US v. Cannistraro
| Decision Date | 12 May 1992 |
| Docket Number | Crim. A. No. 89-218. |
| Citation | 794 F. Supp. 1313 |
| Parties | UNITED STATES of America, Plaintiff, v. Richard S. CANNISTRARO and Richard O. Bertoli, Defendants. |
| Court | U.S. District Court — District of New Jersey |
John M. Fietkiewicz, David M. Rosenfield, Asst. U.S. Attys., U.S. Attorney's Office, Newark, N.J., for U.S.
Richard O. Bertoli, pro se.
Franklin M. Sachs, Podvey, Sachs, Meanor, Catenacci, Hildner & Cocoziello, Newark, N.J., for defendant Richard O. Bertoli.
Michael B. Pollack, New York City, for defendant Richard S. Cannistraro.
John J. Barry, Clapp & Eisenberg, Newark, N.J., for Michael B. Pollack.
This is a criminal action which originated on 16 June 1989 when an indictment (the "Indictment") was returned. Defendants Richard O. Bertoli ("Bertoli"), Leo M. Eisenberg ("Eisenberg") and Richard S. Cannistraro ("Cannistraro") (collectively the "Defendants") were named in the Indictment.1 On 29 September 1989 a six count superseding indictment (the "Superseding Indictment")2 was returned against the Defendants.3 On 21 January 1992 the Government returned an eight count second superseding indictment (the "Second Superseding Indictment") against Bertoli and Cannistraro. Count One of the Second Superseding Indictment charges Bertoli and Cannistraro with racketeering activities in violation of the Racketeer Influenced and Corrupt Organization Act ("RICO"), 18 U.S.C. § 1961, et seq. Count Two charges Bertoli and Cannistraro with conspiracy to commit racketeering in violation of RICO. Count Three charges Bertoli and Cannistraro with conspiracy to obstruct justice. Counts Four through Seven charge Bertoli with obstruction of justice in violation of 18 U.S.C. § 1503. Count Eight charges Bertoli and Cannistraro with conspiracy to commit securities fraud in violation of 18 U.S.C. § 371.4 Eisenberg is not a defendant in the Second Superseding Indictment although he is listed as a co-conspirator.5
Currently before the court is the motion of the Government to disqualify Michael B. Pollack, Esq. ("Pollack"), counsel to Cannistraro, (the "Motion to Disqualify") on the grounds that Pollack may be a potential witness at trial, Pollack previously represented a potential witness at trial and Pollack is the target of an unrelated grand jury investigation.6 For the reasons set forth below, the Motion to Disqualify is granted.
On 6 November 1989 Cannistraro was arraigned under the initial indictment in this matter. At the arraignment, Patricia Cody, Esq., Assistant Federal Public Defender, appeared as standby counsel to Cannistraro who was then proceeding pro se. Minutes of Proceedings, dated 6 November 1989. On 25 January 1990 Pollack, on behalf of Cannistraro, filed a motion on short notice. Notice of Motion, filed 25 January 1990. Since that time, Pollack has continued to represent Cannistraro to date.
The factual basis upon which the Government relies for the Motion to Disqualify comes in large part from the evidence obtained from the Cayman Islands and from a proffer of testimony made by Joseph Lugo ("Lugo"), an individual who has been associated with Bertoli since the early 1970s and who has most recently worked with Bertoli in the offices of International 800 in Nanuet, New York. Government's Ex. 2, Affidavit of Michael J. Cahill, dated 24 February 1992 (the "1st Cahill Aff."), ¶ 2(c). The Government asserts that Pollack has knowledge of facts relating to the proceeds of the RICO and securities fraud charged in the Second Superseding Indictment because of the following events.
The Government states Bertoli, Cannistraro and Eisenberg deposited in Cayman Islands banks millions of dollars in proceeds obtained through fraudulent trading of securities of Astrosystems, Inc., Nature's Bounty, Inc., Liquidation Control, Inc., Toxic Waste Containment, Inc., High Technology Capital Corp. and Solar Age Manufacturing Corp. 1st Cahill Aff., ¶ 4. The Government states in 1984 Bertoli hired Sidney Coleman ("Coleman") of Paget-Brown & Co. Ltd. ("Paget-Brown") to administer and manage this money. Id. It contends that in 1987 or 1988 Coleman formed three individual corporations: Beecham Enterprises Corp. ("Beecham") which was owned by Bertoli; Centurion Enterprises Corp. ("Centurion") which was owned by Cannistraro and Eastern Funds Corp. ("Eastern") which was owned by Eisenberg. Id. Subsequently, Coleman opened bank accounts for Beecham, Centurion and Eastern at Morgan Grenfell (Cayman) Ltd. ("Morgan Grenfell") in the Cayman Islands, which accounts had in total over eight million dollars. Id.
The Government states Lugo has proffered the following information regarding the management and transfer of eight million dollars from the Cayman Islands to Andorra. Lugo stated during 1989 he worked daily with Bertoli in New York and that Bertoli asked him to assist in the transfer of the money from the Cayman Islands to Andorra. Id., ¶ 5. Lugo stated Bertoli indicated he was having trouble with Coleman because Coleman would not transfer monies to pay for Cannistraro's legal fees in this case. Id., ¶ 7. Lugo stated Bertoli subsequently replaced Coleman with Ernest Foster ("Foster"), a money manager at Business Services International, Ltd. in the Cayman Islands. Id.
Lugo proffered that in November 1989 he attended a breakfast meeting with Bertoli and Foster in New York at which Bertoli stated he wanted Foster to transfer the money to Andorra. Id., ¶ 9. Lugo stated at this meeting Bertoli directed Lugo to obtain Eisenberg's signature on a release which would cause the money to be transferred. Id., ¶ 10. Lugo also submitted Bertoli signed Richard Cannistraro's name on a document in Lugo's presence and told Lugo the signature needed to be witnessed.7Id. Lugo stated Bertoli told him to sign any name in the telephone book as a witness; however, Lugo instead took the document to Pollack who signed as the witness of Cannistraro's signature. Id.
Lugo stated that when Pollack learned the document he had signed as a witness was sent to the Cayman Islands to be used for the transfer of funds, Pollack told Bertoli that the document was dangerous. Government's Ex. 3, Affidavit of Michael Cahill, dated 23 March 1992 (the "2d Cahill Aff."), ¶ 4. Lugo stated Bertoli told Pollack not to worry because there would probably be a fire and Pollack said good. Id.
The Government states that in December 1989 an account was set up in the name of Fosca at the Bank Agricoli Comerical D'Andorra in Andorra. 1st Cahill Aff., ¶ 15. The Government further states that in February and April 1990 Morgan Grenfell transferred the balance of the Centurion, Beecham and Eastern accounts to the Fosca account. Id., ¶ 18. Lugo stated after the money was in the Fosca account, Bertoli instructed Jose Camprubi ("Camprubi"), the man hired to manage the Fosca account, to wire transfer between $400,000 and $750,000 from Fosca to a Swiss bank account. 2d Cahill Aff., ¶ 5. Lugo stated Bertoli advised him that the money was to pay Pollack for legal fees incurred in representing Cannistraro. Id. Lugo stated in April or May 1990 he attended a meeting with Bertoli and Pollack in New York during which Bertoli informed Pollack that the money had been wired to the Swiss bank account. Id.
The Government states it has also received evidence that Pollack and Foster were in Andorra in November 1991. Id., ¶ 6. This evidence was obtained from Foster in February 1992 when he was arrested by the Federal Bureau of Investigations (the "FBI") in Florida on money laundering charges. Id. The Government states when Foster was arrested he was in possession of two bills, dated 7 November 1991, from the Andorra Park Hotel, one of which was made out to Pollack. Id. In addition, Foster had Pollack's credit card invoices and Pollack's name and work, home and vacation addresses and telephone numbers on the minicomputer Foster had with him at the time of his arrest. Id., ¶¶ 6-7.
Prior to the indictment of Cannistraro, Pollack represented Lugo in his bankruptcy proceedings in the United States District Court for the Southern District of New York. Moving Brief at 6. Pollack also represented Lugo in a criminal investigation of stock manipulation charges brought by the Manhattan District Attorney's office. Id. Lugo stated he provided Pollack with privileged information during his representation of the criminal investigation. 2d Cahill Aff., ¶ 8. Lugo indicated if he is a witness at trial, he will invoke the attorney-client privilege with respect to any communications made to Pollack. Id.
Pollack is currently representing Steven Cloyes ("Cloyes") in the related civil action, SEC v. Monarch Funding Corp., No. 85-7072 (S.D.N.Y.), now pending in the Southern District of New York. Moving Brief at 6 n. 2. Cloyes is another potential witness of the Government who has not decided whether he will waive the attorney-client privilege if Pollack cross-examines him at trial in this matter. Id.
On 21 January 1992 Pollack received a letter informing him he was the target of a grand jury investigation with respect to a conspiracy to file a false income tax return. Moving Brief at 6. This grand jury investigation is unrelated to the facts underlying the Second Superseding Indictment. Id.
The Government argues Pollack's potential conflicts of interest warrant disqualification. Moving Brief at 7. Specifically, the Government argues Pollack is a potential witness in this case because he has knowledge of events underlying charges in the Second Superseding Indictment. Id. at 9-14; Reply Brief at 5-11. Specifically, the Government states Pollack has knowledge of the witnessing of Cannistraro's signature on the Indemnity Agreement, the use of the Indemnity Agreement for the transfer of Centurion funds and the continuing nature of the racketeering activity. Id. at 5-6.
In addition, the Government argues if...
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