US v. Incorporated Village of Island Park

• Decision Date: 17 May 1995
• Docket Number: No. 90-CV-0992.,90-CV-0992.
• Citation: 888 F. Supp. 419
• Parties: UNITED STATES of America, Plaintiff, v. The INCORPORATED VILLAGE OF ISLAND PARK, Jacqueline Papatsos, in her capacity as Mayor of the Incorporated Village of Island Park, Charlotte Kikkert, in her capacity as Trustee of the Incorporated Village of Island Park, Philip Taglianetti, in his capacity as Trustee of the Incorporated Village of Island Park, James Fallon, in his capacity as Trustee of the Incorporated Village of Island Park, Michael A. Parente, James G. Brady, Francis R. McGinty, Michael Masone, Geraldine McGann, Daniel McGann, Eileen McGann, Anthony Ciccimarro, Janet Ciccimarro, Joseph Ruocco, Mary Ellen Guerin, Dennis Guerin, Joseph DiDomenico, Maria DiDomenico, Donna Moore and Kenneth Moore, Defendants.
• Court: U.S. District Court — Eastern District of New York

888 F. Supp. 419

UNITED STATES of America, Plaintiff, v. The INCORPORATED VILLAGE OF ISLAND PARK, Jacqueline Papatsos, in her capacity as Mayor of the Incorporated Village of Island Park, Charlotte Kikkert, in her capacity as Trustee of the Incorporated Village of Island Park, Philip Taglianetti, in his capacity as Trustee of the Incorporated Village of Island Park, James Fallon, in his capacity as Trustee of the Incorporated Village of Island Park, Michael A. Parente, James G. Brady, Francis R. McGinty, Michael Masone, Geraldine McGann, Daniel McGann, Eileen McGann, Anthony Ciccimarro, Janet Ciccimarro, Joseph Ruocco, Mary Ellen Guerin, Dennis Guerin, Joseph DiDomenico, Maria DiDomenico, Donna Moore and Kenneth Moore, Defendants.

No. 90-CV-0992.

United States District Court, E.D. New York.

May 17, 1995.

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Charles S. Kleinberg, Stanley N. Alpert, Richard K. Hayes, Asst. U.S. Attys., Brooklyn, NY, for the U.S.

Frank D. Dikranis, Dikranis & O'Shea, Long Beach, NY, for Geraldine McGann.

James W. Dougherty, James W. Dougherty, P.C., Malverne, NY, for Daniel and Eileen McGann.

Eugene Mittelman, Dreyer & Traub, New York City, for Joseph and Maria DiDomenico, Mary Ellen and Dennis Guerin, Kenneth and Donna Moore and Joseph and Debra Ruocco.

William H. Pauley III, Snitow & Pauley, New York City, for the Incorporated Village of Island Park, Jacqueline Papatsos, Charlotte Kikkert, Philip Taglianetti and James Fallon.

Joseph A. Quatela, Allen R. Morganstern, P.C., Mineola, NY, for Michael Parente, James Brady and Francis McGinty.

Jonathan L. Rosner, Rosner & Goodman, New York City, for Anthony and Janet Ciccimarro.

Milton Thurm, Thurm & Heller, New York City, for Michael Masone.

MEMORANDUM AND ORDER

GLASSER, District Judge.

This action arose from the administration of a Community Development Block Grant Program ("CDBG Program") and a Section 235 Housing Program and from the alleged misuse of Housing and Urban Development ("HUD") funds in those programs by the Village of Island Park, New York ("Island Park" or the "Village") between 1979 and 1983. The government filed this action on March 22, 1990; it filed an amended complaint on May 8, 1990. The government has named as defendants the Incorporated Village of Island Park and its present Mayor (Jacqueline Papatsos) and trustees (Charlotte Kikkert, Philip Taglianetti and James Fallon), in their official capacities (collectively, the "Village Defendants"); former officials of the Village, including former Mayor Michael Parente ("Parente"), former trustees James Brady ("Brady") and Francis R. McGinty ("McGinty") and former trustee and HUD employee Geraldine McGann; and six of the couples who were awarded Section 235 homes in the Village (the "Homeowner Defendants").

The amended complaint asserted eight causes of action: (1) violation of the False Claims Act, 31 U.S.C. ?? 3729 et seq.; (2) fraud; (3) violation of the Fair Housing Act, 42 U.S.C. ?? 3601 et seq.; (4) breach of fiduciary duty; (5) aiding and abetting breach of fiduciary duty; (6) unjust enrichment; (7) constructive trust; and (8) erroneous payment of funds. Upon defendants' motion for summary judgment dismissing the claims as time barred, this court dismissed the claims for fraud, breach of fiduciary duty and aiding and abetting breach of fiduciary duty in their entirety; dismissed the claims for violation of the False Claims Act, unjust enrichment and erroneous payment of funds to the extent they related to events prior to March 22, 1984; and dismissed the claim for violation of the Fair Housing Act to the extent the government sought civil penalties. United States v. Incorporated Village of Island Park, 791 F.Supp. 354 (E.D.N.Y.1992) (Island Park). The underlying facts and circumstances are set out in that opinion, familiarity with which is assumed.

The government now moves for partial summary judgment against the Village Defendants, Parente and Brady on the remaining False Claims Act and Fair Housing Act causes of action; against the Homeowner Defendants (excluding the Ruoccos) on the unjust enrichment and constructive trust claims; and against the Village Defendants, Parente, Brady and the Homeowner Defendants (other than the Ruoccos) for erroneous payment of funds.

The Village Defendants have cross-moved for summary judgment dismissing the causes of action for False Claims Act violations and erroneous payment of funds and have moved for additional time to conduct discovery with respect to the government's claim under the Fair Housing Act. Parente, Brady and McGinty have adopted the Village Defendants statement of facts and memoranda of law and have also moved to dismiss the causes of action for False Claims Act violations and erroneous payment of funds, as well as for additional time to conduct discovery on the Fair Housing Act claims. The Homeowner Defendants have moved for summary judgment dismissing all remaining claims against them.

Preliminary Matters

Pursuant to Local Civil Rule 3(g), the government has submitted a Statement of Material Facts as to which it contends there is no genuine issue to be tried. Several of the contentions in the government's 3(g) statement relate to matters with respect to which defendants Daniel McGann and James Brady asserted their Fifth Amendment privilege against self-incrimination at deposition. Those defendants now attempt to controvert those contentions by submitting affidavits in opposition to the government's motion for summary judgment. The government has requested that those affidavits be stricken. Thus, prior to determining whether the undisputed material facts in this action warrant summary judgment, this court must determine whether to admit those affidavits.

The privilege against self-incrimination may be invoked by defendants in civil as well as criminal proceedings and during the discovery process as well as during trial. Because of the potential for abuse of the privilege by defendants who use it to obstruct discovery only to waive it and subject the plaintiff to surprise testimony at trial, the courts recognize the appropriateness of imposing sanctions for a civil defendant's assertion of the privilege during discovery. Thus, a decision to assert the privilege during pre-trial depositions may be valid grounds for precluding a defendant from testifying at trial, Gutierrez-Rodriguez v. Cartagena, 882 F.2d 553, 575-77 (1st Cir.1989), as well as for striking affidavits opposing summary judgment motions, In re Edmond, 934 F.2d 1304, 1308-09 (4th Cir.1991); United States v. Parcels of Land, 903 F.2d 36, 43 (1st Cir.).

This principle has been accepted by several district courts in this circuit, SEC v. Drexel Burnham Lambert Inc., 837 F.Supp. 587, 606 n. 6 (S.D.N.Y.1993), aff'd on other grounds, 16 F.3d 520 (2d Cir.1994); United States v. Certain Real Property and Premises Known as 4003-4005 Fifth Avenue, 840 F.Supp. 6 (E.D.N.Y.1993); United States v. Talco Contractors, Inc., 153 F.R.D. 501, 506 (W.D.N.Y.1994); SEC v. Cymaticolor Corp., 106 F.R.D. 545, 549-50 (S.D.N.Y.1985); SEC v. Benson, 657 F.Supp. 1122 (S.D.N.Y.1987), and is consistent with the well-settled principle that a defendant's direct testimony should be stricken if he or she invokes the Fifth Amendment on cross-examination to shield that testimony from scrutiny, Bagby v. Kuhlman, 932 F.2d 131, 135 (2d Cir.1991), cert. denied, 502 U.S. 926, 112 S.Ct. 341, 116 L.Ed.2d 281 (1991); Klein v. Harris, 667 F.2d 274, 289 (2d Cir.1981) (citing Brown v. United States, 356 U.S. 148, 154-57, 78 S.Ct. 622, 626-28, 2 L.Ed.2d 589 (1958)).

In view of Brady's and McGann's repeated invocation of their Fifth Amendment privilege at deposition, their "eleventh hour" attempt to avoid the consequences of asserting that privilege by submitting affidavits in opposition to the government's summary judgment motion constitutes an abuse of the discovery procedure which should not be permitted. Accordingly, the affidavits of Brady and McGann are precluded.

Furthermore, the government may rely on the defendants' assertion of their Fifth Amendment privilege to confirm matters supported by other independent evidence. As this court has previously held, an adverse inference may be drawn in a proceeding against a defendant who invokes the privilege against self-incrimination. United States v. Private Sanitation Industry Association, 811 F.Supp. 808, 812 (E.D.N.Y.1992), aff'd 995 F.2d 375 (2d Cir.1993) (citing Baxter v. Palmigiano, 425 U.S. 308, 318, 96 S.Ct. 1551, 1557-58, 47 L.Ed.2d 810 (1976)). However, liability should not be imposed based solely upon the adverse inference. United States v. Bonanno Organized Crime Family of La Cosa Nostra, 683 F.Supp. 1411, 1452 (E.D.N.Y.1988) (citations omitted), aff'd, 879 F.2d 20 (2d Cir.1989). The government must produce "independent corroborative evidence of the matters to be inferred" before liability will be imposed. Id.

Facts

The Village joined the Nassau County Consortium, which was formed to participate in the "Nassau County Community Development Program pursuant to Title I of the Housing and Community Development Act of 1974, as amended." Pl's 3(g) St. ? 7. The Secretary of HUD approved the Consortium's application for a Community Development Block Grant (CDBG) to finance a community development program for the Village. Id. CDBG funds may be used for such things as acquiring real property, site improvement, and building public works and playgrounds, but not for the construction of new housing or to provide housing assistance or subsidies for occupants. 42 U.S.C. ?? 5305(a)(1), (2), (4) et seq.; 24 C.F.R. ? 570.207(b)(3). A unit of local government is eligible to receive CDBG funds only if it certifies...