U.S. v. Stein

• Decision Date: 22 October 1976
• Docket Number: D,No. 322,322
• Citation: 544 F.2d 96
• Parties: Fed. Sec. L. Rep. P 95,770 UNITED STATES of America, Appellee, v. Sidney STEIN, Defendant-Appellant. ocket 76-1299.
• Court: U.S. Court of Appeals — Second Circuit

Page 96

544 F.2d 96

Fed. Sec. L. Rep. P 95,770

UNITED STATES of America, Appellee, v. Sidney STEIN, Defendant-Appellant.

No. 322, Docket 76-1299.

United States Court of Appeals, Second Circuit.

Argued Sept. 15, 1976.

Decided Oct. 22, 1976.

Angelo T. Cometa, New York City (Louis Nizer, Perry S. Galler, Jonathan D. Warner, Phillips, Nizer, Benjamin, Krim & Ballon, New York City, of counsel), for defendant-appellant.

Lawrence B. Pedowitz, Asst. U. S. Atty. (Robert B. Fiske, Jr., U. S. Atty. for the Southern District of New York, New York City, Frank H. Wohl, Asst. U. S. Atty., New York City, of counsel), for appellee.

Before LUMBARD, MANSFIELD and MULLIGAN, Circuit Judges.

MANSFIELD, Circuit Judge:

Sidney Stein appeals from an order of the Southern District of New York, Constance Baker Motley, Judge, denying reconsideration of his motion challenging consecutive sentences totalling 10 years imprisonment and fines amounting to $25,000, which were imposed after he had pleaded guilty to charges of conspiracy, 18 U.S.C. § 371, securities fraud, 15 U.S.C. §§ 78j, 78ff and Rule 10b-5, and interstate transportation of unregistered securities, 15 U.S.C. § 77e, and had cooperated extensively with the government, testifying against co-defendants, some of whom were convicted and received substantially lesser sentences than that imposed upon Stein. He contends that the sentence was both excessive and illegal. Because the harsh sentence was imposed by the sentencing judge under an apparent misapprehension as to certain material facts, because she failed to permit appellant and his counsel to be heard when they attempted immediately after imposition of the sentence to address the court, and because the defendant was furnished by the court with a materially incorrect impression of the Probation Officer's recommendation, we hold that there was a denial of due process. Accordingly the sentence is vacated and the case remanded to the district court for resentencing.

Prior to the filing in 1974 of the indictment in this case Stein, now 50 years old, had been a principal figure in numerous securities law violations, including frauds and stock manipulations, which dated back to the early 1960s and continued until approximately 1972. Despite his involvement in these illegal activities he apparently began cooperating with the government in the late 1960s, furnishing information with respect to the conduct of others in certain security frauds, manipulations and other crimes. On May 27, 1971, after a jury trial before Judge Frederick vP. Bryan in the Southern District of New York, he was convicted of federal security law violations based upon manipulation of the stock of the Buckeye Corporation in 1960 and 1961 and was sentenced to a term of two years imprisonment. However, he continued his cooperation with federal authorities, testifying in various other trials in the Southern District of New York in 1971, 1972 and 1973 and acting as an undercover agent for the Bureau of Narcotics and Dangerous Drugs in obtaining evidence of trafficking in narcotics on the part of a California attorney. As a result of this cooperation Judge Bryan, on January 30, 1973, reduced Stein's sentence On June 4, 1974, a grand jury in the Southern District of New York filed the present indictment against Stein and nine others, charging them in 20 counts with a 1968-69 conspiracy to violate the federal securities laws and mail fraud statutes in the sale of unregistered stock of Stern-Haskell, Inc. and various substantive violations, including employment of schemes to defraud, use of manipulative and deceptive devices in the sale of stock, and obtaining money and property by means of untrue statements. See United States v. Rubinson, --- F.2d ----, ---- (2d Cir. 1976). The charges were based upon a scheme devised and carried out in 1968 and 1969 for the marketing of some 200,000 unregistered Stern-Haskell shares. On January 9, 1975, Stein pleaded guilty to Counts One (charging all defendants with conspiracy in violation of 18 U.S.C. § 371), Seven (use of the mails to sell Stern-Haskell stock in violation of Rule 10b-5 and 15 U.S.C. §§ 78j and 78ff), and Fourteen (sale of unregistered shares of Stern-Haskell stock in violation of 15 U.S.C. §§ 77e and 77x). ²

to time already served (approximately 90 days) and placed him on probation for five years, on the understanding that he would continue to cooperate with federal law enforcement authorities, which he did. ¹

Trial of Stein's co-defendants commenced on January 22, 1975. Stein, continuing to cooperate with the government, testified as a government witness for six days. The jury found four defendants guilty and acquitted three. ³

On March 28, 1975, Stein appeared before Judge Motley for sentencing. The government prepared and submitted to the court a sentencing memorandum describing Stein's cooperation, including his testimony in various cases (including that in United States v. Quase, 73 Cr. 80, and his testimony before the grand jury and at trial in the present case) and his cooperation with the FBI and the Internal Revenue Service. ⁴ Judge Motley also had before her a copy of the pre-sentence report prepared by the U.S. Probation Officer for use by Judge Bryan in the 1971 sentencing after Stein's conviction in the trial before him (66 Cr. 732) and a supplemental pre-sentence report prepared by the Probation Officer for the present case, dated March 12, 1975. Using a form customarily employed by the U.S. Probation Officer in the Southern District of New York, each of these pre-sentence reports sets forth pertinent data, including a description of the offense for which Stein had been convicted, a statement of his version of the events, his prior criminal history, personal and background data, emotional and physical factors, business history, pending information, finances and a matter of considerable significance in the present case the Probation Officer's "Evaluation" or "Evaluative Summary" in which the Officer frequently makes a recommendation with respect to the sentence to be imposed.

At the sentencing hearing Stein's counsel urged the court to place Stein on probation, pointing out that Judge Bryan had followed this course in the earlier case and that Stein had since conducted himself in a lawful manner, cooperating extensively with various governmental agencies. The government rested on its sentencing memorandum.

Stein, exercising his right of allocution, stated that he had rehabilitated himself and would continue to cooperate with the government. Judge Motley, after reviewing Stein's criminal record, stated that she concurred in the evaluation of the September 14, 1971, pre-sentence report prepared by the U.S. Probation Officer for Judge Bryan. She then read verbatim that evaluation. After reviewing Stein's fraudulent behavior and describing him as a major manipulator of stocks, the Evaluative Summary concluded that Stein had shown "no remorse for his involvement," that he would "continue to act in a fraudulent and manipulative manner," that he "deserves no consideration despite his so-called cooperation in other cases," and that he was "acting in his own self-preservation so that he could not himself be criminally prosecuted." It concluded, "a commitment and fine in his case is recommended on Stein's activities alone. Additionally a commitment hopefully will forewarn others that this type of offense could result in serious consequences." ⁵

Although Judge Motley mentioned in passing that she had read the Probation Officer's supplemental pre-sentence report prepared for her sentencing of Stein, which updated the 1971 report, she did not describe the contents of the supplemental report other than to state at the pre-sentence chambers conference that it "doesn't contain much additional information." However, the Probation Officer's Evaluative Summary attached to the supplemental report as a separate sheet, in sharp contrast to that forming part of the earlier report, states:

"Stein admits his guilt, verbalizes remorse, and has been cooperating with the Government.

"In view of the foregoing, it is respectfully recommended that this defendant be placed on probation."

It does not appear that this supplemental report was ever made available to or read by counsel. For reasons suggested below the Evaluative Summary quoted above may not have been read by Judge Motley. Had it been furnished to counsel, we are confident that the quoted portion, which was of considerable significance in view of Judge Motley's quotation of the evaluation from the earlier report, would have been called to her attention.

Following her reading of portions of the 1971 Probation Office report, Judge Motley sentenced Stein to the maximum sentence that could be imposed on each of the three counts to which he pleaded guilty: 5 years and a committed $10,000 fine on Count One, 2 years and a committed $10,000 fine on Count Seven to run concurrently with the sentence of Count One, and 5 years and a committed $5,000 fine on Count Fourteen to run consecutively to the sentence on Count One. As a result, Stein was sentenced to 10 years imprisonment and payment of committed fines totalling $25,000, based on imposition of consecutive sentences with respect to the same criminal course of conduct.

When Stein's counsel, undoubtedly taken aback by the severity of the sentence, asked to be heard the court replied "No, the defendant is remanded," adding "We are not going to have anymore attempted suicides or anything else with Mr. Stein. We have been through that." Similarly when Stein asked "May I say something, your Honor?" the court replied "The defendant is remanded."

On July 28, 1975, Stein filed a "Motion for Mitigation" accompanied by a memorandum prepared by his counsel which argued (1) that the court, by relying so heavily on the negative evaluation quoted from the out-dated 1971 pre-sentence report instead of considering Stein's...