Former PA Attorney Nicholas Panarella Has Honest Services Fraud Conviction Reversed After 10 Years

 

In 2001, Pennsylvania tax attorney Nicholas Panarella, Jr., pled guilty to charges of honest services fraud. Mr. Panarella was alleged to have paid former Pennsylvania State Senator F. Joseph Loeper more than $330,000 as "consulting fees" to take actions which benefitted Mr. Panarella's tax-collection firm.

However, as a result of the Supreme Court's decision in U.S. v. Skilling relating to honest services fraud, the U.S. District Court for the Eastern District of Pennsylvania this week ruled that Mr. Panarella's actions were no longer criminal and that he was entitled to have his conviction reversed by means of a writ of coram nobis (Latin for "the error before us"), according to Philly.com.

Mr. Panarella was disbarred following his 2001 plea. Prior to his conviction, he assisted former Mayor of Philadelphia in recovering $51.9 million in back taxes. Joseph Loeper served 20 months in prison for obstructing a tax investigation.

 

USA Today on Misconduct by Federal Prosecutors; AUSA in Senator Ted Stevens Prosecution Takes Life;

USA Today ran a lengthy piece on prosecutorial misconduct on September 22. The article states that, since 1997, federal courts have determined that Department of Justice attorneys violated laws or ethical rules in some 201 cases, including the duty expressed by Supreme Court Justice George Sutherland over 70 years ago in Berger v. United States, 295 U.S. 78 (1935);

The United States Attorney is the representative not of an ordinary party to a controversy, but of a sovereignty whose obligation to govern impartially is as compelling as its obligation to govern at all, and whose interest, therefore, in a criminal prosecution is not that it shall win a case, but that justice shall be done. As such, he is in a peculiar and very definite sense the servant of the law, the two-fold aim of which is that guilt shall not escape or innocence suffer. He may prosecute with earnestness and vigor -- indeed, he should do so. But, while he may strike hard blows, he is not at liberty to strike foul ones. It is as much his duty to refrain from improper methods calculated to produce a wrongful conviction as it is to use every legitimate means to bring about a just one.

Most of the cases of misconduct involved concealment of favorable or impeaching evidence from the defendant and presenting false testimony to the jury. In the cases found by the reporters as part of a six month investigation, the misconduct by the prosecution was so egregious that courts dismissed the charges against the defendants or overturned the defendants' convictions. The story states that investigations of prosecutorial misconduct by the Department of Justice prompted by complaints from judges rose to 61 last year, from 42 in 2001. The Department's Office of Professional Responsibility has reported that it has completed more than 750 investigations over the past decade, and that it has found intentional violations in 68 cases. Reporters found that only one prosecutor had been barred from practicing law, even temporarily, in the past 12 years. In one rare exception, in 2007 the Department prosecuted Richard Convertino, a former Assistant U.S. Attorney, for allegedly obstructing justice in his handling of a Detroit terrorism case. Convertino was acquitted.

The story cites the case of Nino Lyons, who was alleged to have been a drug trafficker, and allegations that prosecutors concealed evidence which would have discredited the witnesses against him, many of whom were incarcerated convicted felons. The prosecution was alleged to have withheld from Mr. Lyons' defense promises made to the witnesses to reduce their prison time, and the failure of one key witness to even identify Mr. Lyons. The concealed evidence came to light only after it was suggested in a government filing after Mr. Lyons had already been incarcerated for three years. The U.S. District Court for the Central District of Florida overturned Mr. Lyons' conviction and declared him innocent.  The ordeal also cost Mr. Lyons his home and his business. U.S. District Judge Gregory Presnell wrote in his order that prosecutors engaged in "a concerted campaign of prosecutorial abuse" including covering up evidence and letting felons lie to the jury. Judge Presnell further said that prosecutors "brazenly" defied court orders and presented witnesses who were "allowed, if not encouraged, to lie under oath." As small compensation, the Justice Department paid $150,000 of Mr. Lyons' legal bills in a confidential settlement. The story states that the Department of Justice has paid nearly $5.3 million in legal bills for wrongly accused defendants.

The article noted the heavy caseload and lack of supervision of many federal prosecutors as a possible causes of misconduct. In response to the article, Acting Deputy Attorney General Gary Grinder wrote a letter to the editor, which may be read here, in which he defended that the number of cases of prosecutorial misconduct is actually "minuscule," given the fact that the Department of Justice prosecuted more than 720,000 cases and more than 1 million defendants in the time period covered by the study, suggesting that serious prosecutorial misconduct only occurs in approximately 1 in 3,600 cases.

In related news, following the dismissal of the prosecution of late Alaska Senator Ted Stevens, the Department of Justice commenced an investigation of several Department attorneys for potential prosecutorial misconduct. Senator Stevens was killed in a plane crash on August 9, 2010. One of the attorneys under investigation was Assistant U.S. Attorney Nicholas A. Marsh. Marsh, aged 37, committed suicide late last month, as reported in the Louisville Courier-Journal.

U.S. District Judge Emmet Sullivan appointed a special prosecutor to investigate what he called the worst misconduct he had seen in nearly 25 years on the bench. Marsh's attorney issued statements to the media following his death that Marsh was fearful of the investigation preventing him from continuing to work at the Department of Justice, and indicated that Marsh and investigators were actually "on the verge of a successful resolution." The Department has expressed its condolences to Marsh's family, as does the Blog.

 

 

In-House Counsel to the Mob? Court Denies Government's Motion to Disqualify Attorney Joseph Corozzo, Jr.

As reported by the New York Law Journal, Michael Scarpaci is current charged as an alleged associate of the Gambino crime organization in the Southern District of New York in an indictment charging racketeering violations, including murder, witness tampering, murder of a witness, extortion, narcotics and sex trafficking a minor. In a twist, however, Scarpaci's lawyer, Joseph R. Corozzo, Jr., is also alleged to have connections to the Gambino family, and the prosecution sought to disqualify Corozzo from the case for alleged conflicts of interest. Specifically, Corozzo's father, Joseph Corozzo Sr., is a consigliere of the Gambino family. His uncle, Nicholas Corozzo, is a capo. And Corozzo himself is alleged to serve as the organization's "in house counsel."

Prosecutors moved to disqualify Corozzo from representing Scarpaci, citing Corozzo's disqualification in April from representing Gaetano Napoli, Sr., on the ground that Corozzo had been present at two meetings with his client in 2009 in which they discussed what to do if Napoli was ever approached by law enforcement. Corozzo had advised Napoli to say nothing and give investigators the number for his attorney. Sound advice from a criminal defense attorney--which the government of course alleged constituted obstruction of justice.

Prosecutors also cited a 2006 recorded conversation in which Scarpaci's co-defendant, Daniel Marino, and an alleged Gambino associate, Lewis Kasman, discussed the possibility of Corozzo being arrested and disbarred, arguing that the conversation implicated Corozzo in the racketeering conspiracy charged in the indictment. Finally, the government contended that Corozzo had previously represented a witness for the government in the case.

District Judge Lewis Kaplan denied the government's motion, holding that the government had not identified any actual conflict from Corozzo's representation of Scarpaci, and noted that Scarpaci could make a knowing and intelligent waiver of any potential conflicts. The Judge found that the alleged conflict in the Napoli case was not related to the case against Scarpaci, and that the Court in that case never made any finding that Corozzo's alleged conduct obstructed justice. Judge Kaplan also observed that the conversation between Marino and Kasman did not suggest that Corozzo had engaged in any criminal conduct. The Court further noted that the subject matter of Corozzo's representation of the government witness, and was only "tangentially related" to the subject matter of the case. Finally, regarding Corozzo's family connections with the Gambino family, the Court held that there was no evidence that Corozzo's father or uncle had had in any way supervised any of the RICO acts allegedly committed by Scarpaci.

Judge Dismisses SEC Complaint, Drug Charges, Against Former Broadcom Executives in Case of Prosecutorial Misconduct

Yesterday, a federal judge dismissed alleged drug charges against Henry Nicholas, the former Chief Executive of Broadcom Corp., a manufacturer of integrated circuits for broadband communications. In a related civil action, the judge, U.S. District Judge Cormac Carney of the U.S. District Court for the Central District of California, also ordered the Securities and Exchange Commission to amend alleged fraud charges against Mr. Nicholas and other former Broadcom executives within seven days, stating that he found "serious problems of proof" with the SEC's complaint against the former executives and inquired as to what proof the SEC had against them, as reported by The National Law Journal. The court had previously dismissed the SEC's complaint without prejudice.

Last month, during the trial of Mr. Nicholas and former Broadcom Chief Financial Officer William Ruehle, the court had granted Nicholas' and other defendants' motions to dismiss charges of backdating stock options based on prosecutorial misconduct and entered judgments of acquittal. Judge Carney found that the government "distorted the truth-finding process" and infringed on the defendants' due process rights to a fair trial. The court also questioned the evidence supporting the charges, noting that there was "considerable debate" regarding certain accounting practices used by Broadcom and many other major companies, including Microsoft and Apple.

The defendants made their prosecutorial misconduct claims after the court granted immunity to former Broadcom executives David Dull and Henry Samueli at the request of counsel for Mr. Ruehle so that the witnesses would not refused to answer based upon their Fifth Amendment privilege against self incrimination. Mr. Ruehle wanted Mr. Dull and Mr. Samueli to testify in order to rebut the testimony of Nancy Tullos, former Broadcom Chief of Human Resources, a witness for the government who had pled guilty in 2007 to obstruction of justice charges. The court found that the prosecution had improperly influenced Dull's, Samueli's and Tullos' testimony. Judge Carney also reprimanded the government for leaking misleading information regarding the grand jury proceedings to the news media. It set a hearing for the government to show cause as to why the narcotics case against Mr. Nicholas should continue.

At trial, he court also set aside Mr. Samueli's plea of guilty to making alleged false statements to the SEC following his testimony in Mr. Ruehle's and Mr. Nicholas' trial, stating that he had difficulty finding how Mr. Samueli had committed any crime. Judge Carney found that the government had pressured Broadcom into terminating Mr. Samueli, calling the government's treatment of him "shameful."

The court furthermore criticized the government for leaving Mr. Dull "hanging in the wind" for two years, treating him as an alleged co-conspirator but not charging him. The prosecution had entered a nonprosecution agreement with Mr. Dull after threatening to charge him with perjury based upon statements which Mr. Dull intended to make in his testimony in the Ruehle/Nicholas trial.

The extensive allegations of prosecutorial misconduct in the case against Mr. Nicholas and the other defendants included an allegation by the defense that the government had used Mr. Nicholas' 13 year-old son to gather evidence against his father.


Defendant in Stock Option Backdating Case Requests Hearing Based on Prosecutorial Misconduct/Interference with Witnesses

As reported by Law.com, Bruce Karatz, Chief Executive Officers of KB Home, a home construction corporation based in Los Angeles, California, was indicted in the action of U.S. v. Nicholas, 2:09-cr-00203-ODW (C.D.Ca. 2009), on 20 counts of fraud for defrauding the company and its shareholders of millions of dollars in undisclosed backdated stock option over a period of seven years, and concealing the fraud from KB Home's  directors, compensation committee and shareholders. Karatz's trial in the U.S. District Court for the Central District of California is scheduled to begin on February 23.

Karatz's attorneys have requested a hearing regarding whether prosecutorial misconduct has tainted the government's case against Karatz. Karatz contends that two witnesses for the government--James Johnson, former Chairman of the Board of Directors' Compensation Committee for KB Home, and Gary Ray, former Vice President of Human Resources--initially believed that the stock options grant practice was lawful, but changed their position following contacts with the prosecution. Karatz's lawyers want to examine Johnson regarding why he denied allegedly defending KB Home's option granting process during an internal investigation by the company's outside counsel in his statements to prosecutors. 

The defense also wants to question Ray, who has pled guilty to obstruction of justice and is cooperating with the government, regarding why he had allegedly previously maintained that the process was "lawful and proper." Following is a link to

Karatz's Motion for Evidentiary Hearing Regarding Testimony of Crucial Witnesses

.


Karatz's motion is based on an order in December by U.S. District Judge Cormac Carney in the action of U.S. v. Nicholas, SACR 08-00139 CJC (C.D.Ca. 2008), another backdating case, in which the Court dismissed the government's indictment against co-founder of Broadcom Corp., Henry Nicholas, and former Broadcom Chief Financial Officer William Ruehle, blasting the prosecution for "distorting the truth-finding process" by intimidating and improperly influencing key witnesses. Karatz also relies on the Ninth Circuit Court of Appeals' overturning last August of the conviction of former Chief Executive Officer for Brocade Communication Systems, Inc., Gregory Reyes, for backdating based on false statements by the prosecution in closing arguments that Brocade's finance department didn't know about backdating. A hearing on Karatz's motion has been scheduled for February 8.