Hoffenberg v. U.S., 00 Civ. 1686(RWS).

• Decision Date: 21 June 2006
• Docket Number: No. 00 Civ. 1686(RWS).,00 Civ. 1686(RWS).
• Citation: 436 F.Supp.2d 609
• Parties: Steven Jude HOFFENBERG, Petitioner, v. UNITED STATES of America, Respondent.
• Court: U.S. District Court — Southern District of New York

436 F.Supp.2d 609

Steven Jude HOFFENBERG, Petitioner, v. UNITED STATES of America, Respondent.

No. 00 Civ. 1686(RWS).

United States District Court, S.D. New York.

June 21, 2006.

Robin C. Smith, Esq., Brooklyn, NY, for Petitioner.

Michael J. Garcia, United States Attorney for the Southern District of New York, New York City (Jessica A. Mordas, Assistant U.S. Attorney, of counsel), for Respondent.

OPINION

SWEET, District Judge.

Petitioner pro se Steven Jude Hoffenberg ("Hoffenberg" or the "Petitioner") has filed a petition under 28 U.S.C. § 2255 to vacate his criminal conviction (the "Petition"). The Government has opposed the Petition which is denied for the reasons set forth below.

Prior Proceedings

Hoffenberg filed the Petition on June 21, 2000, and it was assigned to this Court. Hoffenberg sought recusal, and the Court of Appeals remanded his appeal to permit this Court to consider the recusal motion, which was denied by an opinion filed August 25, 2004 (the "August Opinion").

The August Opinion set forth the proceedings surrounding the earlier recusal motions and the erroneous filing of the Petition, as well as certain of the previous proceedings involving Hoffenberg.

Counsel was appointed for Hoffenberg and the Government filed its opposition. The Petition, the Government's opposition, and the memorandum in support of the Petition were marked fully submitted on February 14, 2004.

The Underlying Criminal Proceedings

From 1974 until April 1993, Hoffenberg served as the chief executive officer, president, and chairman of the board of Towers Financial Corporation ("TFC"). United States v. Hoffenberg, Nos. 94 Cr. 213 and 95 Cr. 321(RWS), 1997 WL 96563, at *1, *10 (S.D.N.Y. March 5, 1997), aff'd, Nos. 97-1159(L) and 97-1166, 1998 WL 695933 (2d Cir. Sept.22, 1998). In February 1993, following a lengthy investigation, the Securities and Exchange Commission ("SEC") filed suit against Hoffenberg, TFC, and other TFC officials for, among other things, securities fraud through the circulation of false and misleading financial statements to investors regarding TFC's financial condition. Hoffenberg, 1997 WL 96563, at *7; United States v. Hoffenberg, 908 F.Supp. 1265, 1268 (S.D.N.Y.1995); see SEC v. Towers Fin. Corp., 205 B.R. 27, 27-28 (S.D.N.Y.1997). Soon thereafter, in March 1993, TFC filed for bankruptcy. Hoffenberg, 1997 WL 96563, at *6. The collapse of TFC resulted in losses to investors totaling hundreds of millions of dollars. Hoffenberg, 908 F.Supp. at 1266; Hoffenberg, 1997 WL 96563, at *6.

On April 19, 1994, Hoffenberg was indicted in the Northern District of Illinois on various fraud charges, including mail fraud. Hoffenberg, 1997 WL 96563, at *7. On April 20, 1994, Hoffenberg was indicted in the Southern District of New York on numerous charges related to the SEC investigation and lawsuit, including mail fraud, securities fraud in connection with the sale of notes and bonds of TFC, unlawful conspiracy, and obstruction of justice. Id. at *8; United States v. Hoffenberg, 169 F.R.D. 267, 269 (S.D.N.Y.1996). The criminal case was assigned to this Court. The indictment pending in the Northern District of Illinois was transferred to the Southern District of New York on April 11, 1995 and assigned to this Court. Hoffenberg, 1997 WL 96563, at *7-*8.

On April 20, 1995, Hoffenberg pled guilty to four counts of a superseding information related to the April 20, 1994 indictment: (i) conspiracy to violate the securities laws by fraudulently selling securities, in violation of 18 U.S.C. § 371; (ii) mail fraud, in violation of 18 U.S.C. § 1341; (iii) conspiracy to obstruct justice, in violation of 18 U.S.C. § 371; and (iv) tax evasion, in violation of 26 U.S.C. § 7201. See Hoffenberg, 1997 WL 96563, at *8. Hoffenberg also pled guilty to one count of the indictment transferred from the Northern District of Illinois: mail fraud in violation of 18 U.S.C. § 1341. See Hoffenberg, 1997 WL 96563, at *1.

On March 7, 1997, this Court sentenced Hoffenberg to twenty years' imprisonment, followed by a three-year term of supervised release, as well as a $1 million fine, approximately $475 million in restitution, and a $50 special assessment on each of the five counts. Hoffenberg, 1997 WL 96563, at *1.

Hoffenberg appealed his criminal conviction and sentence and on September 22, 1998 the Second Circuit affirmed the conviction and sentence. United States v. Hoffenberg, Nos. 97-1159(L) and 97-1166, 164 F.3d 620, 1998 WL 695933 (2d Cir. 1998). Hoffenberg filed a petition for rehearing and a petition for rehearing en banc, which the Second Circuit denied in a January 15, 1999 order.

Hoffenberg is currently incarcerated and serving his sentence.

The Petition

Although Hoffenberg is currently represented by counsel, at the time he filed his § 2255 motion he was not represented by an attorney. In addition, he alleged in his filing that he was held in solitary housing for ten months. Thus, Hoffenberg's submissions should be construed liberally "to raise the strongest arguments that they suggest." Green v. United States, 260 F.3d 78 (2d Cir.2001) (citing Graham v. Henderson, 89 F.3d 75, 79 (2d Cir.1996)); see also Haines v. Kerner, 404 U.S. 519, 520, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972) (per curiam) (holding that the allegations in a pro se complaint are "held to less stringent standards than formal pleadings drafted by lawyers").

Construing Hoffenberg's applications liberally, he has alleged the following with respect to his § 2255 claim:

1) his counsel in the district court proceeding, Hoffman & Pollok, fraudulently billed Hoffenberg $150,000.00 in one day;

2) although Hoffenberg had paid Hoffman & Pollok a $1,225,000.00 retainer for representation in the criminal case, Hoffman & Pollok accepted a $450,000.00 payment for Hoffenberg's legal fees from the trustee in the bankruptcy proceedings, Alan Cohen ("Cohen"), who had interests that were adverse to Hoffenberg;

3) Cohen acted irresponsibly as trustee and was later fired from his position. Hoffenberg had a viable defense to the effect that it was Cohen who squandered Towers' funds and was responsible for Towers' collapse 4) Hoffenberg paid Hoffman & Pollok a $1,225,000.00 retainer expecting to go to trial;

5) Hoffman & Pollok, because it had accepted fees from the bankruptcy trustee, forced Hoffenberg to plead guilty, rather than assert his defense that it was Cohen the trustee, from whom it had accepted $450,000.00, who was responsible for the collapse of TFC;

6) the district court appointed Daniel Meyers ("Meyers") after Hoffman & Pollok were fired by Hoffenberg, and appellate counsel Gerald Bodell ("Bodell"), each of whom was ineffective for failing to raise Hoffenberg's claim that Hoffman & Pollok were laboring under an actual conflict of interest which resulted in a lapse in representation.

The facts alleged in Hoffenberg's submissions, construed liberally, constitute a claim that Hoffman & Pollok were operating under an actual conflict of interest that resulted in a lapse in representation, entitling Hoffenberg to reversal. U.S. v. Schwarz, 283 F.3d 76, 90 (2d Cir.2002); Armienti v. United States, 234 F.3d 820, 823 (2d Cir.2000); United States v. Rogers, 209 F.3d 139, 143 (2d Cir.2000); United States v. Blau, 159 F.3d 68, 74 (2d Cir. 1998); United States v. Levy, 25 F.3d 146, 152 (2d Cir.1994).

The Ineffective Assistance Of Counsel Claim Is Denied

During the criminal investigation and through the time of his guilty plea, Hoffenberg was represented by the law firm Hoffman & Pollok. Hoffenberg retained Hoffman & Pollok on April 19, 1993 to represent him in both pending and future civil and criminal matters against him. See Hoffenberg v. Hoffman & Pollok, 248 F.Supp.2d 303, 306 (S.D.N.Y.2003). Initially, Hoffman & Pollok was paid pursuant to a retainer agreement signed by Hoffenberg. Id. The funding of the retainer was subject to approval by the SEC, and in early 1994, the funding ran out. Id.

Subsequently, Hoffenberg, along with his counsel Hoffman & Pollok, other parties related to TFC, and the SEC, entered into negotiations towards a judgment intended to settle some of the pending TFC-related litigation. Id. These negotiations resulted in a consent judgment, which was executed on October 25, 1994. Id. In the consent judgment, Hoffenberg agreed to the entry of a final judgment against him and various entities that he controlled. Cohen acted as the Chapter 11 bankruptcy trustee for TFC (the "TFC Trustee"). Id. As part of the consent judgment, Hoffenberg and other defendants agreed to pay $400,000,000 to the creditors of TFC. Id. In addition, the TFC Trustee agreed to put $450,000 into escrow for the purpose of paying Hoffman & Pollok's legal fees in connection with the firm's continuing representation of Hoffenberg in the pending criminal proceedings. Id. at 307. Hoffenberg attested that he entered into the consent judgment voluntarily and without any promises or threats made towards him. Id.

As set forth above, the criminal proceedings were resolved by Hoffenberg's plea of guilty on April 20, 1995. However, in April 1996, Hoffenberg sought to discharge Hoffman & Pollok as his attorneys in his criminal case based on an "absolute conflict." SEC v. Towers Fin. Corp., No. 93 Civ. 0744(WK)(AJP), 1996 WL 288176 at *1 (S.D.N.Y. May 31, 1996); see SEC v. Towers Fin. Corp., No. 93 Civ. 0744(WK)(AJP), 1996 WL 383238, at *1 (S.D.N.Y. July 8, 1996). Hoffenberg alleged that Hoffman & Pollok had a conflict based on the $450,000 payment put into escrow by the TFC Trustee pursuant to the consent degree, because at the same time the TFC Trustee was an adverse party to Hoffenberg in various litigations. Id. This Court relieved Hoffman & Pollok as counsel in the criminal case. Id. Subsequently, Hoffman & Pollok made a motion, which was granted, to be relieved as Hoffenberg's counsel in the pending TFC civil litigation. SEC v. Towers Fin. Corp., 1996 WL 383238, at *1.

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