- against - 14-CR-403 (S-2) (DRH)

Transcription

1 Case 2:14-cr DRH-SIL Document 256 Filed 07/12/17 Page 1 of 26 PageID #: 6206 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK X UNITED STATES OF AMERICA - against - 14-CR-403 (S-2) (DRH) SOFIA ATIAS and JOSEPH ATIAS, Defendants X JOSEPH ATIAS'S REPLY TO THE GOVERNMENT'S RESPONSE TO ATIAS'S POST-TRIAL RULE 29(c) AND RULE 33 MOTIONS Leonard Lato, Esq. Attorney for Joseph Atias 200 Motor Parkway, Suite C-17 Hauppauge, NY Telephone: (631) Fax: (631) leonardlato@yahoo.com

2 Case 2:14-cr DRH-SIL Document 256 Filed 07/12/17 Page 2 of 26 PageID #: 6207 TABLE OF CONTENTS Preliminary Statement 1 The Government's Argument 1 Rule 29(c) The Non-Existent Medicaid "Fraud" Count 1 Rule 33 The Court's Incorrect Ruling, Trial Counsel's Ineffective Response to the Incorrect Ruling, and Prosecutorial Misconduct 4 Pivotal Government Witness Nicholas Pellegrini and the Carlos Zarate Wrecking Ball That the Court Deactivated 4 Bad Acts That the Government Elicited From Pellegrini 5 Bad Acts That Joseph Atias's Trial Counsel Elicited From Pellegrini 5 Pellegrini's Denials to Sofia Atias's Trial Counsel 6 Pellegrini's One Hundred or So Other Unsavory Acts... and Some Dead People 8 Zarate's Cooperation Agreement 10 The Court's Ruling 12 Evidence of Pellegrini's Eighty Fraudulent "Short-Sales Offer" Would Have Affected His Credibility and Would Not Have Implicated Zarate's Fifth Amendment Right 13 Because of Its Fifth Amendment Ruling, the Court Should Have Directed the Government to Immunize Zarate 13 Defense Counsel Should Have Adjusted to the Court's Incorrect Ruling By Eliciting Zarate's Statement's Through the Government Case Agent 21 Additional Perjury Government Witness Charles Strain 21 Prejudicial Impact on the Medicaid-Theft Count 23 Conclusion 23

3 Case 2:14-cr DRH-SIL Document 256 Filed 07/12/17 Page 3 of 26 PageID #: 6208 PRELIMINARY STATEMENT Joseph Atias replies to the Government's response to Joseph and Sofia Atias's Rule 29(c) and Rule 33 motions. THE GOVERNMENT'S ARGUMENT The Government contends that "The Evidence on the Medicaid Fraud Count was Overwhelming" and that "There was Overwhelming Evidence, Both Document[ary] and Testimon[ial], on the Bank Fraud and Bank Fraud Conspiracy Counts." (ECF No. 241, at 2, 5.) The Government adds that the Court's "Willful Blindness charge was Proper," that "The Court was Correct in Declining to Give the Missing [W]itness Charge [as to Carlos Roa Zarate]," that "The Court Properly Limited Defendants' Cross-Examination of the Cooperator [Nicholas Pellegrini] on Collateral Matters," and that "The Court was Correct in Refusing to Direct [Cooperator] Carlos Roa Zarate to Testify on Collateral Matters." (Id. at 7, 9, 10.) Some of the Government's arguments have merit. Most do not. RULE 29(c) THE NON-EXISTENT MEDICAID "FRAUD" COUNT According to the Government, "Defendants were convicted of Count Four of the Superseding Indictment, charging Medicaid fraud... under section 641 of Title 18 of the United States Code." (ECF No. 241, at 2.) The Atiases were not and could not have been convicted of Medicaid "fraud": The superseding indictment contains no such allegation. 1

4 Case 2:14-cr DRH-SIL Document 256 Filed 07/12/17 Page 4 of 26 PageID #: 6209 Count Four of the superseding indictment is not titled "Fraud." It is titled "Theft of Government Funds." (ECF No. 140, at 8.). Of course, "[T]he title of a statute... cannot limit the plain meaning of the [statute's] text." Brotherhood of R.R. Trainmen v. Baltimore & O.R. Co., 331 U.S. 519, (1947). Nevertheless, absent from Count Four's text are phrases that the Government routinely uses to charge fraud: "scheme or artifice to defraud" and "obtaining money by means of false or fraudulent pretenses, representations or promises." 18 U.S.C (mail fraud) and 1344 (wire fraud). What Count Four's text does allege is that the Atiases violated 18 U.S.C. 641 by "steal[ing], purloin[ing] and convert[ing]... money and things of value... [from] the... Medicaid Program." (ECF No. 140, 29.) It is unnecessary to illuminate the subtle differences between "steal," "purloin" and "convert." What matters is whether, as the Court charged the jury, the Government proved that the Atiases "[stole]... property." (Trial Tr. 3490:5.) The Government's response focuses not on what the Atiases stole, but on income that the Atiases "concealed": "use of a company's credit card," "an inheritance," "fraud proceeds," and "payments to private companies." (ECF No. 241, at 2.) But "stole" differs from "concealed." To prove that the Atiases "stole," the Government had to show that the Atiases were ineligible for Medicaid benefits exceeding $1,000. The Government failed to do so. 2

5 Case 2:14-cr DRH-SIL Document 256 Filed 07/12/17 Page 5 of 26 PageID #: 6210 In her reply to the Government's response, Sofia Atias pointed out that, with respect to business income, "[T]he defendants' expert witness, Moriah Adamo,... [testified that] th[e ineligibility] determination could not be completed without analyzing and accurately classifying various business expenses and loans." (ECF No. 253, at 3.) Sofia's reply also demonstrated that, "With respect to deposits made into the Trust, that is, the $210,000 inheritance check and the... proceeds from the Sacred Heart sale, Adamo was clear that such transactions did not affect the defendants' Medicaid eligibility." (Id. at 4.) Of course, the Government had its own expert Heather Griffin and if Griffin's testimony differed materially from Adamo's testimony on the Atiases ineligibility, Griffin's testimony would be sufficient to sustain the conviction. But that did not occur. In the Government's direct case, Griffin testified that, during certain months, the Atiases were ineligible to receive Medicaid benefits. But after Adamo testified in the defense case testimony that Griffin observed the Government called Griffin as a rebuttal witness. (Trial Tr. 3153:22-25, 3162:17-19.) On crossexamination, Griffin admitted that everything that Adamo had said was accurate except for Adamo's testimony "regarding bona fide loans." (Id. 3163: :5.) Thus, Griffin implicitly withdrew her "ineligibility conclusion." This left the jury with but one expert's opinion Adamo's opinion. And because Adamo opined that the Atiases ineligibility could not be determined without further investigation, 3

6 Case 2:14-cr DRH-SIL Document 256 Filed 07/12/17 Page 6 of 26 PageID #: 6211 the evidence was insufficient to establish the Atiases' theft of Medicaid benefits. RULE 33 THE COURT'S INCORRECT RULING, TRIAL COUNSEL'S INEFFECTIVE RESPONSE TO THE INCORRECT RULING, AND PROSECUTORIAL MISCONDUCT The foundation of the Government's "overwhelming evidence" of the Atiases bank fraud and bank-fraud conspiracy was "Pellegrini s... clear, corroborated and obviously convincing [testimony.]" (ECF No. 241, at 5.) But had the jury seen and listened to the real Pellegrini, the foundation and the Government's case would have collapsed. Pivotal Government Witness Nicholas Pellegrini and the Carlos Zarate Wrecking Ball That the Court Deactivated The Government asserts that the Court correctly precluded the Atiases from calling Zarate as a defense witness. According to the Government, the Atiases sought "collateral," "cumulative" and Rule 608(b)-precluded "other deals [that Zarate] was involved in with Nicholas Pellegrini," deals that, in the Government's view, "might shed some unfavorable light on Mr. Pellegrini." (ECF No. 241, at 9) (emphasis added). Contrary to the Government's view, Zarate would have done more than potentially strip a few items of Pellegrini's clothing. Zarate and the Government knew that Pellegrini had engaged in a smorgasbord of fraudulent acts that Pellegrini denied having committed, and Zarate would have stripped Pellegrini naked. The Court, the Government and ultimately defense counsel failed in their obligation to bring Pellegrini's transgressions to the jury's attention. 4

7 Case 2:14-cr DRH-SIL Document 256 Filed 07/12/17 Page 7 of 26 PageID #: 6212 Bad Acts That the Government Elicited From Pellegrini In its direct examination of Pellegrini, the Government brought out this smattering of improper conduct: In "April or May ," he was suspended from the practice of law for filing a false document in connection with a real-estate "regular" closing that he had done seven years earlier. (Trial Tr. 878:17 881:3.) In July 2013, he was charged with "mortgage fraud[] in state court... in connection with three short-sale closings" (id. 881:11-21) for which he agreed to "plead guilty to some part of the charges" relating to one closing, having denied involvement in the other two (id. 908:17 911:12). Of the "thousands of [short sale] transactions" in which he participated, he made inaccurate statements in, "as far as [he] could tell, four or five." (Id. 923:10-14.) His guilty plea to one of the charges for which the Atiases were on trial: a conspiracy to "[d]efraud[] Bank of America,... [which] held the mortgage of 83 Cathedral Avenue." (Id. 912:14-20, 913:9-12.) With the above, the Government painted a picture that Pellegrini lost his attorney license because the "thousands" of legitimate transactions that he had a hand in were insufficient to save him from his unethical or unlawful association in a mere few. Bad Acts That Joseph Atias's Trial Counsel Elicited From Pellegrini On cross-examination of Pellegrini, Joseph Atias's trial counsel wrested little. Pellegrini admitted that, "during the 25 years that [he had] practiced law, after [his] having done thousands of closings,... maybe between five and eight grievances" were filed against him. (Id.1037:15-23.) Pellegrini also admitted that, 5

8 Case 2:14-cr DRH-SIL Document 256 Filed 07/12/17 Page 8 of 26 PageID #: 6213 in the state-court mortgage-fraud case, he and Zarate were codefendants, but contended that "[o]nly one of the [short sales] that [Pellegrini] was charged with had anything to do with [Zarate.]." (Id.1083: :3.) Pellegrini's Denials to Sofia Atias's Trial Counsel Sofia's counsel went next. Early in the cross-examination of Pellegrini, there was a colloquy about the admissibility of Pellegrini's having advised his sister-in-law to give false information to the police in connection with his sister-inlaw's motor-vehicle collision. (See id. 1140: :13.) Counsel stated: (Id. 1145: :10.) [Pellegrini]'s coming off... during his testimony[] that he [was involved in] only isolated instances of misconduct and... criminal activity. And we have been attempting to show that [that's] not correct, that there were other instances.... [H]is life[:]... lies, deceit, and fraud have been part of it The jury has a right to make a complete evaluation and determination. The Court permitted the inquiry, observing, "[T]his is an absolutely pivotal witness. His credibility is a major factor that the jury must consider in determining how much weight to attach to his testimony." (Id. 1146: :2.) Later during the Pellegrini cross-examination, Sofia's attorney asked whether Pellegrini had participated in other fraudulent short sales with Zarate: Q. [B]etween 2008 and 2012, do you recall providing between 15 and 17 files or transactions for short 6

9 Case 2:14-cr DRH-SIL Document 256 Filed 07/12/17 Page 9 of 26 PageID #: 6214 A. No. sales to Mr. Zarate that were fraudulent flips or fraudulent transactions? Q. Do you recall... engaging in an agreement with Mr. Zarate to pay him a portion of the proceeds from any kind of flip... as a result of work on short sales that you referred to him? A. No.... (Id. 1164:5 1165:2.).... Q.... Were you involved in a short sale of a property on Meacham Avenue in Franklin Square...? A. You know, like I said yesterday [on direct examination], I closed thousands of transactions. That one doesn't ring a bell at all. The next attempted bell-ringing occurred when Sofia's attorney showed Pellegrini a document and asked, "[D]oes that refresh your recollection that you and Mr. Zarate [had]... discussed doing short sales in the name[s] of dead people?" No bell was rung. Pellegrini answered, "I definitely did not discuss doing short sales in the name[s] of dead people." (Id. 1165:5-24.) Counsel turned to Pellegrini's suspension from the practice of law, which, according to the Government's direct examination, involved filing a single false document seven years earlier. (See supra p. 5.) Pellegrini danced and denied: Q. Would you agree with me that your suspension 7

10 Case 2:14-cr DRH-SIL Document 256 Filed 07/12/17 Page 10 of 26 PageID #: 6215 resulted from your... deceit, lack of remorse, and dual representation of the buyer and lender in a single transaction, and your prior disciplinary history...? A. The main reason Q. Yes or no. A. No. (Trial Tr. 1193:14-22.) Counsel confronted Pellegrini with "a copy of the opinion and order regarding [the] disciplinary sanction," which stated that Pellegrini's suspension did, in fact, result from his "deceit, lack of remorse[ and] the dual representation of the buyer and lender in a single transaction, and [his] prior disciplinary history." (Id. 1194:9-14.) Pellegrini still would not answer "Yes," preferring the less inculpatory, "That's what [the document] says." (Id. 1194:22.) Pellegrini. And that was all that counsel could extract from "absolutely pivotal witness" Pellegrini's One Hundred or So Other Unsavory Acts... and Some Dead People On two occasions prior to trial, the Government "proffered" Zarate. The case agent, Russell Castrogiovanni, was present each time. (See ECF Nos and ) Zarate told the Government a lot about Pellegrini, and Zarate supported his statements with documentary evidence. That evidence, according to 8

11 Case 2:14-cr DRH-SIL Document 256 Filed 07/12/17 Page 11 of 26 PageID #: 6216 a Castrogiovanni report, included the following: (ECF No , at 1. 1 ) Zarate stated in approximately 2008 or 2009 Pellegrini sent him roughly files involving fraudulent short sale transactions.... According to Zarate, Pellegrini's office couldn't handle the volume and sent the files to [Zarate]. Zarate informed Pellegrini [that Zarate] would charge one... point on each transaction[,] but Pellegrini refused... the amount[,] so Zarate returned the files. However, Zarate stated he kept a copy of the... files... and will bring [the copy] to the next meeting [with the Government]. Zarate also told the Government, "Pellegrini opened a corporation named Jack Jackson[,] where Pellegrini was involved in home purchases and fake short sales." (Id.) At the same proffer session, "Zarate recalled [that] Pellegrini once referred someone... who wanted to do short sales using the names of dead people, [but] Zarate refused." (Id. at 4.) At the second proffer session, "Zarate provided [the Government with] a list of [the] approximately 80 files involving fraudulent short sale transactions" that Zarate and the Government "discussed [at the] previous proffer." Zarate reiterated that "Pellegrini's office couldn't handle the volume and sent the files to [Zarate]" and that, because "Zarate and Pellegrini couldn't come to an agreement on Zarate's fee[,]... Zarate sent them back." (ECF No , at 1.) 1 Page numbers are to the agent's report, not to those created on ECF. 9

12 Case 2:14-cr DRH-SIL Document 256 Filed 07/12/17 Page 12 of 26 PageID #: 6217 Although Zarate and Pellegrini never came to an understanding on the above "approximately 80 files involving fraudulent short sale transactions," they did, according to Zarate, reach an agreement in an "estimated [other]... fraudulent short sales or fraudulent flips," of which the short sale that was the subject of the trial was but one. (Id.) The next section demonstrates that the Government believed Zarate. Zarate's Cooperation Agreement The Government contends that it gave Zarate not a cooperation agreement, but "a non-prosecution agreement for the charged bank fraud [that lacked]... coverage... for other matters." (Trial Tr. 1370:16-18.) The Government is being misleading. Paragraph 2(b) of Zarate's agreement provides, "No statements made by the Witness during the course of his cooperation will be used against him[,] except as provided in paragraphs 5 and 6." (ECF No , 2(b)) (emphasis added). Thus, paragraph 2(b) requires Zarate's "cooperation." Paragraph 2(b) also precludes the Government from using against Zarate any statements that Zarate had made, or in the future would make, during the course of his cooperation, whether in the U.S. Attorney's Office or testifying at trial. The "testimony" obligations that the agreement imposes on Zarate are identical to the testimony obligations that every cooperation agreement imposes on every cooperating defendant: "to testify at any proceeding... as requested by the 10

13 Case 2:14-cr DRH-SIL Document 256 Filed 07/12/17 Page 13 of 26 PageID #: 6218 [U.S. Attorney's] Office [for the Eastern District of New York]." (Id. 1(d).) Indeed, paragraph 5 provides, "The Witness must... give complete, truthful, and accurate information and testimony." Paragraph 5 also warns Zarate that "[s]hould... [he]... fail[] to cooperate fully" there's that word again, "cooperate" "the Office will be released from its obligations under the Agreement," and "[Zarate] will be subject to prosecution." (Id. 5.). And paragraph 6 cautions, "If the defendant" the Government and Zarate's counsel failed to change defendant to witness "violates any provision of th[e] agreement, prosecutions for crimes currently known and unknown... may be commenced against the defendant," with the understanding that "the defendant waives all claims... that statements made by the defendant on or after [the date of the first proffer], or any leads therefrom[,] should be suppressed." (Id. 6) (emphases added). The point of stressing the "defendant-witness" error is not to be accusatory. The Government's and Zarate's counsel's failure was an oversight. But the reason for the oversight is that Zarate's agreement reads like every other cooperation agreement. And that is what it was a cooperation agreement, albeit one that bestows a nonprosecution commitment instead of requiring a guilty plea. And as in all cooperation agreements, Zarate's agreement requires Zarate to testify, as Pellegrini's cooperation agreement requires him to testify, without limitation as to 11

14 Case 2:14-cr DRH-SIL Document 256 Filed 07/12/17 Page 14 of 26 PageID #: 6219 subject matter, at any proceeding. 2 Notwithstanding the unrestricted obligations that Zarate's agreement imposed on him, the Government now asserts that "Zarate... received a nonprosecution agreement for the charged bank fraud but had no coverage from prosecution for other matters." The Government contends that had it called Zarate as a witness, Zarate's testimony would have been limited "to the bank fraud conspiracy matter relating to 83 Cathedral Avenue,... for which he had coverage." (ECF No. 241, at 9.) The Government took the same view at trial that it could have called Zarate, elicited what it wanted, and then erected a Fifth Amendment shield to protect Zarate on cross-examination. (See Trial Tr. 1506:14-22.) Indeed, the Government went even further: that "everyone, whether they have non pros agreements or cooperation agreements[,] have the right to invoke the Fifth Amendment... whenever they wish." (Id. at 1508:20-23.) If the Government were correct, every Government cooperating witness could conceal from the jury any prior crime not specifically mentioned in the witness's agreement and, in so doing, conceal from the jury the witness's history, no matter how wretched. The Court's Ruling The Court agreed with the Government: "[The defendants] can call [Zarate] 2 Zarate also entered into a cooperation agreement with State prosecutors. (See Trial Tr. 1790:3-9.) 12

15 Case 2:14-cr DRH-SIL Document 256 Filed 07/12/17 Page 15 of 26 PageID #: 6220 and [ask] him concerning 83 Cathedral Avenue[,] but they can't go into other areas that [his] attorney is prepared to underscore for the Court a Fifth Amendment violation." (Id. 1506: :2.) Evidence of Pellegrini's Eighty Fraudulent Short-Sales' Offer Would Have Affected His Credibility and Would Not Have Implicated Zarate's Fifth Amendment Right Pellegrini offered Zarate the opportunity to help Pellegrini with some 80 fraudulent short-sale transactions. The offer, had the jury heard it, would have put Pellegrini in a much darker light than the one he was under during his testimony. But no crime occurred: Because "Zarate and Pellegrini couldn't come to an agreement on Zarate's fee" (ECF No , at 1), there was no meeting of the minds and no conspiracy. Thus, Zarate may have lacked a Fifth Amendment right even if he had not entered into a cooperation agreement. But even if Zarate had the right, it did not encompass Pellegrini's offer. Defense counsel should have been permitted to elicit that Pellegrini made the offer; Zarate's response was unimportant. Because of Its Fifth Amendment Ruling, the Court Should Have Directed the Government to Immunize Zarate "[O]n rare occasions judges have been asked to use their coercive powers to force the government to grant immunity." United States v. Bahadar, 954 F.2d 821, 825 (2d Cir. 1992). There is "a three-part test for requiring the government to grant defense witness immunity." Id. at 826. These are the three parts: 13

16 Case 2:14-cr DRH-SIL Document 256 Filed 07/12/17 Page 16 of 26 PageID #: 6221 Id. First, the district court must find that the government has engaged in discriminatory use of immunity to gain a tactical advantage or, through its own overreaching, has forced the witness to invoke the fifth amendment. Second, the witness's testimony must be material, exculpatory, and not cumulative. Third, the testimony must be unobtainable from any other source. Although the Court concluded otherwise (see Trial Tr. 1791:3-7), the Government engaged in discriminatory use of its immunity power. It immunized Pellegrini, but declined or at least implies that it declined to immunize Zarate. There was no valid reason for the Government to immunize one but not the other. There was, however, an invalid reason. And that was to preclude the defense from extracting what the Government should have elicited in its direct examination of Pellegrini his lengthy history of fraud and other unethical conduct. But the Court's biggest error was concluding that "there [was] a cumulative aspect to [Zarate's testimony.]" (Id. 1791:19.) According to the Court: Pellegrini was subject to a lengthy period of crossexamination. He was asked about many of these other instances, the short sales [t]he line of inquiry which the defense would seek to elicit should [Zarate] take the stand [has been] set forth.... But... [Pellegrini] was on the stand, much of that was explored. So to the extent that it was explored and there was a negative answer or an answer that didn't sit well with the defense[,]... and to the extent this information is offered to address his credibility or, more appropriately, lack thereof, Rule 608(b) comes into play. 14

17 Case 2:14-cr DRH-SIL Document 256 Filed 07/12/17 Page 17 of 26 PageID #: 6222 (Id. 1791: :11.) Moreover, again, it's possibly cumulative. The Government and the district court engaged in a similar cumulative, Rule 608(b) analysis that led the Second Circuit to overturn the convictions in United States v. Wallach, 935 F.2d 445 (2d Cir. 1991). In Wallach: The government's primary witnesses against the defendants were Moreno and Guariglia. Both men testified pursuant to cooperation agreements with the government. Because Moreno had perjured himself in a prior proceeding, the jury was instructed to evaluate his testimony carefully. No such instruction was given relative to Guariglia's testimony. These two witnesses provided the foundation upon which the prosecution built its entire case. They offered the only testimony that directly linked the defendants with the admittedly illegal conduct of Wedtech. Indeed, their testimony was, to say the least, critical to the government. The defendants argue that their convictions must be reversed because Guariglia perjured himself during the course of his testimony at trial. The government concedes that Guariglia committed perjury.... Guariglia's perjury related to his testimony on direct examination that he had stopped his compulsive gambling in the summer of Specifically, Guariglia testified that he had not gambled from the summer of 1988 to the time of the trial in June In response to Guariglia's testimony..., the defendants proffered the testimony of John Copriviza, the assistant cage manager at the Tropicana Casino in Atlantic City. Defense counsel also disclosed to the government certain Tropicana records known as "player 15

18 Case 2:14-cr DRH-SIL Document 256 Filed 07/12/17 Page 18 of 26 PageID #: 6223 Id. at rating slips" which identified Guariglia as having placed bets on October 26, The government objected to the testimony of Copriviza and the introduction of the records under [Rule] 608(b), arguing that the records and testimony were extrinsic evidence offered to impeach Guariglia's credibility and therefore subject to exclusion. The district court sustained the government's objection. The Circuit began its explanation with underscoring the significance of the taint of a conviction obtained through the use of perjured testimony: Whether the introduction of perjured testimony requires a new trial depends on the materiality of the perjury to the jury's verdict and the extent to which the prosecution was aware of the perjury. With respect to this latter inquiry, there are two discrete standards of review that are utilized. Where the prosecution knew or should have known of the perjury, the conviction must be set aside if there is any reasonable likelihood that the false testimony could have affected the judgment of the jury.... Indeed, if it is established that the government knowingly permitted the introduction of false testimony reversal is virtually automatic.... Where the government was unaware of a witness' perjury, however, a new trial is warranted only if the testimony was material and the court [is left] with a firm belief that but for the perjured testimony, the defendant would most likely not have been convicted. Id. at 456 (alteration in original) (internal quotation marks and citations omitted). According to the Wallach panel, "In light of Guariglia's acknowledged history of compulsive gambling,... given the inconsistencies in his statements[,] the government should have been on notice that Guariglia was perjuring himself." 16

19 Case 2:14-cr DRH-SIL Document 256 Filed 07/12/17 Page 19 of 26 PageID #: 6224 Id. at 457. Underwhelmed by the Government's conduct, the court stated: Id. [I]nstead of proceeding with great caution, the government set out on its redirect examination to rehabilitate Guariglia and elicited his rather dubious explanation of what had happened. Defendants placed before the government and the court powerful evidence that Guariglia was lying. Although this information was not formally admitted into evidence, it nonetheless cast a dark shadow on the veracity of Guariglia's statements. We fear that given the importance of Guariglia's testimony to the case, the prosecutors may have consciously avoided recognizing the obvious that is, that Guariglia was not telling the truth. As in Wallach, the Government here should have been on notice that Pellegrini was perjuring himself. The Government entered into a cooperation agreement with Zarate, and implicit in the execution of that agreement was the Government's belief that Zarate was telling the truth about Pellegrini's bad acts. And Zarate wasn't just reciting from memory: He gave the Government documentary proof to support his allegations. And although Pellegrini's cooperation agreement implies that, on the date of that agreement's execution, the Government also believed that Pellegrini was telling the truth, the Government entered into its agreement with Zarate on June 8, 2016 (ECF No , at 4), long after the Government entered into its agreement with Pellegrini. (See ECF No. 86.) Zarate's version of Pellegrini's past cannot be reconciled with Pellegrini's 17

20 Case 2:14-cr DRH-SIL Document 256 Filed 07/12/17 Page 20 of 26 PageID #: 6225 version of that past. And just as "Guariglia was the centerpiece of the government's case" in Wallach, 935 F.2d at 457, here Pellegrini "[wa]s an absolutely pivotal witness. His credibility [wa]s a major factor that the jury [had to] consider in determining how much weight to attach to his testimony." (Trial Tr. 1146: :2.) In Wallach, "Had it been brought to the attention of the jury that Guariglia was lying after he had purportedly undergone a moral transformation and decided to change his ways, his entire testimony may have been rejected by the jury." 935 F.2d at 457. After all, "It was one thing for the jury to learn that Guariglia had a history of improprieties; it would have been an entirely different matter for them to learn that after having taken an oath to speak the truth he made a conscious decision to lie." Id. Similarly here, it was one thing for the jury to hear that Pellegrini had engaged in a handful of illegal or unethical acts, many of which he minimized; "it would have been an entirely different matter for them to learn that having taken an oath to speak the truth he made a conscious decision to lie" about his involvement in some 100 fraudulent short-sale transactions. It does not matter here, any more than it mattered in Wallach, whether the Government was aware that a critical witness was perjuring himself. See id. at 458. Referring to its earlier decision in United States v. Seijo, which involved prosecutorial "neglect," the Circuit recounted: In Seijo, a cooperating witness, when asked on crossexamination whether he had ever been convicted of a 18

21 Case 2:14-cr DRH-SIL Document 256 Filed 07/12/17 Page 21 of 26 PageID #: 6226 drug offense, answered untruthfully that he had never been convicted of such an offense. Although the prosecution had no reason to know that the response was untruthful at the time it was given, we, nevertheless, reversed the defendant's conviction. In so doing, we emphasized that despite the presence of other impeaching material during the trial the disclosure of the witness' false statement would have had a tremendous impact on the jury's credibility assessment of the witness. Id. (citing Seijo, 514 F.2d 1357, 1364 (2d Cir. 1975)). In Wallach, the Circuit also rejected the district court's finding that "evidence of Guariglia's perjury [was] inconsequential because it was merely cumulative, providing one more basis for challenging Guariglia's credibility." Id. Indeed, in Seijo, "[T]he witness... admitted cooperating with the government, using opium, and being addicted to and selling heroin. Despite these admissions, [the Seijo court] concluded that [the witness's] denial of a prior marijuana conviction had 'a different and more serious bearing" and was not "merely cumulative impeaching material.'" Id. (quoting Seijo, 514 F.2d at 1363). "[The Wallach court] emphasized: The taint of [the] false testimony is not erased because [the witness's] untruthfulness affects only his credibility as a witness. The jury's estimate of the truthfulness and reliability of a given witness may well be determinative of guilt or innocence." Id. (first alteration in original) (internal quotation marks omitted). 19

22 Case 2:14-cr DRH-SIL Document 256 Filed 07/12/17 Page 22 of 26 PageID #: 6227 The Wallach court "conclude[d] as a matter of law that had the jury been aware of Guariglia's perjury it probably would have acquitted the defendants." Id. "Guariglia's false testimony regarding his gambling," the court found, "directly call[ed] into question the veracity of the rest of his statements. Guariglia's testimony was essential to the government's case; indeed, he tied all the pieces together." Id. Similarly, here it was Pellegrini whose testimony was essential to the Government's case, the witness who "tied all the pieces together." Had the jury heard from Zarate, the Government's case would have unraveled. Compounding the taint in Wallach was the Government's closing argument, which "made much of Guariglia's motive for telling the truth." Id. at Noting that "vouching for a witness' credibility alone is not ordinarily a basis for reversal," the court found that the Government's "comments provide[d] one more reason to set aside the jury's verdict." Id. at 459. Here, the Government asked rhetorically in its summation, "Why would Nicholas Pellegrini lie? He has already admitted being part of the fraud and committing a felony." (Trial Tr. 3276:2-4.) He lied because he believes that it is better to admit to the few frauds that the Government knows about than to volunteer evidence of an additional hundred or so frauds that the Government may never discover. 20

23 Case 2:14-cr DRH-SIL Document 256 Filed 07/12/17 Page 23 of 26 PageID #: 6228 Defense Counsel Should Have Adjusted to the Court's Incorrect Ruling By Eliciting Zarate's Statement's Through the Government's Case Agent All of the impeachment material that Zarate had on Pellegrini could have been elicited from Special Agent Castrogiovanni. Evidence that Pellegrini's incourt denials were inconsistent with his prior statements to Zarate were nonhearsay under Rule 801(d)(1)(A). Zarate's other statements would have been admissible as a hearsay exception under Rule 804. The Court's Fifth Amendment ruling made Zarate unavailable under Rule 804(a)(1). Under Rule 804(b)(3), Pellegrini's statements to Zarate were against Pellegrini's interest, and Zarate's acknowledgment of the joint-wrongdoing was against Zarate's interest. Finally, Zarate's statements were supported by corroborating circumstances Zarate's cooperation agreement and his retention of a copy of the 80 fraudulent short sales that Pellegrini offered him. And even if no rule of evidence specifically permitted this inquiry, the Government, in refusing to officially immunize Zarate, waived its hearsay objection. Additional Perjury Government Witness Charles Strain In his Rule 33 reply submission, Sofia Atias's counsel provides examples of the perjured testimony of Charles Strain. (See ECF No. 253, at ) True, it was the defense, not the Government, that called Strain to the witness stand. (See Trial Tr. 1322:12-15.) But in its cross-examination of Strain, the Government 21

24 Case 2:14-cr DRH-SIL Document 256 Filed 07/12/17 Page 24 of 26 PageID #: 6229 converted Strain into its own witness and brought forth what the Government knew to be untrue. For instance, the Government asked Strain, a prominent attorney closely affiliated with the ultimate buyer in the short sale (see id. 1323:5 1324:24), if he knew that the Atiases were "related" to the intermediate buyer, the corporation. Strain answered that he was unaware of any relation (see id. 1447:1-24), but the Government knew from recorded conversations between Strain and Joseph Atias that Strain did know of the relation. Indeed, in a recorded conversation Strain went so far as to ask Joseph Atias whether the bank knew of the relation. Strain's query did more than cement his knowledge of the relation it suggested that he knew that the relation was improper. (See ECF No , at 3.) It is one thing for the Government to expose a witness's perjury. It is another thing to solicit it. And even worse is to use that perjury to bolster a summation, which the Government did with this: "[Joseph Atias] never told Charlie Strain that the sale approved by Bank of America was a sale from [Joseph's] wife to a corporation in which [Joseph's] stepdaughter was the signator or his mother-in-law was funding the purchase." (Trial Tr. 3269:15-22.) One more matter must be raised. When Strain became a Government witness, along with the conversion came the Government's obligation to disclose to the defense any 3500 material and any Giglio material in the Government's 22

25 Case 2:14-cr DRH-SIL Document 256 Filed 07/12/17 Page 25 of 26 PageID #: 6230 possession. Based on the Government's questions and Strain's answers to those questions, it is likely that, prior to taking the witness stand, Strain or at least Strain's attorney spoke with the Government about Strain's upcoming testimony. It is also likely that Strain's attorney was aware that the recorded conversations were potentially damaging to Strain. If Strain were to testify consistently with what he said in the recordings, he faced the prospect of disciplinary action. If he testified inconsistently, he could be faced with a worse prospect: prosecution for perjury. But if Strain were to seek shelter from the Fifth Amendment, it could damage his reputation. A formal proffer agreement could also tarnish that reputation. But an informal, unrevealed assurance from the Government that he would not be prosecuted would resolve the dilemma. Only Strain, Strain's counsel and the Government know if the Government made such an assurance. If the Government did, it had an obligation to disclose it to the defense. Prejudicial Impact on the Medicaid-Theft Count The perjured testimony and other improprieties involving the bank-fraud counts infected every aspect of the trial. Thus, even the Medicaid conviction cannot stand. CONCLUSION The Medicaid count should be dismissed. As for the bank fraud and bankfraud conspiracy counts, the Atiases are entitled to a new trial. And better now 23

26 Case 2:14-cr DRH-SIL Document 256 Filed 07/12/17 Page 26 of 26 PageID #: 6231 than after a reversal and remand from the Second Circuit. Dated: Hauppauge, New York July 12, 2017 Respectfully, Leonard Lato Leonard Lato ec: AUSAs Charles P. Kelly & Burton T. Ryan Jr. Robert P. LaRusso, Esq. 24