UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

Transcription

1 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ) ) THOMAS T. PROUSALIS, JR., ) ) Petitioner, ) ) v. ) 1:17-cv UA ) UNITED STATES, ) ) Respondent. ) ) ) VERIFIED PETITION FOR A WRIT OF ERROR CORAM NOBIS The petitioner, Thomas T. Prousalis, Jr., appearing pro se, hereby files this verified petition for a writ of error coram nobis, pursuant to the All Writs Act, 28 U.S.C. 1651(a). Respectfully submitted, October 21, 2017 Thomas T. Prousalis, Jr. Pro Se S. Falconbridge Court Richmond, Virginia (202) N1TP@msn.com

2 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ) ) THOMAS T. PROUSALIS, JR., ) ) Petitioner, ) ) v. ) 1:17-cv UA ) UNITED STATES, ) ) Respondent. ) ) ) PETITIONER S MEMORANDUM OF LAW IN SUPPORT OF VERIFIED PETITION FOR A WRIT OF ERROR CORAM NOBIS The petitioner, Thomas T. Prousalis, Jr., appearing pro se, hereby files this memorandum of law in support of his verified petition for a writ of error coram nobis, pursuant to the All Writs Act, 28 U.S.C. 1651(a). 2

3 TABLE OF CONTENTS TABLE OF AUTHORITIES INTRODUCTION JURISDICTION AND VENUE PROCEDURAL HISTORY STATEMENT OF FACTS ARGUMENT MR. PROUSALIS S JUDGMENT MUST BE VACATED IN VIEW OF ACTUAL INNOCENCE, PROSECUTORIAL MISCONDUCT, AND INEFFECTIVE ASSISTANCE OF COUNSEL Applicable Law Standards of Review Mr. Prousalis s Judgment Must Be Vacated In View Of Actual Innocence, Inasmuch As He Did Not Willfully And Knowingly Fail To File His Schedule 13D With The SEC, In Violation Of 17 C.F.R b-5, Which Was Concealed By Prosecutorial Misconduct And Ineffective Assistance Of Counsel Mr. Prousalis s Judgment Must Be Vacated In View Of Actual Innocence, Inasmuch As He Did Not Willfully And Knowingly Fail To Disclose Interest Of Counsel, In Violation Of 17 C.F.R , Which Was Concealed By Prosecutorial Misconduct And Ineffective Assistance Of Counsel Mr. Prousalis s Judgment Must Be Vacated In View Of Ineffective Assistance Of Counsel, Inasmuch As Counsel Failed To Advise Mr. Prousalis That If He Entered Into The Plea Agreement With The Government And Pleaded Guilty, He Could Be Liable For Substantial, Nondischargeable Restitution CONCLUSION HEARING REQUESTED VERIFICATION CERTIFICATE OF SERVICE INDEX TO EXHIBITS

4 TABLE OF AUTHORITIES Federal Cases Berger v. United States, 295 U.S. 78 (1935) Bousley v. United States, 523 U.S. 614, 618 (1998) , 64, 70 Brady v. Maryland, 373 U.S. 83 (1963) , 45, 51, 54, 61, 70 Caldwell v. Mississippi, 472 U.S. 320 (1985) Cheek v. United States, 498 U.S. 192 (1991) Chessman v. Teets, 354 U.S. 156 (1957) Coleman v. Thompson, 501 U.S. 722 (1991) Elonis v. United States, 575 U.S. (2015) Elrod v. Burns, 427 U.S. 347 (1976) , 61, 70 Fleming v. United States, 146 F.3d 88 (2d Cir. 1988) , 32, 33 Foont v. United States, 93 F.3d 76 (2d Cir. 1996) , 32, 33 Garnett v. Undercover Officer C0039, et al., No (2d Cir. Sept. 30, 2016) , 58 In re Pfizer Inc. Sec. Litig., No (2d Cir. Apr. 12, 2016) In the Matter of Thomas T. Prousalis, Jr., No. 04-BG-994 (D.C. Ct. App. 2004) , 65 4

5 Janus Capital Group, Inc. v. First Derivative Traders, 131 S. Ct (2011) , 63, 65 Keeney v. Tamayo-Reyes, 504 U.S. 1 (1992) Kevin O Connor, et al. v. Oakhurst Dairy, et al., No (1st Cir., Mar. 13, 2017) Kuhlmann v. Wilson, 477 U.S. 722 (1991) Leocal v. Ashcroft, 543 U.S. 1 (2004) McCleskey v. Zant, 499 U.S. 467 (1991) McQuiggen v. Perkins, 133 S. Ct (2013) , 33 Morse v. Fusto, No , 2015 U.S. App. LEXIS (2d Cir. Sept. 11, 2015) , 44, 47 Nicks v. United States, 955 F.2d 161(2d Cir. 1992) Padilla v. Kentucky, 559 U.S. 356 (2010) , 53, 60, 69 Ratzlaf v. United States, 510 U.S. 135 (1994) Schlup v. Delo, 513 U.S. 298 (1985) Sec. Inv. Protection Corp. v. Barbour, 421 U.S. 412 (1975) SEC v. C.M. Joiner Leasing Corp., 320 U.S. 344 (1943) SEC v. Kelly, et al. (08 Civ. 4612) (CM) (S.D.N.Y. September 22, 2011)

6 Staples v. United States, 511 U.S. 600 (1994) Strickland v. Washington, 466 U.S. 668 (1984) United States v. Arteca, 411 F.3d 315 (2d Cir. 2005) United States v. Balint, 258 U.S. 250 (1922) , 42 United States v. Chiarella, 588 F.2d 1358 (2d Cir. 1978) United States v. Denedo, 556 U.S. 904 (2009) United States v. Mandanici, 205 F.3d 519 (2d Cir. 2000) United States v. Morgan, 346 U.S. 502 (1954) United States v. Santos, 553 U.S. 507 (2008) United States v. Travers, 514 F.2d 1171 (2d Cir. 1974) United States v. United States Currency in the Amount of $228,536, 895 F.2d 908, (2d Cir. 1990) United States v. X-Citement Video, Inc., 513 U.S. 64 (1994) United States Constitution U.S. Const. amend. V , 59, 66 U.S. Const. amend. VI , 59, 66 Federal Securities Acts Securities Act of passim 6

7 Securities Exchange Act of passim Federal Statutes 11 U.S.C. 523(a)(13) , 61, U.S.C passim 18 U.S.C , 47, U.S.C. 3664(f)(2) , 65, U.S.C , 65, U.S.C U.S.C. 1651(a) , 31, 46, U.S.C , U.S.C Federal Securities Regulations 17 C.F.R passim 17 C.F.R b passim 17 C.F.R d , 37, 38 Item 10(a)(1), Registration S-B Item 509, Registration S-B, Part , 55 Federal Securities Rules Rule 10b-5, Securities Exchange Act of passim Rule 12b-2, Securities Exchange Act of , 54, 56 Rule 405, Securities Act of , 54, 55 Federal Regulation Federal Aviation Regulations, Sec

8 New York Statute N.Y. Jud. Law Section 487: N.Y. Code Section , 47, 51 Other Authorities A.A. Sommer, Jr., Former SEC Comm r, Address on the Emerging Responsibilities of the Securities Lawyer (Jan. 24, 1974) Barry Scheck, et al., Actual Innocence (2000) Bennett L. Gershman, Prosecutorial Misconduct (2 nd ed. 2005) Black s Law Dictionary (10 th ed. 2014) Gabriel J. Chin, The New Civil Death: Rethinking Punishment in the Era of Mass Conviction, 160 U. Penn. L. Rev (2012) , 61, 62, 65, 70 Harry David Saunders, Civil Death A New Look at an Ancient Doctrine, 11 Wm. & Mary L. Rev. 988 (1970) , 61, 62, 65, 70 Leading Cases, McQuiggen v. Perkins, 127 Harv. L. Rev. 318 (2013) , 33 Limin Zheng, Actual Innocence as a Gateway through the Statute of Limitations Bar on the Filing of Federal Habeas Corpus Petitions, 90 Cal. L. Rev (2002).. 31 Louis Loss, et al., Fundamentals of Securities Registration (6 th ed. 2016) , 38, 55 Matt Richtel, Friends and Families Invited When Companies Go Public, The New York Times, Sept. 19, New York Rules of Professional Conduct passim Oxford English Dictionary (Oxford University Press 2017) , 40 Perkins Coie LLP, The Initial Public Offering Handbook, Merrill Corporation (2000)

9 Rules of Professional Conduct, The District of Columbia Bar Steven S. Thel, Affidavit (March 31, 2004) , 29, 63, 64, 73 Steven S. Thel, Taking Section 10b Seriously: Criminal Enforcement of SEC Rules, 2014 Colum. Bus. L. Rev. 1 (2014) Steven S. Thel, The Original Conception of Section 10(b) of the Securities Exchange Act, 42 Stan. L. Rev. 385 (1990), reprinted in 23 Sec. L. Rev. 85 (1991) U.S. Attorneys Manual , 44, 47 Wayne R. LaFave, et al., Criminal Procedure (2d ed. 1999) , 70 Wayne R. LaFave, Substantive Criminal Law (2d ed. 2003)

10 INTRODUCTION The petitioner, Thomas T. Prousalis, Jr., a former Washington lawyer and Air Force pilot, agreed to plead guilty to three charges in a superseding indictment: conspiracy to commit securities fraud, wire fraud, and mail fraud, in violation of 18 U.S.C 371; securities fraud, in violation of 17 C.F.R b-5; and failure to disclose interest of counsel, in violation of 17 C.F.R , in connection with making false statements and omissions in his corporate client s registration materials. The registration materials were statutorily filed by his corporate client, busybox.com, inc. (sic), a Delaware corporation, with the SEC in connection with its IPO. Mr. Prousalis, among other outside 1 legal, accounting, and financial advisers, participated in drafting the registration materials with Busybox s officers and directors. More than a year later, Busybox declared bankruptcy and, ultimately, failed. Thereafter, Mr. Prousalis was indicted 2 in the Southern District of New York. In the arraignment hearing on the indictment, the government conceded that all of the charges were related to Mr. Prousalis making false statements and omissions in the registration materials, in violation of Rule 10b-5 (codified at 17 C.F.R b-5). 1 In the indictment, Mr. Prousalis was described by the government as outside counsel to his corporate client, Busybox. Ex. 8 at 2. 2 Neither Busybox, nor any of its officers and directors, was charged by the government, despite plundering $12,812,500 in IPO proceeds, resulting in a petition for bankruptcy, failure of the company, and two securities fraud lawsuits. See Jean Pierre Fouladian v. Patrick A. Grotto, et al., No. BC (Cal. Super. Ct., September 17, 2001) (where in a securities fraud class action the officers and directors of Busybox settled the case for more than $1 million in damages); Bernard J. Carl v. Patrick A. Grotto, et al., No. BC (Cal. Super. Ct., October 24, 2005) (where in a securities fraud action the officers and directors of Busybox were held jointly and severally liable for $2,486,809 in damages). Mr. Prousalis was not named as a defendant in either lawsuit. 10

11 Upon the advice, consent, and approval of counsel, and the consent and approval of the government, Mr. Prousalis entered into a plea agreement with the government and pleaded guilty. Mr. Prousalis was sentenced to 57 months imprisonment, three years of supervised release, and ordered to pay $12,800,000 in restitution, representing the proceeds of the IPO. Mr. Prousalis completed his sentence and supervised release, and currently makes monthly restitution payments. * * * The government alleged, inter alia, in the grand jury proceedings, in the indictment, and at trial, that Mr. Prousalis willfully and knowingly failed to file an important, required financial disclosure document, known as a Schedule 13D, with the SEC, and, thereby, committed securities fraud, in violation of Rule 10b-5. And the centerpiece of the government s demonstrative evidence against Mr. Prousalis for the alleged crime was an official, engraved SEC certification, signed by an analyst and the Secretary of the SEC, complete with an embossed gold seal and a royal blue ribbon, which purportedly showed that he willfully and knowingly failed to file his 13D with the SEC. However, newly discovered evidence found by an official in the clerk s office of the Court shows that the SEC certification was false and misleading. And, the purported legal basis of the SEC certification the Securities Act of 1934 as prominently engraved on the certificate, does not exist in our jurisprudence. Moreover, the newly discovered evidence shows that Mr. Prousalis mailed his 13D to the SEC, and his 13D was received by the SEC. Nevertheless, the government alleged in the indictment, before the grand jury and at trial, that Mr. Prousalis willfully and knowingly failed to 11

12 file this important, required financial disclosure document with the SEC, and, thereby, committed securities fraud. Nothing could be further from the truth and the government knew it all along. The government not only alleged in the indictment that Mr. Prousalis intentionally failed to file his 13D with the SEC, but, as demonstrative proof thereof, introduced the SEC certification before the grand jury and at trial, to demonstrably show his intent to defraud. Yet, despite the false and misleading representations in the SEC certification, the newly discovered evidence shows, in fact, that Mr. Prousalis mailed his 13D to the SEC, and his 13D was received by the SEC. Thus, the government intentionally introduced evidence of a material fact, based on a nonexistent federal statute, before the grand jury and at trial, with knowledge aforethought that such evidence was false and misleading. Due to the extraordinary efforts of the FBI, evidence that Mr. Prousalis mailed his 13D to the SEC, and that his 13D was received by the SEC, was originally discovered in Busybox s corporate records at its bankruptcy trustee s offices in Los Angeles, California. Importantly, the FBI s discovery occurred before the grand jury proceedings on May 10, 2004, and the commencement of trial on June 7, In early May 2004, the FBI discovered a letter from the SEC ( SEC letter ), dated August 21, 2000, on official SEC stationery and addressed to Busybox, in its corporate records, which showed that Mr. Prousalis mailed his 13D to the SEC, and that his 13D was received by the SEC. The SEC letter evidenced the mailing and receipt of Mr. Prousalis s 13D in paper form, as he had not submitted his 13D on the then new Internet-based EDGAR filing system. More importantly, the SEC letter showed that Mr. Prousalis did not harbor the requisite criminal intent mens rea in his alleged intentional failure to file his 13D with the SEC. Indeed, the SEC letter 12

13 showed Mr. Prousalis s state of mind, such that he was acting in good faith at least in an attempt to file his 13D with the SEC. Thus, Mr. Prousalis was actually innocent of the criminal charge of willfully and knowingly failing to file his 13D with the SEC. And the government knew it all along beginning with its introduction of the false and misleading SEC certification before the grand jury, in a cleverly disguised, deceptive maneuver to show probable cause. The record also shows that counsel never provided Mr. Prousalis with the SEC letter, or any other correspondence or pleadings in his case, despite repeated (and continuing) requests for the production of such material information and files in his case. Even though the SEC letter showed that Mr. Prousalis mailed his 13D to the SEC, and that his 13D was received by the SEC in contradiction to the SEC certification that falsely and misleadingly stated that the SEC had not received his 13D the government secreted the SEC letter from the grand jury and at trial, while, at the same time, intentionally deceived the grand jury and the jury with the false and misleading SEC certification, in a clever, surreptitious, and dishonest effort to introduce an official government certification under false pretenses. On June 15, 2004, midway through the government s presentation of its case, upon the advice, consent, and approval of counsel, and the consent and approval of the government, Mr. Prousalis entered into a plea agreement with the government and pleaded guilty. 3 During the plea and sentencing hearings, the government and counsel intentionally failed to disclose the false and misleading SEC certification and the exculpatory SEC letter to the Court, and they, otherwise, 3 Following contentious negotiations, Mr. Prousalis agreed to plead guilty to three charges in the indictment, which were outlined with especial particularity in the plea agreement: conspiracy to commit securities fraud, wire fraud, and mail fraud, in violation of 18 U.S.C 371; securities fraud, in violation of 17 C.F.R b-5; and failure to disclose interest of counsel, in violation of 17 C.F.R Ex. 11 at

14 intentionally failed to express any valid reasons why Mr. Prousalis should not be permitted to plead guilty. With reckless disregard for Mr. Prousalis s constitutional due process and effective assistance of counsel rights, the government and counsel knew, or should have known, that he was actually innocent of a pivotal, material charge in the indictment, which served to underpin the securities fraud charges. But for the government s dishonesty, deceit, and intentional fraud, and counsels material errors and omissions, Mr. Prousalis would not have entered into the plea agreement with the government and pleaded guilty. * * * In the third count of the indictment, under the caption entitled Failure to Disclose Interest of Counsel, the government alleged that Mr. Prousalis willfully and knowingly failed to disclose interest of counsel in the registration materials, in violation of 17 C.F.R However, Mr. Prousalis did not willfully and knowingly violate 17 C.F.R , inasmuch as the plain text of the federal securities regulation does not even apply to him, as a matter of law. The regulation, its Instruction, and its related federal securities rules only reference and apply to a small business issuer, as that term is defined under such rules of the Securities Act of 1933 and the Securities Exchange Act of Simply put, Mr. Prousalis was actually innocent of violating 17 C.F.R In the plain text of the Instruction to 17 C.F.R , such guidance within the federal securities regulation is clearly directed to the small business issuer not to Mr. Prousalis, or any other outside adviser, whose interests may be the subject of the regulatory disclosure by such issuer. 14

15 And, in the plain texts of Rule 405, under the Securities Act of 1933, and Rule 12b-2, under the Securities Exchange Act of 1934, such applicable federal securities rules only pertain to the small business issuer not to Mr. Prousalis, or any other outside adviser, whose interests may be the subject of the regulatory disclosure by such issuer. It is inescapable that the small business issuer was Mr. Prousalis s corporate client, Busybox. Busybox was the company and entity, which met the definition of a small business issuer, as defined in the plain texts of the applicable federal securities rules. Busybox statutorily filed its registration materials with the SEC as an issuer who qualified as a small business issuer under such rules. Indeed, Busybox was disclosed on the cover page of the registration materials as a small business issuer, pursuant to the Securities Act of Mr. Prousalis, a natural person, was an outside legal adviser to Busybox. A natural person, by legal definition, is a human being, not a corporate entity acting as an issuer (or small business issuer). As an outside adviser, Mr. Prousalis clearly did not meet the legal definition of a small business issuer, as that federal securities term is defined in the plain texts of 17 C.F.R , its Instruction, and Rules 405 and 12b-2. And, although the alleged violation of the federal securities regulation was clearly a false charge and subject to dismissal, counsel failed to file a motion to dismiss the false charge, even after the Court agreed to entertain such a good faith motion, as requested by counsel during Mr. Prousalis s arraignment on the indictment. Therefore, inasmuch as 17 C.F.R , its Instruction, and the related federal securities rules are not applicable to Mr. Prousalis, as a matter of law, his actual innocence to the alleged offense is incontestable. 15

16 On June 15, 2004, midway through the government s presentation of its case at trial, upon the advice, consent, and approval of counsel, and the consent and approval of the government, Mr. Prousalis entered into the plea agreement with the government and pleaded guilty. With reckless disregard for Mr. Prousalis s constitutional due process and effective assistance of counsel rights, the government and counsel knew, or should have known, that Mr. Prousalis was actually innocent of a violation of 17 C.F.R , 4 and that it was, otherwise, a false charge. But for the government s reckless false charge, and counsels errors and omissions, Mr. Prousalis would not have entered into the plea agreement with the government and pleaded guilty. * * * On October 28, 2004, the Court held a sentencing hearing, where Mr. Prousalis was sentenced to 57 months imprisonment, three years of supervised release, and was ordered to pay $12,800,000 in restitution, representing the proceeds of the IPO. During contentious negotiations of the plea agreement, counsel failed to advise Mr. Prousalis that if he entered into the plea agreement with the government and pleaded guilty, he could be liable for substantial restitution, as much as the proceeds of the IPO. Counsel also failed to advise Mr. Prousalis that restitution was a nondischargeable debt in bankruptcy proceedings. While the plea agreement only briefly mentions that the Court must order restitution, Mr. Prousalis had no information, knowledge, or belief that such an order of restitution could be as much as the proceeds of the IPO over which Mr. Prousalis did not have ultimate authority. In 4 In fact, in the history of our jurisprudence, no natural person, other than Mr. Prousalis, has ever been charged with and found guilty of a criminal violation of 17 C.F.R And that is because the plain texts of 17 C.F.R , its Instruction, and Rules 405 and 12b-2 are not applicable to natural persons they are only applicable to small business issuers. 16

17 fact, the record shows that Mr. Prousalis did not have any degree of authority over Busybox, or its registration materials. If any restitution was to be ordered at all by the Court, Mr. Prousalis believed that his liability was limited to $1,256,193, which was the amount of compensation he received in the IPO, or, possibly, less, given his dire financial condition. At no time during the negotiations of the plea agreement, or at any other time, did counsel advise Mr. Prousalis that if he entered into the plea agreement with the government and pleaded guilty, he could be liable for substantial, nondischargeable restitution, as much as the proceeds of the IPO. Indeed, at the plea and sentencing hearings, and at all other times, counsel remained silent on this pivotal, material information. Moreover, at the plea hearing, the Court only briefly hinted that it may very well be a requirement at the time of sentencing that you pay restitution. (emphasis added) Because of counsels professional deficiencies, Mr. Prousalis was not advised of this pivotal, material information, and was, otherwise, completely blindsided when the Court ordered restitution of $12,800,000 at his sentencing hearing, representing the proceeds of the IPO. At no time during the plea negotiations, or at any other time, did counsel advise Mr. Prousalis that if he entered into the plea agreement and pleaded guilty, he could be liable for substantial, nondischargeable restitution, as much as the proceeds of the IPO. In other words, counsels silence undermined Mr. Prousalis s legal defense, such that counsel failed to disclose pivotal, material information to Mr. Prousalis, which would have directly affected his threshold decision as to whether he should have entered into the plea agreement with the government and pleaded guilty. Counsels failure to advise Mr. Prousalis that if he entered into the plea agreement with the government and pleaded guilty, he could be liable for the proceeds of the IPO; counsels failure to 17

18 disclose to Mr. Prousalis that restitution was a nondischargeable debt in bankruptcy, pursuant to 11 U.S.C. 523(a)(13); counsels failure to present mitigating evidence to the Court, pursuant to 18 U.S.C. 3664(f)(2), regarding Mr. Prousalis s dire financial condition, including his support of four dependents, for the Court to weigh and consider prior to rendering judgment and the order of restitution; counsels failure to provide Mr. Prousalis with a copy of the final PSR, which disclosed the probation office s recommendation to the Court that his sentence include full restitution of $12,800,000 ; counsels failure to provide objections to the final PSR to the Court, regarding the probation office s recommendation of substantial, nondischargeable restitution; counsels failure to provide the Court with a Sentencing Memorandum, which would have disclosed Mr. Prousalis s defenses to the Court in mitigation of his sentence; counsels failure to contest the Court s order of restitution; and counsels failure to put Mr. Prousalis s constitutional rights before their own pecuniary interests were ineffective assistance of counsel. But for counsels ineffective assistance of counsel, Mr. Prousalis would not have entered into the plea agreement with the government and pleaded guilty. JURISDICTION AND VENUE Jurisdiction is proper in this Court because Mr. Prousalis is currently subject to a judgment and an order of restitution of this Court. 28 U.S.C Venue is proper because the respondent is deemed a resident in this judicial district. 28 U.S.C. 1391(a)(b)(1). PROCEDURAL HISTORY On December 29, 2003, the government obtained a two-count indictment under seal against Mr. Prousalis for conspiracy to commit securities fraud, wire fraud, and mail fraud, in violation of 18 U.S.C 371, and securities fraud, in violation of 17 C.F.R b, in connection with making alleged false statements and omissions in the registration materials. 18

19 On January 7, 2004, Mr. Prousalis was arrested at his McLean, Virginia, home. On May 10, 2004, following Mr. Prousalis s refusal to enter into a plea agreement with the government and plead guilty, the government obtained a three-count superseding indictment under seal against Mr. Prousalis, which included the first two counts of the original indictment, and a third count for failure to disclose interest of counsel, in violation of 17 C.F.R On May 12, 2004, the Court held an arraignment hearing. On June 7, 2004, the trial commenced. On June 15, 2004, midway through the government s presentation of its case, upon the advice, consent, and approval of counsel, and the consent and approval of the government, Mr. Prousalis entered into a plea agreement with the government and pleaded guilty. On June 15, 2004, the Court held a plea hearing, and Mr. Prousalis pleaded guilty. On October 28, 2004, the Court held a sentencing hearing, and Mr. Prousalis was sentenced to 57 months imprisonment, three years of supervised release, and was ordered to pay $12,800,000 in restitution. On October 28, 2004, the Court entered judgment against Mr. Prousalis. On January 7, 2005, Mr. Prousalis self-surrendered to Nellis FPC, Las Vegas, Nevada. In January 2005, Mr. Prousalis appealed his sentence to the Second Circuit. On January 28, 2006, the Second Circuit dismissed the appeal, holding that Mr. Prousalis waived his right to appeal his sentence in his plea agreement. On November 6, 2006, Mr. Prousalis filed a habeas petition with the Court, pursuant to 28 U.S.C. 2255, challenging his sentence. On August 24, 2007, the Court denied Mr. Prousalis s habeas petition, holding that he waived a challenge to his sentence in his plea agreement. 19

20 On February 7, 2008, Mr. Prousalis completed his sentence. On July 2, 2008, the Second Circuit affirmed the Court s decision. On October 6, 2008, the Supreme Court denied Mr. Prousalis s petition for a writ of certiorari. On February 21, 2012, Mr. Prousalis filed a habeas petition with the district court (Eastern District of Virginia Richmond), pursuant to 28 U.S.C. 2241, based on an intervening substantive change in the law. On March 1, 2013, Mr. Prousalis completed his supervised release. On March 19, 2013, the district court denied Mr. Prousalis s habeas petition without a hearing. On May 7, 2014, the Fourth Circuit affirmed the district court s decision in a split-panel decision. On November 19, 2014, Mr. Prousalis filed a petition for a writ of certiorari with the Supreme Court. On January 12, 2015, the Supreme Court denied Mr. Prousalis s petition for a writ of certiorari. On March 3, 2016, Mr. Prousalis filed a habeas petition with the district court (District of Columbia), pursuant to 28 U.S.C. 2241, based on an intervening substantive change in the law, recent leading authoritative support, and recent policy changes of the SEC and the Justice Department. On May 5, 2016, the district court (District of Columbia) ordered the transfer of the habeas petition to the Court. 20

21 On June 24, 2016, the Court ordered the transfer of the habeas petition to the Second Circuit for treatment as a successive petition. On August 22, 2016, the Second Circuit ordered that the motion for leave to file the habeas petition be denied and remanded the petition for determination by the Court. On August 27, 2016, by an explanatory letter to the Court, Mr. Prousalis amended his 2241 habeas petition, such that it became a petition for a writ of error coram nobis, pursuant to the All Writs Act, 28 U.S.C. 1651(a). On September 19, 2016, the Court denied Mr. Prousalis s coram nobis petition without a hearing. On October 3, 2016, Mr. Prousalis appealed the Court s decision to the Second Circuit. On June 30, 2017, the Second Circuit affirmed the Court s decision. On July 21, 2017, Mr. Prousalis filed a petition for a rehearing / petition for a hearing en banc with the Second Circuit. On September 12, 2017, the Second Circuit denied the petition. On October 21, 2017, Mr. Prousalis filed a petition for a writ of certiorari with the Supreme Court, which remains pending. STATEMENT OF FACTS Prior to his guilty plea on June 15, 2004, Mr. Prousalis was an attorney in good standing before The District of Columbia Bar for more than 25 years. 21

22 Mr. Mr. Prousalis is a former Air Force pilot. 5 Mr. Prousalis is a former law clerk with the Presidential Clemency Board, Washington, D.C. 6 On December 9, 1998, Busybox, a Delaware corporation, retained Mr. Prousalis as an outside legal adviser, under a retainer agreement, among other outside legal, accounting, and financial advisers, to advise Busybox, and its officers and directors, in the preparation of its registration materials. 7 From December 1998 through June 2000, Mr. Prousalis, and other outside advisers, 8 were retained to advise Busybox, and its officers and directors, in the preparation of a final Busybox IPO registration statement and prospectus (collectively, [r]egistration [m]aterials ), as described by the government in the indictment. Ex. 8 at 3. 5 Mr. Prousalis is a former decorated, commissioned officer and aviator in the United States Air Force, serving tours on five continents, over more than a decade. Mr. Prousalis was honorably discharged in Mr. Prousalis remains a FAA-certified (FAA Certificate No ), multi-engine, instrument-rated pilot. Mr. Prousalis s Air Force and FAA records are meritorious. 6 Mr. Prousalis is a former law clerk with the Presidential Clemency Board, under the auspices of the Executive Office of the President, The White House, Washington, D.C., during the Ford Administration. During his two-year tenure with the Board, Mr. Prousalis represented more than 150 petitioners, all of whom were granted clemency by the president. 7 As a quintessential dot-com Internet technology company in a volatile, small-cap Nasdaq market in the late 1990s, the officers and directors of Busybox were more than eager to float an IPO. In June 1998, Busybox initially retained Covington & Burling LLP, a Washington, D.C., based law firm, as an outside legal adviser to advise Busybox, and its officers and directors, in the preparation of its registration materials, but later terminated the firm s services for its failure to perform and excessive charges. On December 9, 1998, Mr. Prousalis was retained as an outside legal adviser, under a retainer agreement, among other outside legal, accounting, and financial advisers, to advise Busybox, and its officers and directors, in the preparation of its registration materials. Ex Busybox also retained Patton Boggs LLP, a Washington, D.C., based law firm, Fenwick & West LLP, a San Francisco, California, based law firm, Grant Thornton LLP, a Washington, D.C., based audit, tax, and advisory firm, and Barron Chase Securities, Inc., a Boca Raton, Florida, based broker-dealer firm and underwriter (collectively, outside advisers ), in connection with the preparation of its registration materials. All of the foregoing outside advisers, including Mr. Prousalis, advised Busybox, and its officers and directors, in the preparation of its registration materials. Mr. Prousalis was paid $1,256,193 in compensation for his services. Ex. 3. Patton Boggs LLP was paid more than $3,000,000 in compensation for its services. 22

23 In January 1999, Busybox retained Barron Chase Securities, Inc., a Boca Raton, Florida, based broker-dealer firm, as its underwriter for a proposed firm commitment IPO, pursuant to the terms and conditions of an underwriting agreement. Barron Chase was registered with the SEC and was a member firm of the National Association of Securities Dealers, Inc. ( NASD ). In June 1999, Busybox, as a small business issuer, statutorily filed its registration materials with the SEC in connection with its IPO, under the Securities Act of Ex. 2 at 3. On April 7, 2000, Mr. Prousalis distributed copies of the Corporate Director s Guidebook to the members of the board of directors of Busybox. The Guidebook was promulgated by the American Bar Association and provided guidance under the federal securities laws, regulations, and rules for directors of a public company. On May 24, 2000, Busybox filed the seventh amendment to the registration materials with the SEC. This was the last amendment filed prior to the IPO being declared effective by the SEC on June 26, The officers and directors of Busybox signed the registration materials. Mr. Prousalis did not sign the registration materials. Robert T. Kirk, Jr., the chief executive officer of Barron Chase, the underwriter, and Mr. Prousalis s alleged co-conspirator, did not sign the registration materials. During June 2000, Patrick A. Grotto, the chief executive officer, and Mark A. Leffers, the chief financial officer, of Busybox, went on a multi-city road show together to promote the proposed IPO before numerous interested broker-dealer firms throughout the United States. Mr. Prousalis did not participate in the road show. On June 7, 2000, Mr. Grotto, on behalf of Busybox, wrote a letter to the SEC and requested that an effective date be granted as soon as practicable. In his request, Mr. Grotto stated that [t]he Company confirms that it is aware of its responsibilities under the Securities Act of 1933 and 23

24 the Securities Exchange Act of 1934 as they relate to the proposed public offering of the securities specified in the registration statement. On June 23, 2000, the SEC notified Busybox that the registration materials would be declared effective as of June 26, Busybox requested that Merrill Corporation, its financial printer, print 10,000 final prospectuses, dated June 26, On June 26, 2000, Barron Chase, on behalf of Busybox, distributed more than 10,000 final prospectuses to its clients in the United States and abroad. On June 26, 2000, the NASD cleared the registration materials in connection with Barron Chase s proposed firm commitment IPO, following its review of the underwriter s financial condition and its ability to undertake a firm commitment underwriting. On June 26, 2000, following the financial review of Barron Chase by the NASD, the Nasdaq Stock Market, Inc. cleared Busybox s securities for listing. Busybox s common stock and warrants began trading on Nasdaq the following day under the symbols BUSY and BUSYW, respectively. On June 26, 2000, the registration materials became effective with the SEC. On June 26, 2000, Mr. Prousalis distributed a federal securities memorandum, outlining certain rights and responsibilities under the federal securities laws, regulations, and rules, to the officers and directors of Busybox. On June 26, 2000, the officers and directors of Busybox signed resolutions and certificates in connection with the IPO, which represented and warranted, inter alia, that the registration materials do not contain any untrue statements of material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. Ex. 4. On June 27, 2000, Busybox s common stock and warrants began trading on Nasdaq. 24

25 On June 30, 2000, the IPO closed, which included friends and family participation that Barron Chase, the underwriter, requested. Busybox received gross proceeds of $12,812,500 from the IPO, in accordance with the registration materials, before the repayment of outstanding note obligations, and deductions for salaries, bonuses, and legal fees, costs, and expenses. Fiserv, Inc., the underwriter s clearing firm, managed the escrow and distribution of the IPO proceeds on behalf of Busybox. All of the foregoing deductions and the repayment of note obligations were approved by resolutions and certificates signed by the board of directors of Busybox. Ex. 4. Busybox disclosed the repayment of the note obligations, and the legal fees, costs, and expenses associated with the IPO, in its first quarterly report on Form 10-QSB, as filed with the SEC for the period ending June 30, On June 30, 2000, Mr. Prousalis invested $1,255,625, representing a substantial part of his compensation received at the closing of the IPO, in the securities of the IPO, in support of his corporate client, Busybox. Mr. Prousalis suffered a loss of $508,941 on his investment. On June 30, 2000, Mr. Prousalis s family invested $100,000 in the securities of the IPO, in support of Busybox. Mr. Prousalis s family suffered a total loss on its investment. 9 9 The officers and directors of an issuer (or small business issuer), its outside advisers, and friends and family may purchase securities in an IPO, provided that the purchases of the securities are made under the same terms and conditions as offered to public investors. See Perkins Coie LLP, The Initial Public Offering Handbook, Merrill Corporation (2000); Matt Richtel, Friends and Families Invited When Companies Go Public, The New York Times, Sept. 19, The securities market views such friends and family participation as a sign of confidence in the [issuer s] future and as an effective commitment by these persons associated with the [issuer], and thus a positive sign for investors. Steven S. Thel, Affidavit, Ex. 6. See also Steven S. Thel, Taking Section 10b Seriously: Criminal Enforcement of SEC Rules, 2014 Colum. Bus. L. Rev. 1 (2014); Steven S. Thel, The Original Conception of Section 10(b) of the Securities Exchange Act, 42 Stan. L. Rev. 385 (1990), reprinted in 23 Sec. L. Rev. 85 (1991). 25

26 On June 30, 2000, Mr. Prousalis mailed his 13D, dated June 26, 2000, to the SEC, which, among other things, disclosed his securities positions, legal fees, costs, and expenses in connection with the IPO. 10 On August 15, 2000, Busybox filed its Form 10-QSB, for the period ending June 30, 2000, which, inter alia, disclosed Mr. Prousalis s securities position, legal fees, costs, and expenses in connection with the IPO. In April 2001, Busybox s securities were de-listed from Nasdaq. In April 2001, investors in the IPO filed a class action lawsuit for securities fraud against the officers and directors of Busybox and Grant Thornton LLP. See Jean Pierre Fouladian v. Patrick A. Grotto, et al., No. BC (Cal. Super. Ct., Sept. 17, 2001) (where in a securities fraud class action the officers and directors of Busybox and Grant Thornton LLP settled the case for more than $1 million in damages). Mr. Prousalis was not named as a defendant in the lawsuit. In July 2001, approximately 13 months after the June 26, 2000, effective date of its IPO, Busybox filed a petition for bankruptcy. 11 In August 2001, an investor in the IPO filed a securities fraud lawsuit against the officers and directors of Busybox and Grant Thornton LLP. See Bernard J. Carl v. Patrick A. Grotto, et al., No. BC (Cal. Super. Ct., Oct. 24, 2005) (where in a securities fraud action the officers 10 Because Mr. Prousalis beneficially owned more than five percent (6.3 percent) of Busybox s securities following the IPO, Mr. Prousalis was required to file a 13D with the SEC. 17 C.F.R d-1. Accordingly, on June 30, 2000, Mr. Prousalis mailed his 13D in paper form, dated June 26, 2000, to the SEC. The SEC received Mr. Prousalis s 13D. 11 In its registration materials, Busybox disclosed that the net proceeds of the IPO would be sufficient for its operations for a period of 12 months, or from June 26, 2000, to June 26, 2001, and that it would require additional financing for its continued operations. Ex. 2 at However, Busybox was unable to obtain additional financing and, in July 2001 (13 months after its IPO) filed a petition for bankruptcy. Soon thereafter, Busybox failed. 26

27 and directors of Busybox and Grant Thornton LLP were held jointly and severally liable for $2,486,809 in damages). Mr. Prousalis was not named as a defendant in the lawsuit. In March 2003, unbeknownst to Mr. Prousalis, the U.S. Attorney s Office for the Southern District of New York commenced a criminal investigation of Busybox, and its officers and directors. Beginning in March 2003, when Patrick A. Grotto and Jon M. Bloodworth, III, Esquire, officers, directors, and principal shareholders of Busybox, were surreptitiously and selectively providing documents and information to the government during its investigation in their concerted effort to implicate Mr. Prousalis for securities fraud, they willfully and knowingly failed to disclose the SEC letter to the government. The FBI discovered the SEC letter in Busybox s corporate records in early May 2004 before the grand jury proceedings on May 10, 2004, and the commencement of trial on June 7, On April 23, 2003, Mr. Prousalis learned that he may be a target of the criminal investigation from a shareholder of Busybox. Upon learning this information, Mr. Prousalis immediately telephoned the U.S. Attorney s Office and spoke with Assistant U.S. Attorney Steven R. Glaser, then 27, who lead the investigation. Mr. Prousalis requested an open, in-person, on-the-record meeting with Mr. Glaser to discuss the IPO, but his request was denied. Mr. Glaser agreed to allow Mr. Prousalis to self-surrender in New York, in the event of an indictment. On April 24, 2003, Mr. Prousalis retained George J. Terwilliger, III, Esquire, a former acting United States Attorney General, then a partner at White & Case LLP, a New York, New York, based law firm. Mr. Prousalis was later unable to retain the law firm to represent him at trial because he was unable to afford the firm s services. 27

28 On June 30, 2003, Mr. Prousalis closed his law practice, as a result of the criminal investigation and subsequent indictment, which led to great personal and professional loss, financial ruin, and civil death. On December 29, 2003, the government obtained a two-count indictment under seal against Mr. Prousalis in the Southern District of New York, charging him with conspiracy to commit securities fraud, wire fraud, and mail fraud, in violation of 18 U.S.C. 371; and securities fraud, in violation of 17 C.F.R b-5, for alleged false statements and omissions in the registration materials. On January 7, 2004, Mr. Prousalis was arrested at his McLean, Virginia, home. 12 On January 19, 2004, Mr. Prousalis retained David E. Kenner, Esquire, Los Angeles, California, and Alvin E. Entin, Esquire, Ft. Lauderdale, Florida, to represent him as counsel. On March 31, 2004, Professor Steven S. Thel opined in an Affidavit that the disclosures in the registration materials did not violate Rule 10b-5 (referencing the operative text of the SEC rule). Professor Thel also opined that Mr. Prousalis s handling of the disclosures in the registration materials was not inappropriate. 13 (Professor Thel did not testify at Mr. Prousalis s trial, because 12 Despite an earlier agreement, on April 23, 2003, between Mr. Prousalis and Assistant U.S. Attorney Glaser to selfsurrender in New York in the event of an indictment, Mr. Glaser caused Mr. Prousalis to be arrested at his McLean, Virginia, home on the morning of January 7, 2004, in front of his wife and three daughters by seven armed FBI agents, who arrived in three unmarked black SUVs, tactically surrounded his residence, and pounded on the front door with great force to announce their presence for the arrest. During, and subsequent to, his arrest, Mr. Prousalis was not given a Miranda warning. Miranda v. Arizona, 384 U.S. 436 (1966). 13 Professor Thel stated, inter alia, in his Affidavit that: After reviewing the referenced documents, I am of the opinion that Amendment No. 7 to Form SB-2 Registration Statement of busybox.com, inc. and the Prospectus therein the Registration Statement that I understand the SEC declared effective on June 26, 2000 does not contain any false statement of material fact or omit to state any material fact necessary to make the statements made not misleading with respect to the nature of the underwriting agreement between Baron Chase and busybox.com, the use of proceeds by busybox.com, the purchase of securities by Mr. Prousalis and 28

29 Mr. Prousalis entered into the plea agreement with the government and pleaded guilty midway through the government s presentation of its case.) On April 21, 2004, Assistant U.S. Attorneys Glaser and Diane Gujarati obtained an official, engraved certification from the SEC ( SEC certification ), complete with an embossed gold seal and a royal blue ribbon, which purportedly showed that Mr. Prousalis willfully and knowingly failed to file his 13D with the SEC. Ex. 7. In early May 2004, the FBI discovered a letter, on official SEC stationery ( SEC letter ), dated August 14, 2000, addressed to Busybox, in its corporate records at Busybox s bankruptcy trustee s offices in Los Angeles, California. Ex. 5. The SEC letter evidenced the mailing and receipt of Mr. Prousalis s 13D in paper form, as it had not been submitted on the then new Internet-based EDGAR filing system. On May 10, 2004, the government introduced the SEC certification to the grand jury to misleadingly and deceptively show that Mr. Prousalis willfully and knowingly failed to file his 13D with the SEC, which served to underpin the securities fraud charges against him. Moreover, at the same time, the government secreted the recently discovered SEC letter from the grand jury, which showed that Mr. Prousalis had mailed his 13D to the SEC, and that his 13D had been received by the SEC. The grand jury accepted the veracity of the SEC certification, and, armed with perceived probable cause, returned the superseding indictment against Mr. Prousalis, which included the first principals of busybox.com, or Mr. Prousalis s fees. I am also of the opinion that the disclosures with respect to these matters in the Registration Statement were in compliance with the federal securities law and consistent with common practice in the field of federal securities law. To put a point differently, I would be surprised that any [person] would find Mr. Prousalis s handling inappropriate. (emphasis added) Ex