Opinion
No. 04 Cr. 447 (RPP).
September 6, 2005
David N. Kelley, United States Attorney, Southern District of New York, New York, NY, Attn: Katherine Polk Failla/Marc Litt, Counsel for the Government.
Cheryl J. Sturm, Esq., Chadds Ford, PA, Counsel for the Defendant.
OPINION AND ORDER
On July 10, 2003, defendant Artour Arakelian, by his newly retained counsel, Cheryl J. Sturm, Esq., moved for recusal pursuant to 28 U.S.C. § 455(a) in view of the Court's remarks on the record on May 18, 2005 and May 20, 2005. This motion is denied for the reasons stated below.
BACKGROUND
Arakelian was indicted in a mail and wire fraud scheme in which customers of Lexington Royce Associates ("Lexington Royce"), a corporation formed by Arakelian in the fall of 2003, were fleeced of their savings. From September 2003 to April 2004, Lexington Royce, through its telephone solicitation and written materials, held itself out as having a twenty-two-year history as a foreign exchange currency dealer. (Presentence Investigation Report, dated Feb. 16, 2005 ("PSR") ¶ 26.) Lexington Royce contacted potential customers and offered them the opportunity to invest in its "Managed Account Program," which it touted as a successful pooled fund by which retail investors could engage in foreign currency transactions. (PSR ¶ 24.) After receiving deposit checks from customers, Lexington Royce in actuality did not place the funds in the Managed Account Program, but transmitted the funds to foreign bank accounts or a second sham corporation called 65J, Inc. (PSR ¶¶ 28-29.) Arakelian operated Lexington Royce with a single secretary and an undisclosed sales force. (PSR ¶¶ 24-25.)
Arakelian was arrested in April 14, 2004, when FBI agents executed a search warrant at Lexington Royce's offices. (PSR ¶ 31.) His initial counsel was Steven Statsinger, Esq., an experienced criminal defense attorney, who appeared for bail and presentment only. On the day of Arakelian's arrest, Magistrate Judge Douglas F. Eaton held a detention hearing and ordered that Arakelian be detained based on risk of flight. Magistrate Judge Eaton found that Arakelian came to the United States at age 16 in 1992, and that it was not clear whether he was a legal alien. He also found that the Government presented strong evidence that Arakelian obtained at least $2 million by operating a fraudulent foreign exchange company, that he had diverted $1.6 million of the company's funds, and that he probably had access to much of it. Magistrate Judge Eaton also indicated that Arakelian had told Pretrial Services that, prior to the summer of 2003, his only employment was as a deli clerk for six or seven years.
Samuel Slone Weissman, Esq., entered his notice of appearance for Arakelian on April 29, 2004. After the original indictment was filed, Mr. Weissman appeared before this Court for the arraignment on May 13, 2004, at which time Arakelian pleaded not guilty to each of five counts and the Court denied Arakelian's renewed application for bail. The Court established the following schedule: the Government was to provide discovery by June 4, 2004; Arakelian had until June 18, 2004 to make motions; and the parties were to appear on June 29, 2004 for oral argument on any motions. After determination of Arakelian's motions on June 29, 2004, the Court set a trial date of September 27, 2004, and excluded time until July 29, 2004 to allow Arakelian to consider any motions arising out of the Supreme Court's decision in Blakely v. Washington, 542 U.S. 296 (2004).
On September 9, 2004, the Court received a letter from Mr. Weissman dated September 7, 2004, requesting a trial adjournment. The letter explained that Richard Jasper, Esq., had been recently retained as co-counsel to assist Mr. Weissman at trial, and that Mr. Jasper's schedule did not permit him to become fully familiar with the case by the trial date. The Court denied the application as not sufficient to waive the Speedy Trial Act limitations or adjourn the trial.
On September 13, 2004, Mr. Weissman filed a motion to suppress statements Arakelian made at the time of his arrest. On September 15, 2004, the Government filed a superseding indictment containing a conspiracy count and four counts of wire fraud. The superseding indictment also alleged, under Blakely, enhancements for losses of over $2.5 million, more than fifty victims, and "sophisticated means," on which the Government would be seeking a jury's determination beyond a reasonable doubt.
On September 23, 2004, Arakelian pled not guilty to the superseding indictment. At that time, the Government advised that it planned to file a second superseding indictment which would include a forfeiture provision. Mr. Weissman moved to strike the third enhancement factor in the superseding indictment, "sophisticated means," stating that the superseding indictment, which pled that some of the money collected by Lexington Royce had been wired overseas, failed to adequately plead "sophisticated means." (9/23/04 Tr. at 8, 15-18.) The Court stated that, based on Mr. Weissman's account of what the evidence shows, the evidence in the case would be "pretty strong" and suggested that Arakelian should consider a plea. (Id. at 18-19.) Mr. Weissman then indicated that there had been plea negotiations, but that the Government was unwilling to agree to a sentencing computation with a loss amount of less than $2.5 million or fewer than fifty victims under U.S.S.G. § 2B1.1, and was asking for levels to be added for "sophisticated means" and a managerial role. The Court did not comment either favorably or unfavorably on the Government's positions. (Id. at 23-24.) The Court set a hearing for October 4, 2004 on the motion to strike the "sophisticated means" enhancement factor in the superseding indictment. It also confirmed its understanding that Mr. Weissman, not Mr. Jasper, was going to be trial counsel in the case. (Id. at 10-11.) The Court set September 30, 2004 for an arraignment on the forthcoming second superseding indictment, October 4, 2004 for argument and hearing of the defense motion to strike, and October 25, 2004 as a tentative trial date. (Id. at 9, 28-29.)
On September 30, 2004, Arakelian pled not guilty to the second superseding indictment, which contained a conspiracy count, four counts of wire fraud, and five counts of mail fraud, as well as four enhancement factors (for loss of over $2.5 million, more than fifty victims, "sophisticated means," and a managerial or supervisory role) and forfeiture allegations.
On October 4, 2004, the Government withdrew its opposition to Arakelian's motion to suppress statements he made at the time of his arrest, and the Court denied Arakelian's motion to strike the allegation of "sophisticated means" in the second superseding indictment. The parties also confirmed the October 25, 2004 trial date.
At a conference on October 15, 2004, ten days before the scheduled trial date, the Government served its proposed voir dire questions and proposed jury charges. The Court then expressed its strong concern that Arakelian's trial counsel, Mr. Weissman, had not been before the Court in other cases and might not be familiar with federal criminal procedures and the effect the U.S. Sentencing Guidelines have in federal criminal proceedings, and stressed the necessity that counsel knowledgeable in these matters give Arakelian the benefit of its advice. (10/15/05 Tr. at 2-7.)
On October 21, 2004, four days before the scheduled trial date, the Court called a conference to conduct an ex parte inquiry with Mr. Weissman and Mr. Jasper to determine whether there was a need for a hearing pursuant to United States v. Curcio, 680 F.2d 881 (2d Cir. 1982). Messrs. Weissman and Jasper assured the Court that Arakelian's family, not a third party, was paying Arakelian's legal fees, and the Court announced in open court that it had determined that a Curcio hearing was unnecessary. Thereafter, Mr. Jasper informed the Court that he had been formally retained as Arakelian's trial counsel and he requested an adjournment in view of his increased responsibilities. The Court granted the request and set December 8, 2004 for trial.
The Court ordered the Criminal Justice Act ("CJA") attorney on duty for the day to be present to advise Arakelian in the event a Curcio hearing was necessary.
On November 22, 2004, Arakelian appeared before the Court and, after receiving a Pimentel letter from the Government, pleaded guilty to Counts One through Ten of the second superseding indictment, but not to the four enhancing factors. (11/22/04 Tr. at 16.) Arakelian stated under oath that no promises or assurances of any kind had been made to him to induce him to enter a plea of guilty, that he understood the maximum sentence applicable to the offense and that he could be deported as a result of his conviction, and that he had been advised by counsel as to how the Sentencing Guidelines might apply to his sentence. (Id. at 5.) He also agreed to forfeit any interest he had in $3,568,781.82 received by Lexington Royce from investors. (Id. at 20, 27.) The Court set February 23, 2005 for sentence, which was subsequently adjourned to a later date.
Between Arakelian's guilty plea and his sentencing date, the Supreme Court handed down its decision in United States v. Booker, 125 S. Ct. 738 (2005), and the Second Circuit decidedUnited States v. Crosby, 397 F.3d 103 (2d Cir. 2005).
On March 3, 2005 and March 18, 2005, the Court received letters from the defense and the Government, respectively, with regard to sentencing, as well as approximately ninety letters from investors in Lexington Royce's foreign currency pooled fund.
On March 23, 2005, the parties appeared for a hearing pursuant to United States v. Fatico, 579 F.2d 707 (2d Cir. 1978), on the managerial role and the sophisticated means enhancements sought by the Government and the minimal role sought by counsel for Arakelian. Before the hearing began, the Government indicated that it would call one witness, a secretary employed by Lexington Royce, to testify to Arakelian's role as a manager, and that it understood the defense was not calling any witnesses. (3/23/05 Tr. at 2-3.) The defense did not take issue with the Government's contentions and suggested it would rely on its memorandum to support its argument for a departure under the Sentencing Guidelines and under 18 U.S.C. § 3553(a) for a substantial reduction from the Guideline computation. (Id.) The Court then pointed out that there were "a number of statements, both in [the defense's] memorandum and the government's memorandum, that relate to certain factual matters not [in] evidence." (Id. at 4.) The Court went on to state that it would sentence Arakelian based on the evidence or lack of evidence before it, and that if Arakelian was not going to testify about his role in the offense, the Court might be forced to take the position that he was a main actor. (Id.) The Court also expressed its concern about the content of the letters submitted by investors who had been victimized by Lexington Royce and suggested that the defense might want an adjournment to consider whether it would like to present evidence to support the position articulated in its sentencing memorandum. (Id. at 5.) After briefly discussing the situation with Mr. Weissman and Arakelian, Mr. Jasper requested a two-week adjournment. The Government then informed the Court that it was in possession of information suggesting Arakelian had lied to the Probation Office about his prior employment history and prior income. The matter was put over to permit Arakelian and counsel to confer in the light of these developments and to allow Arakelian to be visited by his father. Arakelian's sentencing was ultimately rescheduled for May 18, 2005.
On May 16, 2005, two days before the scheduled sentencing, the Court received and docketed a handwritten, undated letter from Arakelian. In the letter, Arakelian stated that he wanted to inform the Court of the likelihood of his deportation and his fear of retaliation from co-conspirators he referred to as "X" and "Y." He also made an application for assignment of new counsel and to withdraw his plea. That same day, the Court received a letter from Mr. Weissman dated May 16, 2005, containing a transcribed and signed statement by Arakelian in which he explained his involvement with Lexington Royce. Arakelian's statement also expressed his feeling that his counsel had represented him ineffectively and asked the Court to appoint new counsel because he could not afford to retain new counsel.
Arakelian and his counsel next appeared before the Court on May 18, 2005. In view of Arakelian's request for assignment of new counsel, the Court arranged for Lawrence Feitell, Esq., Criminal Justice Act ("CJA") attorney on duty for the day, to be present. After the Government's attorneys left the courtroom so that Arakelian could state his grounds for requesting the assignment of new counsel, Mr. Weissman reported that Arakelian had advised him that Arakelian had paid a retainer to new counsel, "Sherrill Stern," who had subsequently left a telephone message for Mr. Weissman. (5/18/05 Tr. at 9.) After attempting to identify Arakelian's new counsel, who had not entered a notice of appearance, and learning from the Government that it believe her name was Cheryl J. Sturm, Esq., the Court agreed to adjourn the sentencing to May 20, 2005 to determine if Ms. Sturm was appearing in the action.
Ms. Sturm did not appear at the May 20, 2005 proceeding. Counsel for the Government indicated that Ms. Sturm had stated on the telephone that, in fact, she had not yet received a retainer from the Arakelian family. The matter was adjourned again.
On May 31, 2005, Ms. Sturm filed a notice of appearance, and on July 13, 2005, the instant motion for recusal under 28 U.S.C. § 455(a) was filed.
DISCUSSION
Section 455 of Title 28 of the United States Code provides, in pertinent part, the following:
(a) Any justice, judge, or magistrate of the United States shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned.
(b) He shall also disqualify himself in the following circumstances:
(1) Where he has a personal bias or prejudice concerning a party, or personal knowledge of disputed evidentiary facts concerning the proceeding.28 U.S.C. § 455. According to counsel for Arakelian, the instant motion is based only on Section 455(a).
Section 455(a) "governs circumstances that constitute an appearance of partiality, even though actual partiality has not been shown. The determination of whether such an appearance has been created is an objective one based on what a reasonable person knowing all the facts would conclude." Chase Manhattan Bank v. Affiliated FM Ins. Co., 343 F.3d 120, 127 (2d Cir. 2003) (internal citations omitted); see also Liteky v. United States, 510 U.S. 540, 548 (1994) (noting that Section 455(a) requires an "objective" evaluation of a potentially disqualifying interest, and that "what matters is not the reality of bias or prejudice but its appearance"). With respect to Section 455(b)(1), the Supreme Court has stated that "judicial remarks during the course of a trial that are critical or disapproving of, or even hostile to, counsel, the parties, or their cases, ordinarily do not support a bias or partiality charge." Liteky, 510 U.S. at 555. Furthermore, evidence that a judge relied on facts outside of the proceedings, i.e., an "extrajudicial source," in reaching an opinion hostile to a party, may provide grounds for satisfying the standard of Section 455(b)(1), but will do so "only if [the judicial remarks] reveal such a high degree of favoritism or antagonism as to make fair judgment impossible." Id.
The situation facing the Court on May 18, 2005 was as follows. Arakelian had requested withdrawal of his plea and assignment of new counsel under the Criminal Justice Act because he had insufficient funds to retain new counsel on his own. According to the PSR, prior to his involvement with Lexington Royce, Arakelian had been employed as a deli clerk, a waiter, and a truck dispatcher, and he reported having no assets, aside from approximately $200 held in a checking account. (PSR ¶¶ 64-68.) The Government had seized all funds at Lexington Royce, and the remainder of the money collected by Lexington Royce from its investors had been sent to overseas entities. Defense counsel had indicated that Arakelian's family was also of meager means. His father was a immigrant to the United States from Armenia and was employed as a cook in Florida. It had been a hardship for him to come to New York to help his son.
On May 16, 2005, two days prior to Arakelian's scheduled sentencing, Arakelian sent a letter to the Court, stressing his fear of deportation and his fear of retaliation if he disclosed the identities of individuals he referred to as "X" and "Y." In his letter, Arakelian also moved pro se for withdrawal of his plea and the assignment of new counsel, but he stated no factual grounds for the relief of present counsel or why he thought his counsel had been ineffective.
In light of Arakelian's letter, the Court arranged to have CJA counsel present on May 18, 2005, so that CJA counsel could consult and advise Arakelian and, on receipt of a financial affidavit from Arakelian, CJA counsel could be assigned to represent him. Thus, in the event there were grounds for withdrawal of the plea, competent trial counsel would be present to proceed to trial at no cost to Arakelian.
At the May 18, 2005 proceeding, after a discussion with Arakelian off the record, Mr. Jasper stated that Arakelian seemed to be raising issues about the quality and integrity of the advice given to him by counsel. (5/18/05 Tr. at 8.) The Government attorneys then left the courtroom so that Arakelian could explain his grounds for seeking assignment of new counsel. At that point, Mr. Weissman announced that Arakelian had retained new counsel on his own several days earlier and that he had received a telephone messages the day before from Arakelian's new counsel, "Sherrill Stern" from Philadelphia. (Id. at 9.)
The Court then sought to identify Arakelian's new counsel and the following discussion between the Court and Mr. Weissman ensued:
The Court: This lady that hangs out down there in Pennsylvania, outside the prison down there?
Mr. Weissman: I have no idea. I have never heard of her before. All I know is Mr. Arakelian has paid her some retainer. Have you heard of her name?
The Court: I think I know who you are referring to. I don't know if I am right or not. She comes in on 2255s sometimes.
Mr. Weissman: I don't know, I don't know who she is.
The Court: You don't see her in the trial bar here[.]
Mr. Weissman: Her husband is also a lawyer?
The Court: I don't know. I don't know what her husband does. All I know is there is a woman that phonetically sounds similar to the one that you have named, whose name appears on 2255s claiming, in effect, ineffective assistance of counsel. I don't think he [sic] has been effective yet.
(Id. at 9-10.) The Court subsequently recalled the name of the prison and stated incorrectly that Ms. Sturm's office was in Lewisburg. (Id. at 15.) Later, the Court noted that if Ms. Sturm had been retained, "she doesn't seem to be familiar with the rules of the Court. . . . We haven't received any notice of retainer or substitution of counsel, or anything else." (Id. at 11.)
Ms. Sturm has appeared before this Court representing three or four individuals moving pursuant to 28 U.S.C. § 2255 and alleging ineffective assistance of counsel. None of these motions have been successful.
The Court's legitimate concern was that Arakelian have competent trial counsel to advise him and, if necessary, try the case. (See 9/23/04 Tr.; 10/15/04 Tr.) Arakelian had made a pro se motion to withdraw his plea, and he stated in correspondence with the Court that he had no funds to hire an attorney. The prospect of new counsel, known only to the Court for handling 28 U.S.C. § 2255 motions, did not appear to be what Arakelian needed. In addition, Arakelian's family was incurring further legal costs when competent CJA counsel was present in the courtroom and immediately available at no cost. Since Arakelian was moving to withdraw his plea, counsel who could handle the subsequent trial seemed desirable. Here, the proposed out-of-state counsel would have had to relocate to New York for a seven-to-ten-day trial and might not be available for the prompt trial required by the Speedy Trial Act. Thus, there was the possibility that, if Arakelian's motion to withdraw his plea was successful, he would need to retain, or be assigned, additional trial counsel. Under these circumstances, the Court's concern about the prospective retention of Ms. Sturm did not reflect any bias or prejudice against Arakelian or Ms. Sturm but rather concern for Arakelian and concern about the possibility of out-of-state counsel specializing in 28 U.S.C. § 2255 motions appearing when no factual grounds for ineffective assistance of counsel had been articulated and competent CJA counsel was available at no cost.
Section 2255 proceedings are generally handled on the papers with any evidentiary hearing lasting less than a day.
Ms. Sturm also complains about the Court's inquiry on May 20, 2005 as to whether a third party was paying her retainer. (5/20/05 Tr. at 3-4.) In view of Arakelian's concern about "X" and "Y," and his supposed lack of funds, the Court was merely seeking to ensure that no conflict of interest was developing and that a hearing pursuant to United States v. Curcio, 680 F.2d 881 (2d Cir. 1982), would not be required. The Court had conducted a similar inquiry on October 21, 2004 to determine whether a third party was providing legal fees for Arakelian's defense in view of his alleged employment history and limited financial means. (10/21/05 Tr. at 2).
Based on the foregoing, it does not appear to the Court that "an objective, disinterested observer fully informed of the underlying facts, [would] entertain significant doubt that justice would be done absent recusal,' or . . . [that] 'a reasonable person, knowing all the facts,' would question the judge's impartiality." United States v. Yousef, 327 F.3d 56, 169 (2d Cir. 2003) (quoting United States v. Lovaglia, 954 F.2d 811, 815 (2d Cir. 1992)); see also Chase Manhattan Bank, 343 F.3d at 127. Although the Court's remarks may be construed as critical of Arakelian's incoming counsel, in view of the facts and circumstances present when the Court made the remarks, the remarks do not "reveal such a high degree of . . . antagonism as to make fair judgment impossible." Liteky, 510 U.S. at 555. Nor would reasonable persons with knowledge of the history of this case conclude that the Court's remarks created the appearance of bias or prejudice. The Court had, sua sponte, taken extraordinary steps on earlier occasions to ensure that Arakelian was receiving knowledgeable advice from experienced and competent counsel and that said counsel did not have any conflict of interest. The Court's concerns that Arakelian's proposed incoming counsel was not a member of the trial bar of this Court, might not be available for a prompt trial, and might not have any trial experience or experience dealing with the U.S. Attorney's Office were valid concerns for a trial court to have in view of the surprising developments at the May 18, 2005 proceeding.
CONCLUSION
For the foregoing reasons, Arakelian's motion for recusal pursuant to 28 U.S.C. § 455(a) is denied.
IT IS SO ORDERED.