U.S. v. Pelullo

• Citation: 14 F.3d 881
• Decision Date: 22 March 1994
• Docket Number: Nos. 93-1261,93-1284,s. 93-1261
• Parties: UNITED STATES of America v. Leonard A. PELULLO, Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Page 881

14 F.3d 881

UNITED STATES of America v. Leonard A. PELULLO, Appellant.

Nos. 93-1261, 93-1284.

United States Court of Appeals, Third Circuit.

Argued Oct. 8, 1993.

Decided Jan. 24, 1994.

Sur Petition for Rehearing March 22, 1994.

John Nields (argued), W. Neil Eggleston, Richard A. Ripley, Diane B. Heller, Dianne S. Pickersgill, Howrey & Simon, Washington, DC, William J. Winning, Curran, Winning & Fioravanti, Media, PA, for appellant.

Michael J. Rotko, U.S. Atty., Ronald G. Cole (argued), Joel M. Friedman, Walter S. Batty, Jr., Frank A. Labor III, Asst. U.S. Attys., Philadelphia, PA, for appellee.

Before: HUTCHINSON, COWEN and NYGAARD, Circuit Judges.

OPINION OF THE COURT

COWEN, Circuit Judge:

This is the second time that Leonard A. Pelullo appeals to this court from the final judgment of conviction entered in the United States District Court for the Eastern District of Pennsylvania as well as the sentences imposed on him. We conclude that his appeal is meritorious and will reverse the conviction and the sentence imposed for the conviction resulting from the retrial. We will also vacate the resentencing on Count 54, which resulted from the first trial.

I.

On July 3, 1991, a jury convicted Pelullo of 49 counts of wire fraud (18 U.S.C. Sec. 1343), and one count of racketeering (Racketeer Influenced and Corrupt Organization Act (RICO), 18 U.S.C. Sec. 1962), for engineering several schemes whereby Pelullo utilized the Royale Group, Ltd., a publicly held corporation, and its affiliates (Royale) which he controlled, to defraud the American Savings & Loan and the shareholders of Royale. On May 12, 1992, this court affirmed the conviction of wire fraud on Count 54, but reversed the conviction on all other counts and remanded the case for retrial. United States v. Pelullo, 964 F.2d 193 (3d Cir.1992) (Pelullo I ). We also held that the district court could resentence Pelullo on Count 54. Id. at 222. The reversal was largely based on the erroneous admission by the district court of certain bank records and summaries thereof, which had not been qualified as business records under Fed.R.Evid. 803(6), or any other exception to the hearsay rules. Id.

On remand, Pelullo was retried on 48 counts of wire fraud and one count of RICO, and was convicted on all counts. The jury also returned a verdict of forfeiture pursuant to 18 U.S.C. Sec. 1963(a) in the amount of $1.854 million, together with Pelullo's interest in a ranch in Montana. On March 12, 1993, Pelullo was sentenced on all counts, including Count 54.

The facts that gave rise to the indictment against Pelullo are set forth at length in Pelullo I, 964 F.2d at 197-99. We will not repeat them here except as it is necessary to spell out that the indictment arose from several schemes that Pelullo allegedly designed to defraud American Savings and Loan (American) and to divert corporate funds for personal use.

The first scheme was the subject of Counts 1-53. These counts alleged that through Royale, the corporation which he controlled, Pelullo defrauded the American and Royale shareholders by diverting loan proceeds from American earmarked for hotel renovations for his own benefit. The modus operandi allegedly utilized by Pelullo was to submit false documents to American to secure disbursements which were supposed to be released only upon proof that funds had been expended for renovation. These counts independently constituted fraud violations of which Pelullo was convicted. They also constituted predicate acts, Racketeering Acts 1-59, for his alleged RICO violations.

The second scheme consisted of the facts giving rise to Count 54. Through this scheme, Pelullo allegedly defrauded Royale and its shareholders of $114,000 by diverting cash from a bank account of Palm Beach Heights Development & Sale Corporation (PBH), a wholly-owned subsidiary of Royale, and using the money to repay a debt Pelullo owed to a loanshark connected with the Philadelphia Mafia. This was alleged to constitute a separate wire fraud count as well as a predicate act, Racketeering Act 60, for the RICO count.

In the third scheme, Pelullo allegedly defrauded Royale and its shareholders by diverting to his personal use money which American had loaned Royale to pay administrative costs. The government did not allege these facts constituted independent wire fraud violations, but maintained that they constituted predicate acts, Racketeering Acts 61-72, for the RICO count.

Pelullo presents several issues in this appeal with each issue relating to a different set of facts. We will discuss the issues separately and summarize the facts necessary to decide that question where appropriate. The district court had jurisdiction under 18 U.S.C. Sec. 3231, and we have appellate jurisdiction pursuant to 28 U.S.C. Sec. 1291.

II.

Pelullo contends that during the first trial, the government withheld Brady material from the defense despite a request for production. He therefore argues that he is entitled to a new trial on Count 54. We disagree.

In Pelullo I we affirmed the district court's judgment convicting Pelullo of Count 54. 964 F.2d at 222. That count charged Pelullo with diversion of corporate funds to pay a personal loan. The jury heard evidence during the first trial that Pelullo obtained a personal loan from a Mr. DiSalvo, who was said to be an associate of the Philadelphia Mafia. Pelullo failed to repay the loan. DiSalvo sought the assistance of the Philadelphia Mafia to effect collection. Philip Leonetti, who was described as the underboss of the Philadelphia Mafia, testified that the Mafia agreed to assist DiSalvo in collecting the debt from Pelullo in exchange for fifty percent of any amount collected. Leonetti, together with his uncle who was described as the boss of the Philadelphia Mafia, met with Pelullo and advised Pelullo that he had to repay DiSalvo. As a result of that meeting, Pelullo was alleged to have diverted $114,000 from a PBH bank account and wired the money to a family corporation in Philadelphia. Those corporate funds were later converted to cash for delivery to DiSalvo.

Following the first trial and the first appeal, but prior to retrial, the defense discovered that the government had withheld Brady material, despite Pelullo's request for production. The evidence was an IRS memorandum detailing an interview with Leonetti which set forth facts inconsistent with the testimony of Leonetti, particularly with respect to when and where he first met DiSalvo and Pelullo.

The government contends that it is "questionable whether this issue can be raised in this [second] appeal." Brief for Appellee at 24 n. 19. Pelullo's motion for a new trial on Count 54 was made under Rule 33 of the Federal Rules of Criminal Procedure. This rule provides that such a motion can be made before or within two years after final judgment. Pelullo made a timely motion and is entitled to appeal the ruling of the district court on his motion. He presents this issue in this appeal. Although it may have been preferable for Pelullo to separately appeal the district court's denial of his Rule 33 motion, we conclude that this appeal encompasses that purpose since he was resentenced on Count 54 on which he was convicted in the first trial, together with other counts on which he was convicted in the second trial. The issue has also been briefed thoroughly by the parties.

Ordinarily, we review the denial of a motion for new trial on the basis of newly discovered evidence for abuse of discretion. See United States v. Perdomo, 929 F.2d 967, 969 (3d Cir.1991). A Brady claim, however, presents questions of law and fact. Accordingly, we conduct a de novo review of the district court's conclusions of law and a review based on the "clearly erroneous" standard of its findings of fact. Id.

We conclude that the IRS memorandum qualifies as Brady evidence. Pelullo unquestionably could have used the memorandum to impeach Leonetti. Such impeachment evidence falls within the confines of the Brady rule. Giglio v. United States, 405 U.S. 150, 153-55, 92 S.Ct. 763, 766, 31 L.Ed.2d 104 (1972); United States v. Bagley, 473 U.S. 667, 676-77, 105 S.Ct. 3375, 3380-81, 87 L.Ed.2d 481 (1985).

As much as we abhor a Brady violation, it does not mandate "automatic reversal." Bagley, 473 U.S. at 677, 105 S.Ct. at 3381. A reversal is warranted only when the suppression of the Brady evidence "undermines confidence in the outcome of the trial." Id. at 678, 105 S.Ct. at 3381. Put another way, we will reverse the district court judgment only when the Brady evidence would produce a "reasonable probability that the Leonetti's testimony established that Pelullo diverted corporate funds for personal use. In addition to the testimony of Leonetti, two other witnesses testified to Pelullo's admission that he used the money to repay DiSalvo. Pelullo does not contend that the IRS memorandum contradicts this crucial fact. Rather, Pelullo focuses on the different versions of the dates when Leonetti met with him and DiSalvo, and argues that "these inconsistencies on the facts material to Mr. Pelullo's guilt on Count 54 would have devastated Leonetti's testimony about the timing of the payment in the eyes of the jury." Brief for Appellant at 30-31.

                result of the proceeding would have been different."  Id. at 682, 105 S.Ct. at 3383.   We do not believe that the IRS memorandum would have such an effect
                

We do not believe that some inconsistencies in the dates would devastate the thrust of Leonetti's testimony on Pelullo's diversion of funds and, thus, would have changed the outcome of the proceeding. The evidence is merely cumulative or impeaching, United States v. Adams, 759 F.2d 1099, 1108 (3d Cir.), cert. denied, 474 U.S. 971, 106 S.Ct. 336, 88 L.Ed.2d 321 (1985), and thus, not sufficient to warrant a new trial.

Testifying in 1991 about events alleged to have taken place in 1985 and 1986, Leonetti could not be expected to remember the dates as if...