U.S. v. Rosen, Docket No. 04-3037-CR.

• Decision Date: 06 June 2005
• Docket Number: Docket No. 04-3037-CR.
• Citation: 409 F.3d 535
• Parties: UNITED STATES of America, Appellee, v. Jerome E. ROSEN, Defendant-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

409 F.3d 535

UNITED STATES of America, Appellee, v. Jerome E. ROSEN, Defendant-Appellant.

Docket No. 04-3037-CR.

United States Court of Appeals, Second Circuit.

Argued: February 16, 2005.

Decided: June 6, 2005.

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Raymond J. Lohier, Jr., Assistant United States Attorney, New York City (David N. Kelley, United States Attorney for the Southern District of New York, Marc A. Weinstein, Harry Sandick, Assistant United States Attorneys, New York City, on the brief), for Appellee.

Maranda E. Fritz, New York City, for Defendant-Appellant.

Before: OAKES, KEARSE, and SACK, Circuit Judges.

KEARSE, Circuit Judge.

Defendant Jerome E. Rosen appeals from a judgment entered in the United States District Court for the Southern District of New York following his plea of guilty before Shirley Wohl Kram, Judge, convicting him of securities fraud, in violation of 15 U.S.C. §§ 78j(b), 78ff, and 18 U.S.C. § 2, and conspiracy to commit securities and wire fraud, in violation of 18 U.S.C. § 371, and sentencing him principally to 14 months' imprisonment, to be followed by a three-year term of supervised release, and ordering him to pay a $21,000 fine. On appeal, Rosen contends principally that the district court should have allowed him to withdraw his guilty plea on the ground that the plea agreement he signed erred in predicting his sentence. Rosen also contends that the court miscalculated his sentence under the Sentencing Guidelines ("Guidelines"); and in any event he requests a remand in light of United States v. Booker, ___ U.S. ___, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005), for consideration of resentencing pursuant to this Court's decision in United States v. Crosby, 397 F.3d 103 (2d Cir.2005). For the reasons that follow, we affirm the district court's refusal to allow Rosen to withdraw his plea of guilty; we remand for consideration of resentencing in accordance with Crosby.

I. BACKGROUND

This case arises out of a scheme devised in 1997 by Michael Mitton, a principal of H & R Enterprises, Inc. ("H & R"), whose shares were publicly traded on the National Association of Securities Dealers Automated Quotation System Over-The-Counter market ("NASDAQ OTC Market"), and David Scott Heredia, president of a consulting firm, to manipulate the price of H & R shares. More than 3.7 million shares of H & R stock were issued to Mitton and his associates (collectively "Mitton") at prices between $.01 and $.50 per share, and shares were given to Heredia; the shares were placed in brokerage accounts in the names of companies owned by Heredia and Mitton. Heredia recruited brokers to create artificial trading volume and price increases so that members of the conspiracy could sell their shares at inflated prices.

One of the recruited brokers was Rosen, who was employed by J. Alexander Securities, Inc. ("J.Alexander"), a registered securities broker-dealer that was a market-maker in H & R securities. In August and September 1997, Rosen was secretly given some 250,000 H & R shares at no cost, which he stashed in accounts under the name "OTCBB Holdings Limited" in Canada and the Cayman Islands. Rosen agreed to buy H & R stock from accounts controlled by Heredia and Mitton and sell it to other accounts controlled by Heredia and Mitton, at prices dictated by Heredia. Rosen knew that Heredia and Mitton were both the buyers and the sellers of the same blocks of stock and that these transactions thus resulted in no change in the shares' beneficial ownership. The coordinated circular sequence of transactions in which Rosen and other recruited brokers participated was a "daisy chain" that created the appearance of an active market for H & R stock. Mitton also caused H & R to issue a series of false and misleading press releases that further inflated the price of H & R stock. As a result, between September 19, 1997, and September 24, 1997, H & R's share price rose from $2 to more than $6.75. Rosen sold shares he had received, at no cost, at the inflated prices.

The daisy chain came undone when, on September 24, 1997, two brokerage houses refused to accept delivery of or pay for some 5 million H & R shares. With the unraveling of the daisy chain, the share price of H & R stock dropped to less than $2 in two days. In September 2002, Rosen and others were indicted for their actions in manipulating the H & R shares, charged with conspiring to commit securities and wire fraud (Count One) and engaging in fraudulent securities transactions (Count Two).

A. Rosen's Plea Agreement and Plea Allocution

On January 21, 2004, Rosen and the government entered into a plea agreement ("Plea Agreement" or "Agreement"), in which the government agreed to forgo any further prosecution of Rosen (except for criminal tax violations) with respect to the securities fraud conspiracy described above, in consideration for Rosen's agreeing to plead guilty to both counts of the indictment. The Agreement described the counts and stated, inter alia, that "Count One of the Indictment carries a maximum sentence of five years' imprisonment" (Plea Agreement at 1) and that "Count Two of the Indictment carries a maximum sentence of ten years' imprisonment" (id.), for a "combined maximum term of imprisonment for Counts One and Two [of] 15 years" (id. at 2). As to Rosen's likely sentence, the parties stipulated that under the November 5, 2003 version of the Guidelines ("2003 Guidelines"), which would be in effect at the time of sentencing, Rosen's base offense level was 6, and that with a four-step upward adjustment pursuant to 2003 Guidelines § 2B1.1(b)(1)(C) for a loss amount between $10,000 and $30,000, and a two-step downward adjustment pursuant to § 3E1.1(a) for acceptance of responsibility, Rosen's total offense level was 8. (See Plea Agreement at 2-3.) The Agreement stated that "[b]ased upon the information now available to th[e United States Attorney's] Office (including representations by the defense), the defendant has zero criminal history points. In accordance with the above, the defendant's Criminal History Category is I." (Id. at 3.) "Based upon the[se] calculations," the parties stipulated that Rosen's Guidelines imprisonment range would be 0-6 months. (Id.)

The Plea Agreement stated that the calculations stipulated to in the Agreement were not binding on the district court and that calculations by the court resulting in a different sentence would not entitle Rosen to withdraw his plea:

It is understood that ... neither the Probation Department nor the Court is bound by the above stipulations, either as to questions of fact or as to the determination of the proper Sentencing Guidelines to apply to the facts....

It is understood that the sentence to be imposed upon the defendant is determined solely by the Court. Th[e United States Attorney's] Office cannot, and does not, make any promise or representation as to what sentence the defendant will receive. Moreover, it is understood that the defendant will have no right to withdraw his plea of guilty should the sentence imposed by the Court be the result of calculations different from those stipulated to herein.

(Plea Agreement at 4 (emphases added).)

Finally, the parties stipulated that "[n]o additional understandings, promises, or conditions have been entered into other than those set forth in this Agreement." (Plea Agreement at 5-6.) The Agreement stated that "[t]he defendant hereby acknowledges that he has accepted this plea Agreement and decided to plead guilty because he is in fact guilty." (Id. at 5.)

On January 21, 2004, after the Plea Agreement was signed, Rosen entered a plea of guilty to both counts of the indictment. Before accepting his plea, the district court, in accordance with Fed.R.Crim.P. 11, questioned Rosen to determine, inter alia, that he was competent to plead, had no dissatisfaction with his attorney, understood the constitutional rights he would be giving up if he pleaded guilty, and understood the charges and the maximum sentences associated with each. (See Plea Transcript, January 21, 2004 ("Plea Tr."), at 2-10.) As to the charges against Rosen, the colloquy included the following:

THE COURT: .... Now, I want to tell you the elements of the counts to which you are pleading guilty.

Count One, you desire to plead guilty to the charge of conspiracy to commit securities fraud and wire fraud.... [T]his is what the government must prove beyond a reasonable doubt. 1, that two or more persons agreed or conspired to commit an offense, in this case to violate the laws of the United States[] that make it a crime to commit securities fraud or wire fraud, in violation of 18 U.S.C. Section 371; 2, that you knew of that agreement or conspiracy; 3, that you intended to participate in the conspiracy; and, 4, that you or another member of the conspiracy acted to effect an object of the conspiracy during the life of the conspiracy.

....

THE COURT: Now as to Count Two, to which you are pleading guilty to a charge of securities fraud, the government must establish beyond a reasonable doubt the following: 1, that in connection with the purchase or sale of the security, you did any one of the following: A, employed a device, scheme or artifice to defraud or, B, made an untrue statement of a material fact, or omitted to state a material fact that made what was said under the circumstances misleading, or, C, engage[d] in an act, practice or course of business that operated or would operate as a fraud or a deceit upon a purchaser or seller; 2, that you acted willfully and knowingly and with the intent to defraud; 3, that you used, or caused to be used, any means or instruments of transportation or communication in interstate commerce or the mails in furtherance of this fraudulent conduct.

(Plea Tr. 7-8 (emphases added).) Rosen stated that he had discussed the elements of each count with his attorney and did not wish to discuss them with her any further. (See Plea Tr. 7, 8.) The court con...