US v. Rivera

• Decision Date: 17 January 1996
• Docket Number: Criminal No. 95-84(HL).
• Citation: 912 F. Supp. 634
• Parties: UNITED STATES of America, v. Pedro RIVERA, et al., Defendants.
• Court: U.S. District Court — District of Puerto Rico

912 F. Supp. 634

UNITED STATES of America, v. Pedro RIVERA, et al., Defendants.

Criminal No. 95-84(HL).

United States District Court, D. Puerto Rico.

January 17, 1996.

Jorge E. Vega, Chief, Criminal Division, U.S. Attorney's Office, San Juan PR, Charles De Monaco, Assistant Chief, Michael Woods, Trial Attorney, U.S. Department of Justice, Environmental Crimes Division, Washington, D.C., for plaintiff.

Joseph Laws, San Juan PR, for Pedro Rivera.

Ramón García García, San Juan PR, for Bunker Group of P.R.

Yolanda Collazo, Bayamón PR, for Bunker Group Inc. Jorge L. Arroyo, San Juan PR, for New England Marine Services.

ORDER

LAFFITTE, District Judge.

Before the Court is the Report and Recommendation of Magistrate Judge Delgado-Colón regarding the appointment of counsel for the defendants in this action. The Court has carefully reviewed the record and the Report and Recommendation, as well as the objections thereto. The Court hereby adopts the Report and Recommendation and orders as follows:

The Court hereby vacates the appointment under the Criminal Justice Act of counsel for the corporate defendants. The corporate defendants are hereby granted until January 25, 1996 to retain new counsel and have that counsel make an appearance. If new counsel has not been retained by that date, the Court will designate attorney Jorge Arroyo-Alejandro to represent Defendant New England Marine Services, Inc., attorney Yolanda Collazo Rodriguez to represent Defendant Bunker Group Incorporated, and attorney Ramon Garcia to represent Defendant Bunker Group Puerto Rico. These alternative designations will not be made under the Criminal Justice Act.

In the event the above-named attorneys are appointed to represent the defendants, their fees and expenses will be paid from the assets and properties listed in the Court's order of April 6, 1995.

The Court further orders that Peter Frank be appointed as corporate representative for the corporate defendants. In this capacity Peter Frank will be personally responsible to ensure that the defendant corporations comply with any Court orders, including orders regarding payment of attorneys. Failure to comply with these responsibilities will result in his being subject to criminal contempt penalties.

The status conference scheduled for January 19, 1996, is hereby reset to January 31, 1996, at 2:00 p.m. Among the matters to be considered at the status conference will be Jared Stamell's motion to vacate the Court's order of April 6, 1995.

IT IS SO ORDERED.

REPORT AND RECOMMENDATION

DELGADO-COLON, United States Magistrate Judge.

I. BACKGROUND OF THE CASE

On April 5, 1995, a Grand Jury returned an indictment against Pedro Rivera (Rivera), Bunker Group of Puerto Rico (BGPR), Bunker Group, Inc. (BG), and New England Marine Services (NEMS). The defendants were charged with violating the Federal Water Pollution Act, also known as the Clean Water Act, 33 U.S.C. § 1251 et seq.; specifically, Counts II and III depict a violation of 33 U.S.C. § 1321(b)(3), 1319(c)(1) and 1232(b)(1), respectively. Count I depicts a violation to 46 U.S.C. § 10908. (Docket No. 1)

At government's request, on April 6, 1995, the Court issued an order determining that the corporate defendants were constituent parts of an integrated group of more than fifty corporate entities controlled by Peter Frank, Jane Frank Kresch and Susan Frank Stamell, both sisters of Peter Frank. The Order listed the properties that appeared to be under the control or custody of the integrated enterprise and, under 28 U.S.C. 1651, prohibited said properties from being removed from its location, concealed, destroyed or disposed of without prior Court authorization. (Docket No. 5) The Order also provided the corporate defendants an opportunity to state their position in regards to this Order. This opportunity was twice declined by the defendants by their failure to appear at Court scheduled hearings. (See Docket Nos. 15, 17, 23, 25, 30, and 32.) As of May 24, 1995, the corporate defendants had not been arraigned. Although the government argued that the defendants had sufficient funds to secure legal representation, on that date Peter Frank represented to the Court that the three corporate defendants had no assets and were unable to retain counsel. Inasmuch as Peter Frank was identified as the President for all three corporations, he was then appointed the corporations' representative. On that same date the Court appointed Attorney Joseph Laws, also the attorney for defendant Rivera, for arraignment purposes only. (Docket Nos. 33-35)

On May 25, 1995, the government filed a motion requesting that each corporate defendant be appointed separate counsel provided that all corporate defendants be ordered to reimburse all legal fees and expenses incurred in relation to their defense. The government contended that the Court maintained the authority to appoint counsel to a recalcitrant defendant, but that legal fees and expenses could not be paid from public funds. 18 U.S.C. § 3006A. (Docket No. 36) On June 2, 1995, the Federal Public Defender¹ (for BGPR) and Attorneys Yolanda Collazo (on behalf of BG) and Jorge Arroyo (for NEMS) were appointed as counsel for the corporate defendants. (Docket No. 39) Although not clearly stated, it is understood that said appointments were made under the provisions of the Criminal Justice Act, 18 U.S.C. § 3006A et seq.

The government sought a "Reimbursement Order" through its July 26, 1995 motion. The government reinstated their contention (accepted by the Court on April 6, 1995) to the effect that (a) the corporate defendants were constituents of an integrated group of family operated corporate entities; (b) had the necessary funds to secure legal representation; and (c) under this or any other scenario, the legal fees and expenses could not be paid from public funds.²

In order to determine whether the corporate defendants were entitled to legal representation under 18 U.S.C. § 3006A and whether they had the necessary funds to secure legal representation, an evidentiary hearing was held on August 15, 1995.

II. EVIDENCE PRESENTED

At the hearing the government presented the expert testimony of John O'Connor (hereinafter O'Connor), a certified public accountant and certified fraud examiner with expertise in forensic accounting. At the inception of this investigation, the government decided to retain expert services to assess "how the group of the Frank family companies was structured" and then have the companies' assets identified. O'Connor, even having been subjected to vigorous and detailed cross-examination, emphatically stated that having examined the companies' voluminous records, financial statements and income tax returns for either the corporations and/or its officers, he had concluded that the Frank family companies were actually a single integrated enterprise comprised of over fifty (50) corporate entities; that all operations were centrally controlled by the Frank brother and sisters and their close friends; and that the companies' assets moved freely within the companies through inter-company transactions. Due to the government's overwhelming evidence, that was not rebutted by the defendants, we feel compelled to agree with such determinations. As stated by O'Connor, the transfer of assets throughout the companies was not consistently accounted for in accounting books. Occasionally such transactions were conducted to enable the use of such funds by Peter Frank or his sisters for their personal benefit. The data examined by O'Connor also revealed a pattern of moving assets in order to avoid civil, criminal or tax liability.

Although O'Connor during cross-examination admitted that he never conducted or received independent appraisals of the assets held by every corporation and did not know whether there were pending liens over all of the enumerated assets, he concentrated his efforts in identifying the existence of assets that do have, at the present time, considerable equity.

Daniel Jacobson (Jacobson),³ an attorney and certified public accountant who had previously rendered professional services to more than one of the Frank-owned companies, was also called to testify on behalf of the corporate defendants.⁴

Although Jacobson's testimony was proffered as essential, we are under the impression that even defense counsel was taken by surprise given the witness' inability to articulate the reasons why he considered the corporate defendants financially unable to retain counsel. Furthermore, the last time Jacobson had any contact or conducted auditing for one of the Frank's companies was around 1989-1990, and he did not have specific knowledge concerning the equity of any given asset.

During an incisive cross-examination, Jacobson even admitted that upon having examined O'Connor's reports, he also considered there were numerous transactions among companies that do have the same common control, with the same persons being the shareholders and officers for such companies. Furthermore, upon being asked to examine financial and auditing statements that his firm had prepared either for NEMS or other affiliates (Exhibits C and 7), he conceded that there were notes that reflected: (a) long-term loans to corporate affiliates, controlled by the Franks in the sum of $1,116,400 for which there was no data supporting its collectability; and (b) that a 1990 audit for Standard Marine Services also reflected that $397,497 had been loaned to Peter Frank. Neither loan bore interests and still then appeared as collectable. When directly questioned, he considered "fair" the government's assertion that all documents he had presented alluded "to related companies with commonly related party transactions that do operate with a common centralized control." Jacobson estimated that at a given point, all the deposits of approximately 25 of said companies did go to a single bank account. Among these companies was NEMS. Similarly...