Drexel and Princeton/Newport. Jones denied knowledge of "parking" deals, although she said there had been deals in which Drexel would purchase bonds, only to resell them to Princeton/Newport within 30 or 33 days. Jones asked to speak with an attorney before answering any more questions. The government investigator recommended that she seek counsel independent of the attorneys representing her employer.

Drexel knew of the investigation and had retained two New York City law firms--Cahill Gordon & Reindel and Curtis, Mallet-Prevost, Colt & Mosle--to represent itself and its employees. When Jones appeared

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before the grand jury on January 11, 1988, she was represented by Drexel's attorneys. Jones did not testify at that time because she requested and received additional time to prepare. At the start of her second appearance on January 13, an Assistant United States Attorney ("AUSA") informed Jones of her rights to have independent counsel and to have an attorney appointed if she could not afford one. The AUSA told Jones that her attorneys represented Drexel and that her interests and Drexel's interests in the investigation might differ. Jones replied that she was satisfied with her lawyers. When she invoked her fifth amendment right against self-incrimination, Jones was served with a compulsion order granting her immunity from prosecution on the basis of her testimony. She then testified that she could not recall ever discussing or calculating the cost of carrying securities for Princeton/Newport. Jones testified specifically that she never discussed the cost of carrying with William Hale or Paul Berkman of Princeton/Newport, and that she never kept a record of such costs.

Jones returned to the grand jury on January 20 and was reminded of the compulsion order. She was told again that she had been granted immunity from criminal prosecution, but that she had to testify truthfully or she would be subject to prosecution for perjury or obstruction of justice. Jones testified that she had never heard of any instance in which Drexel purchased a security from a client with the understanding that the client would buy it back at a later date. She denied knowledge of any such understanding between Drexel and Princeton/Newport, stating: "If I knew that there was an agreement or arrangement, I think I would have remembered it." On January 27, Jones testified that she had no information concerning who might have engaged in parking transactions involving Drexel and Princeton/Newport.

On February 23, 1988, the government informed Jones' lawyers that she was a target of a federal grand jury investigating perjury and other possible violations of federal criminal law. Apparently unknown to Jones, her counterpart at Princeton/Newport, William Hale, had preceded her before the grand jury and had testified to parking transactions involving Drexel and Princeton/Newport. The government also had obtained a tape recording of a telephone conversation between Hale and Jones relating to calculations for the cost of carrying securities Princeton/Newport had sold to, then repurchased from, Drexel. Jones retained new counsel, Brian O'Neill, on July 18 and shortly thereafter learned that an indictment was imminent.

At an August 2, 1988 meeting with representatives of the United States Attorney's Office, Jones and O'Neill heard the recording of the telephone conversation between Hale and Jones. The recording revealed that Jones understood that the securities would be held for 32 days, then resold to Princeton/Newport, and also that she understood the intricate calculations involved in the transactions.

O'Neill discussed the tapes with Jones, who said they had refreshed her recollection of events. In an attempt to avoid an indictment, Jones authorized O'Neill to inform the government of testimony she could provide now that her memory was refreshed. O'Neill so informed the government, and later memorialized that oral proffer in a letter, also authorized by Jones, to the United States Attorney's Office. The proffer letter stated that Jones now recalled discussing with Hale securities to be bought by Princeton/Newport from Drexel at the same price at which Drexel had originally purchased them from Princeton/Newport. Jones and Hale calculated "the cost to Drexel of maintaining Princeton's position in the security," including an accommodation for intervening changes in the market price. At some point, she recalled learning that there was to be a 31-day interval between purchase and sale. However, Jones denied ever hearing the terms...

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