U.S. v. Sisti, s. 1058

• Decision Date: 22 July 1996
• Docket Number: Nos. 1058,D,1083,s. 1058
• Citation: 91 F.3d 305
• Parties: UNITED STATES of America, Appellee, v. Benjamin SISTI and Jonathan N. Googel, Defendants-Appellants. ockets 95-1419, 95-1421.
• Court: U.S. Court of Appeals — Second Circuit

Page 305

91 F.3d 305

UNITED STATES of America, Appellee, v. Benjamin SISTI and Jonathan N. Googel, Defendants-Appellants.

Nos. 1058, 1083, Dockets 95-1419, 95-1421.

United States Court of Appeals Second Circuit.

Argued Feb. 16, 1996.

Decided July 22, 1996.

Jacob D. Zeldes, Zeldes, Needle & Cooper, PC, Bridgeport, Connecticut (Shelley R. Sadin, Adele V. Patterson, Zeldes, Needle & Cooper, Bridgeport, Connecticut, of counsel), for Defendant-Appellant Sisti.

James T. Cowdery, Cowdery & Ecker, LLC, Hartford, Connecticut (Peter Goldberger, Alan Ellis, Pamela A. Wilk, Law Offices of Alan Ellis, PC, Ardmore, Pennsylvania; Steven D. Ecker, Christopher Schmeisser, Cowdery & Ecker, LLC, Hartford, Connecticut, of counsel), for Defendant-Appellant Googel.

Peter A. Clark, Assistant United States Attorney, New Haven, Connecticut (Edwin J. Gale, Acting United States Attorney for the District of Connecticut, Thomas J. Murphy, Assistant United States Attorney, New Haven, Connecticut, of counsel), for Appellee.

Before: MAHONEY, WALKER, and CALABRESI, Circuit Judges.

WALKER, Circuit Judge:

Defendants-appellants Benjamin Sisti and Jonathan Googel appeal from sentences imposed in July 1995 by the United States District Court for the District of Connecticut (T.F. Gilroy Daly, District Judge ). The sentence in each case included a two-level enhancement for obstruction of justice and a seven-level upward departure from the applicable Guidelines range. We affirm in part, and vacate and remand in part.

BACKGROUND

The defendants, Benjamin Sisti and Jonathan Googel, were central players in what by reputation is the largest real estate scandal in Connecticut's history. The collapse of the Colonial Realty Company ("Colonial"), a West Hartford based company founded by Sisti and Googel in 1966, was precipitated by a massive fraudulent scheme masterminded by the defendants and others. Colonial was a national real estate syndication firm consisting of eighty limited partnerships that controlled approximately $2 billion in real estate, located primarily in Connecticut. On September 14, 1990, as a result of the receipt of millions of dollars of false investor notes by numerous banking institutions, six of Colonial's creditor banks forced Colonial, Sisti, and Googel into bankruptcy, which resulted in several thousand investors sustaining substantial losses. The "criminal depravity" of the defendants' actions, as characterized by the district court, was far-reaching and involved the concealment from investors of material information about the company's failing finances; the secret funneling of millions of dollars to out-of-state relatives in an effort to hide cash from creditors; the business-as-usual sale of shares in limited partnerships even after the defendants knew the company was headed for collapse; and the bribery of prominent persons, including the Mayor of Waterbury, Connecticut, to keep up the flow of investments into Colonial projects of funds controlled by these persons. To date, eighteen Colonial-related defendants have been charged with federal crimes. Of these, sixteen have entered guilty pleas and one was convicted after trial. The remaining defendant, Colonial's third principal and Chief Financial Officer Frank Shuch, committed suicide in February 1992 while awaiting trial.

On June 8, 1993, as part of a plea and cooperation agreement, Googel pleaded guilty to an information charging him with two counts of wire fraud, in violation of 18 U.S.C. § 1343; one count of bank fraud, in violation of 18 U.S.C. § 1344; and one count of endeavoring to impede the due administration of the internal revenue laws, in violation of 26 U.S.C. § 7212(a). On the same day, also as part of a plea and cooperation agreement, Sisti pleaded guilty to an information charging him with two counts of bankruptcy fraud, in violation of 18 U.S.C. § 152; one count of wire fraud, in violation of 18 U.S.C. § 1343; and one count of structuring transactions to evade reporting requirements, in violation of 31 U.S.C. §§ 5322(a) and 5324(a)(3).

On July 6, 1995, the district court sentenced Googel to terms of sixty months in prison concurrently on the first three counts (the "fraud" group), and thirty-six months consecutively on the fourth count (the "finder's fees" group), for a total effective sentence of ninety-six months to be followed by three years of supervised release with a special requirement that the defendant timely file all tax returns. On July 7, 1995, the district court sentenced Sisti to prison terms of sixty months concurrently on the first three counts (the "fraud" group), and forty-eight months consecutively on the fourth count (the "tax" group), for a total effective sentence of 108 months to be followed by three years of supervised release with a special requirement that the defendant file all tax returns. The defendants are presently serving their sentences.

The sentence of each defendant included a seven-level departure upward from his applicable Guidelines range. The sentencing court stated that the departures were supported on several grounds and that each of these grounds "individually" supported the seven-level upward departure. The district court principally relied on 1) the defendants' participation in the bribery of then-Waterbury Mayor Joseph Santopietro and his Corporation Counsel, Francis Donnarumma, to secure the investment of municipal employee pension funds into Colonial projects and 2) the defendants' actions in withholding a disclosure document from investors, which led to the investment of more than $20 million in their last limited partnership at a time when the defendants knew Colonial was headed for bankruptcy.

The conduct to which Sisti and Googel pleaded guilty arose from their roles as principals of Colonial, although, as reflected by their offenses of conviction, their roles differed. Sisti's bankruptcy violations consisted of the fraudulent transfer and concealment of funds. As early as March 1990, Sisti was aware of his own and Colonial's financial instability. Despite this knowledge, Sisti transferred assets through various Sisti family members to keep those assets out of the bankruptcy estate. Specifically, at a time when he knew that an involuntary bankruptcy petition was likely to be filed against him, Sisti transferred $1 million from one of his accounts at a now-defunct Connecticut bank into a certificate of deposit in his wife's name at a Florida bank. In addition, he fraudulently transferred a $3.7 million certificate of deposit from the same failed bank to a certificate of deposit in his wife's name at the same Florida bank. Sisti's wire fraud violation resulted from the misappropriation of a $4 million home equity loan. Prior to the closing of the loan, which he represented would be used for the purchase of a magazine, Sisti knew that the proceeds of the loan would actually be used to purchase residential and commercial property in Florida in his wife's name. Finally, Sisti's internal revenue laws violation was based on the fact that he directed a Colonial employee to obtain $36,000 in cash by cashing four Colonial checks. To obviate the necessity of filing currency transaction reports, each of the checks was made out to cash in the amount of $9,000. By similar methods on more than forty other occasions, Sisti generated over $1 million in cash.

Googel's misconduct arose out of Colonial's sales operations. As the head of Colonial's sales force, Googel solicited several "straw" purchasers to invest in two Colonial limited partnerships. Although these purchasers executed promissory notes, Googel gave them secret assurances that they would not be held liable on the notes. Googel then pledged the promissory notes to two financial institutions as collateral for investor note loans in the amount of $2,277,000 to the two Colonial limited partnerships. In addition, Googel participated in paying "finder's fees" to persons who identified potential investors. These fees were paid in cash out of the sales commissions to frustrate revenue collection by the Internal Revenue Service ("IRS"). Although not reflected in the counts of his conviction, Googel was also involved in the payment of a $50,000 bribe to Waterbury's Mayor and Corporation Counsel to facilitate the investment of municipal pension funds in Colonial. During the official investigation of the payment, Googel called James Cahill, a former Colonial employee, to discuss what the latter would tell the investigators concerning these payments.

At the outset of the investigation, Sisti and Googel actively sought to mislead and obstruct the federal investigators who were looking into their misconduct. Their plea agreements, however, required them to cooperate with the government in its criminal investigation of Colonial and, after they pleaded guilty, they cooperated fully with the government. Their cooperation resulted in the conviction of Dominick Lopreato, the leader of the Connecticut Laborers' Union, for accepting cash bribes in exchange for his efforts to place union pension funds in Colonial investments.

On appeal, Sisti challenges virtually every aspect of his sentence, arguing that the district court 1) violated his right to due process and Rule 32 of the Federal Rules of Civil Procedure by imposing sentence without fair notice of the grounds upon which it was to be imposed, 2) assumed a "prosecutorial stance," 3) erred in imposing a seven-level upward departure, 4) erred in making enhancements, and 5) erred in finding two groups of criminal conduct instead of one group. In a more limited appeal, Googel argues that the district court 1) provided inadequate notice with respect to the adjustment for obstruction of justice and 2) erred in enhancing his sentence for obstruction of justice. ¹ The adequacy of the notice to both defendants of various departures and enhancements, the two-level enhancement for Googel's obstruction of justice, and...