U.S. v. Lohan, s. 1447

• Decision Date: 23 September 1991
• Docket Number: D,Nos. 1447,1448,s. 1447
• Citation: 945 F.2d 1214
• Parties: UNITED STATES of America, Appellee-Cross Appellant, v. Michael J. LOHAN, also known as Michael Desiderio, Defendant-Appellant-Cross Appellee. ockets 90-1637, 90-1660.
• Court: U.S. Court of Appeals — Second Circuit

Page 1214

945 F.2d 1214

UNITED STATES of America, Appellee-Cross Appellant, v. Michael J. LOHAN, also known as Michael Desiderio Defendant-Appellant-Cross Appellee.

Nos. 1447, 1448, Dockets 90-1637, 90-1660.

United States Court of Appeals Second Circuit.

Argued May 15, 1991.

Decided Sept. 23, 1991.

Charles S. Kleinberg, Asst. U.S. Atty., E.D.N.Y., Brooklyn, N.Y., (Andrew J. Maloney, U.S. Atty., and Robert L. Begleiter, Asst. U.S. Atty., of counsel), for appellee-cross appellant U.S.

Salvatore S. Russo, Brooklyn, N.Y., for defendant-appellant-cross appellee Michael J. Lohan.

Before CARDAMONE, PIERCE and FRIEDMAN, ^* Circuit Judges.

FRIEDMAN, Circuit Judge:

This appeal and cross-appeal challenge on various grounds only the sentence imposed upon the appellant Lohan following his guilty plea to criminal contempt, 18 U.S.C. § 401(3) (1988). We affirm-in-part, vacate-in-part, and remand.

I

In 1987, Lohan was president of his firm, New York Futures Traders, Inc. (Traders), a commodities futures broker. In that year, Lohan and Traders settled a civil action in the United States District Court for the Eastern District of New York, brought against them by the Commodities Futures Trading Commission (Commission), which alleged that Lohan and Traders had defrauded their customers of approximately $130,000 and had solicited investments in commodities futures without being registered with the Commission.

Upon the consent of the parties, the district court entered a broad and detailed injunction against Lohan and Traders. Commodities Futures Trading Commission v. New York Futures Traders Inc., No. CV-86-0770 (E.D.N.Y. Apr. 1, 1987) (the April 1987 injunction). In addition to barring Lohan and Traders from violating various provisions of the Commodities Exchange Act, the April 1987 injunction enjoined them from "[c]heating or defrauding, or attempting to cheat or defraud, any person" in connection with any commodities futures transaction, and specified particular fraudulent practices that the provisions covered, such as "[c]onverting customer funds to their own use" and making "false, deceptive and misleading" oral statements to customers.

At about the same time, the State of New York instituted a criminal prosecution of Lohan for grand larceny and securities fraud, based on the same facts that gave rise to the federal injunction suit. In April 1987, Lohan pleaded guilty to a misdemeanor securities fraud charge and was sentenced to 90 days imprisonment.

Shortly after his release from custody on the New York conviction, Lohan changed his name to "Michael Desiderio" and incorporated a new firm, Donateco, Inc. (Donateco), of which he was the chief executive officer. In the Fall of 1988, the Commission, based upon information received from a Donateco customer, opened a new investigation into Lohan's activities, and instituted a new civil action against Lohan and Donateco. The Commission's investigation revealed that Lohan had operated Donateco as a commodities broker in Florida and had engaged in other activities prohibited by the April 1987 injunction.

On November 8, 1989, at the government's request, the district court issued an order to Lohan to show cause at a hearing on January 4, 1990, "why he should not be found to be in violation of 18 U.S.C. § 401(3) for criminal contempt ..." (the November 1989 order). That order specified the contemptuous acts Lohan allegedly had committed, and contained three paragraphs making specific accusations that he had "cheated or defrauded customers" and others. The order provided that if Lohan were found guilty of criminal contempt of the April 1, 1987 injunction, he would be "subject to an appropriate fine and a term of imprisonment not to exceed six months." The order also directed Lohan's arrest.

From late October, 1989 to February 14, 1990, however, Lohan was a fugitive from justice on unrelated New York State criminal charges, and was never served with the November 1989 order or arrested thereunder. After New York State authorities located and arrested Lohan, the district court (a different judge presiding) on March 1, 1990 issued a new order to show cause (the March 1990 order). The March 1990 order was substantially the same as the November 1989 order, except that it did not limit Lohan's imprisonment upon conviction to six months, but instead referred to "an appropriate term of imprisonment." Lohan was taken into federal custody pursuant to the March 1990 order and appeared at a bail hearing on March 5, 1990.

In June 1990, Lohan agreed to plead guilty to criminal contempt of the April 1987 injunction without any specification of the contemptuous acts he committed. The court then issued a new order to show cause (the June 1990 order) which only charged, without specification, that Lohan had violated the April 1987 injunction. The June 1990 order also provided that,

in the event defendant is found guilty of criminal contempt of the April 1, 1987 Final Judgment and Order of Injunction, he shall be subject to an appropriate fine and an appropriate term of imprisonment, and since defendant may be sentenced to a term of imprisonment exceeding 6 months, he is entitled to a jury trial.

At the plea hearing on June 13, 1990, the court informed Lohan of his constitutional rights, including the fact that he was "facing--not necessarily going to get, but facing a term of imprisonment in excess of six months." Lohan pleaded guilty to the willful violation of the court's April 1987 injunction. The government stated that, for sentencing purposes, it intended to prove at a subsequent "Fatico " hearing the facts constituting contempt, including any fraud. A "Fatico " hearing is a sentencing hearing at which the prosecution and the defense may introduce evidence relating to the appropriate sentence. See United States v. Fatico, 603 F.2d 1053 (2d Cir.1979), cert. denied, 444 U.S. 1073, 100 S.Ct. 1018, 62 L.Ed.2d 755 (1980).

At the sentencing hearing, the district court ruled that the government had presented "clear and convincing evidence" at the Fatico hearing that "various individuals were defrauded of their funds" and that Lohan, as specified in the presentence report, "willfully violated the Court's order by fraud and deceit and admitted the same...." The presentence report described extensive violations of the April 1987 injunction.

Noting that there was no sentencing guideline directly applicable to criminal contempt, the court sentenced Lohan under U.S.S.G. § 2F1.1 (fraud and deceit), as "the most analogous offense guideline." The court stated:

Fraudulently and deceitfully the defendant changed his name to Desiderio and changed his corporation to Donateco, Inc. and set up a commodity futures sales office in Florida employing four to six sales persons who made between 750 and 1,000 or more cold canvass [sic] calls, soliciting potential investors to invest a minimum of $3,000 each through Donateco, Inc. [E]ach such solicitation was a fraudulent and deceitful violation of the Court's order.

Lohan was sentenced to 37 months imprisonment, a $200,000 fine, a five-year supervisory release term, and a special assessment of $50.00.

II

Lohan argues for the first time on appeal that the imposition of a sentence of more than six months, after the first order to show cause had specified that term as the maximum punishment and without any justification by the government for seeking a greater sentence in the subsequent orders to show cause, denied him due process in violation of the Fifth Amendment. We hold, however, that the imposition of a sentence of more than six months following Lohan's guilty plea to the final contempt charge, did not violate his constitutional rights.

The November 1989 order, which contained the six months' limitation, expired on January 4, 1990, when Lohan failed to appear at the hearing the order directed to be held on that date. The superseding March 1990 order contained substantially the same allegations of contempt and fraud as the earlier order, but did not include the six months' sentence limitation. Lohan was arrested by the federal authorities pursuant to that latter order, and it was that order which formed the basis of the subsequent plea bargaining between Lohan and the government that resulted in Lohan's guilty plea to the June 1990 order to show cause.

Prior to Lohan's 1990 guilty plea, the court informed him that he could be sentenced to more than six months on that guilty plea and Lohan indicated his awareness of that fact. If Lohan wished to challenge the increased penalty possible under the later orders to show cause, he should have attacked those later orders on that ground or sought a jury trial on the charges, to which the court informed him he was entitled.

Lohan argues that "after appellant had been arrested on the original application and retained counsel, the Government unilaterally determined to seek greater punishment than its original order to show cause called for," and that "the prosecution's efforts to broaden the basic punishment applicable to appellant's case after a change in Judges smacks of prosecutorial vindictiveness."

Nothing in the record justifies this charge. Since Lohan never objected to any of the superseding orders on this ground, no record was developed regarding the government's reason for seeking a higher sentence.

As noted, federal authorities arrested Lohan under the March 1990 order, which did not limit imprisonment to six months. Thus, the government's change in position did not come after, or in response to, Lohan's exercise of any pre-trial right. "[A] presumption of prosecutorial vindictiveness does not exist in a pre-trial setting." United States v. Hinton, 703 F.2d 672, 678 (2d Cir.), cert. denied, 462 U.S. 1121, 103 S.Ct. 3091, 77 L.Ed.2d 1351 (1983) (citing United States v. Goodwin, 457 U.S. 368, 102 S.Ct. 2485, 73 L.Ed.2d 74 (1982)). The fact that a prior order to show cause, issued while Lohan...