U.S.A. v. Hirsch

• Decision Date: 01 August 2000
• Docket Number: Docket No. 99-1758
• Citation: 239 F.3d 221
• Parties: (2nd Cir. 2001) UNITED STATES OF AMERICA, Appellee, v. GERALD HIRSCH, Defendant-Appellant
• Court: U.S. Court of Appeals — Second Circuit

Page 221

239 F.3d 221 (2nd Cir. 2001)

UNITED STATES OF AMERICA, Appellee, v. GERALD HIRSCH, Defendant-Appellant.

Docket No. 99-1758

August Term, 2000

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Submitted: November 30, 2000

Decided: January 17, 2001

Appeal from a judgment of conviction and sentence after the defendant pleaded guilty to six counts of mail fraud in violation of 18 U.S.C. § 1341. The defendant challenges the order of the district court (Deborah A. Batts, Judge) denying his motion to withdraw his plea, denying an adjustment in offense level for acceptance of responsibility under § 3E1.1 of the United States Sentencing Guidelines, and imposing a two-level enhancement for abuse of trust under § 3B1.3 of the Guidelines.

Affirmed.

[Copyrighted Material Omitted] MICHAEL S. KIM, Assistant United States Attorney for the Southern District of New York (Mary Jo White, United States Attorney, and Christine H. Chung, Assistant United States Attorney, of counsel), New York, N.Y., for Appellee.

LAWRENCE H. SCHOENBACH, New York, NY, for Defendant-Appellant.

Before: McLAUGHLIN and SACK, Circuit Judges, and CHATIGNY,^* District Judge.

SACK, Circuit Judge:

Gerald Hirsch appeals from a judgment of conviction and sentence entered on December 21, 1999 by the United States District Court for the Southern District of New York (Deborah A. Batts, Judge) after he pleaded guilty to six counts of mail fraud in violation of 18 U.S.C. § 1341. On appeal he argues that the district court (1) abused its discretion by refusing to allow him to withdraw his guilty plea; (2) erroneously denied him a three- level reduction in offense level for acceptance of responsibility pursuant to § 3E1.1 of the United States Sentencing Guidelines; and (3) erred by imposing a two-level enhancement for abuse of trust under § 3B1.3 of the Guidelines. We affirm the judgment of the district court.

BACKGROUND

Gerald Hirsch was indicted on September 30, 1997 on sixteen counts of mail fraud in violation of 18 U.S.C. § 1341. Nine counts related to a scheme to induce individuals to invest in mortgage participation certificates, and seven counts related to a scheme involving investments in certificates of deposit.

The facts surrounding the scheme were set forth in the Presentence Report prepared after Hirsch's guilty plea. According to the Report, during the relevant time period, Hirsch was the chairman of the Churchill Group, a collection of mortgage and security brokerages and other companies. Between 1987 and 1997, Hirsch operated two Ponzi schemes. The mortgage participation scheme involved the sale of certificates (totaling $15 million) that ostensibly represented fractional interests in mortgages. A mortgage lien was supposed to be filed in the investor's name, and the investor would be entitled to principal and interest payments made by the mortgagor. But in many instances Hirsch failed to make the promised investment, falsely told investors that their funds were invested in specific properties, sold the same share to different investors, or failed to inform investors of foreclosures. Investors' money was used to pay the Churchill Group's obligations and to pay the returns of earlier investors. In 1993, Hirsch agreed to discontinue the mortgage participation scheme pursuant to the settlement of an action brought by the Securities and Exchange Commission, but he breached that agreement, continuing the scheme until 1997.

A second scheme involved Hirsch's representations that investors' money would be placed in safe and insured investments such as certificates of deposit (CD's). Hirsch sent false account statements to investors, showing the amount invested and the amount of interest earned. Some of the actual funds, however, were used to pay Hirsch's obligations. Other funds were placed in various uninsured investments. In 1997, both schemes collapsed and the Churchill Group entered bankruptcy. According to the government, the total amount lost by investors due to these two schemes was $30 million.

On April 2, 1999, Hirsch pleaded guilty to three counts relating to the mortgage participation scheme and three counts relating to the CD investment scheme. At his plea allocution, Hirsch stated that he understood the charges, that he had made material misrepresentations and omissions to investors with respect to each scheme, and that he knew that his acts were illegal at the time he committed them. He also admitted that he had not told investors about losses in their accounts and that interest was being paid from other funds rather than the actual investments.

On August 18, 1999, after the Probation Department submitted its report recommending a total offense level of 25 (the plea agreement had stipulated to an offense level of 23 or 25, depending on whether the court imposed an enhancement for abuse of trust) and a sentence of 71 months, the defendant submitted on August 18, 1999 a pro se letter as a "reply" to the Probation Department. In the letter, Hirsch challenged several of the Probation Department's findings, claimed that he was "not guilty of an intentional fraud," and asserted that a number of documents that had been lost by the bankruptcy receiver undermined the government's allegations. A second pro se letter from Hirsch, dated September 1, 1999, clarified some of the assertions in the August 18 letter, and apologized for erroneous or misleading statements he had previously made. On October 1, 1999, defense counsel submitted a letter stating that Hirsch claimed that the newly discovered documents undermined the government's "loss" figure and that Hirsch wished to withdraw his plea. Hirsch submitted an affidavit on October 29, 1999 in support of his motion to withdraw his plea. The affidavit described various documents and alleged that they showed that the government's loss figure was incorrect. It also stated that the new documents "substantiate [his] original belief" that he was not guilty of "criminal fraud." The government responded to Hirsch's letters on October 13, 1999 and November 13, 1999, disputing that the documents were newly discovered and disputing that they supported a lower loss figure. In addition, the government argued that the documents did not support Hirsch's claim of innocence.

The district court denied Hirsch's motion to withdraw his plea on November 24, 1999, finding that the "purported recent discovery of mortgage documents . . . would at best be relevant to the amount of restitution owed on three of the six counts to which he pled guilty; none of his reasons address the issue of guilt." The court emphasized that Hirsch was unable to articulate how the documents proved his innocence: "the evidence he cites . . . remain[s] illusory and the Defendant makes no semblance of an argument as to how such evidence would be exculpatory." The district court therefore concluded that Hirsch had not provided a "fair and just reason," Fed. R. Crim. P. 32(e), to permit withdrawal of the plea.

The district court also decided to impose a two-level enhancement under § 3B1.3 of the Sentencing Guidelines for abuse of trust. The court's decision relied on Hirsch's "admitted personal relationships with his clients wherein they relied on and trusted him for continued investment in his worthless schemes."

Finally, the court refused to grant a three-level decrease for acceptance of responsibility under § 3E1.1 of the Sentencing Guidelines, because (1) Hirsch tried to withdraw his guilty plea; (2) the plea allocution "was protracted by the Defendant's apparent difficulty in accepting responsibility for his crimes"; and (3) his pro se submissions "effectively recanted" the admissions he made at the allocution.

On December 13, 1999, the district court sentenced Hirsch to a total of 97 months in prison (60 months for the mortgage participation scheme and 37 months for the CD investment scheme) and three years of supervised release, more than $30 million in restitution, and a $550 special assessment. Hirsch appeals the district court's decisions to deny the motion to withdraw the guilty plea; to impose an enhancement for abuse of trust; and to deny a reduction for acceptance of responsibility.

DISCUSSION

I. Withdrawal of Guilty Plea

Federal Rule of Criminal Procedure 32(e) states that a "court may permit [a] plea to be withdrawn if the defendant shows any fair and just reason." "A defendant has no absolute right to withdraw his plea of guilty." United States v. Williams, 23 F.3d 629, 634 (2d Cir. 1994). Instead, the defendant bears the burden of showing that relief should be granted. See United States v. Avellino, 136 F.3d 249, 261 (2d Cir. 1998). When considering a motion to withdraw a plea, a court should consider the potential prejudice to the government, but only if the defendant has set forth sufficient grounds to withdraw the plea. See United States v. Torres, 129 F.3d 710, 715 (2d Cir. 1997). A court's refusal to allow the withdrawal of a plea is reviewed for an abuse of discretion. See id.

In this case, the government does not contend that it would be prejudiced by the withdrawal, but rather that the defendant has failed affirmatively to justify it. Hirsch argues that new Churchill Group documents have been discovered that "substantiate[] appellant's original belief that his actions constituted mismanagement rather than criminal fraud." Appellant's Br. at 12. A claim of innocence can be a basis for withdrawing a guilty plea, but the claim must be supported by evidence. "A defendant's bald statements that simply contradict what he said at his plea allocution are not sufficient grounds to withdraw the guilty plea." Torres, 129 F.3d at 715.

Hirsch's claims of innocence in his motion and on appeal are wholly conclusory. As the district court observed, Hirsch's affidavit in support of his motion primarily discusses documents that would show, at most, a reduction in the amount of money lost by investors. In...