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UNITED STATES v. PELULLO

June 9, 1998

UNITED STATES OF AMERICA
v.
LEONARD A. PELULLO


Robert F. Kelly, J.


The opinion of the court was delivered by: KELLY

FINDINGS OF FACT AND CONCLUSIONS OF LAW

RE: THE REMAND HEARING

 R.F. KELLY, J.

 JUNE 9, 1998

 On January 9, 1997, the United States Court of Appeals for the Third Circuit remanded this matter for the purpose of conducting an evidentiary hearing with regard to Defendant Leonard A. Pelullo's motion for a new trial. *fn1" *fn2" Specifically, the court stated, "On remand, the government should be afforded an opportunity to demonstrate, consistent with its burden of proof, that Pelullo would have testified during his first trial even if the withheld material had been turned over." The court did not state what standard of proof applied to the government's burden. That then, is the first issue for this Court to decide.

 STANDARD OF PROOF

 In similar cases, the Supreme Court has consistently held that the preponderance standard applies when the government has the burden of showing that evidence is not tainted by a constitutional violation, and therefore is not subject to suppression under the exclusionary rule. See Lego v. Twomey, 404 U.S. 477, 488-89, 30 L. Ed. 2d 618, 92 S. Ct. 619 (1972); U.S. v. Matlock, 415 U.S. 164, 177 n.14, 39 L. Ed. 2d 242, 94 S. Ct. 988 (1974); Nix v. Williams, 467 U.S. 431, 444 n.5, 81 L. Ed. 2d 377, 104 S. Ct. 2501 (1984); Colorado v. Connelly, 479 U.S. 157, 168, 93 L. Ed. 2d 473, 107 S. Ct. 515 (1986).

 In Lego, the defendant contended the police coerced his confession. The trial court admitted the confession, finding the state had proved the confession was voluntary by a preponderance of the evidence. The defendant challenged this finding contending that the standard was beyond a reasonable doubt. In upholding the trial court, the Supreme Court held,

 
To reiterate what we said in Jackson : When a confession challenged as involuntary is sought to be used against a criminal defendant in his trial, he is entitled to a reliable and clear-cut determination that the confession was in fact voluntarily rendered. Thus the prosecution must prove that at least by a preponderance of the evidence that the confession was voluntary.

 404 U.S. at 488-89 (citations omitted).

 In Matlock, where the Supreme Court remanded the case for an evidentiary hearing on the issue whether the evidence was sufficient to establish consent to search, the court noted that the district court had correctly applied the preponderance standard at the suppression hearing:

 
The controlling burden of proof at suppression hearings should impose no greater burden than proof by a preponderance of the evidence. See Lego v. Twomey, 404 U.S. 477, 488-89, 30 L. Ed. 2d 618, 92 S. Ct. 619 (1972).

 United States v. Matlock, 415 U.S. at 178 n.14.

 In Nix v. Williams, the police obtained a statement from a murder suspect, in violation of his sixth amendment right to counsel, identifying the location of the victim's body. The Supreme Court reversed the defendant's initial conviction because the state admitted the statement into evidence. On retrial, the state introduced evidence of the condition of the victim's body, which the police found using the defendant's statement. The defendant contended that evidence of the victim's body should have been suppressed as "poisonous fruit" of the sixth amendment violation. The Supreme Court disagreed, holding that the state's evidence established by a preponderance of the evidence that the police would have inevitably discovered the body without the defendant's statement and therefore, application of the exclusionary rule was not warranted. See Nix v. Williams, 467 U.S. at 448-50. In United States v. Wade, 388 U.S. 218, 18 L. Ed. 2d 1149, 87 S. Ct. 1926 (1967), the Supreme Court held that a pretrial line-up violated the defendant's sixth amendment right, but remanded the case for a hearing to give the government the opportunity to establish that the illegal identification did not taint the later in-court identification. Justice Brennan stated that the clear and convincing standard would apply in the suppression hearing on remand, but did so without analysis of the issue. See id. at 240. Justice Brennan's decision in Wade preceded the cases cited above in which the Supreme Court did analyze the standard of proof issue. The Supreme Court has expressly declined to follow Justice Brennan's view that the clear and convincing standard should apply in other suppression contexts. See Lego v. Twomey, 404 U.S. at 492 (J. Brennan, dissenting); Nix v. Williams, 467 U.S. at 459; Colorado v. Connelly, 479 U.S. at 185-86. The Supreme Court subsequently limited Wade to line-up cases. See Nix v. Williams, 467 U.S. at 444 n.5; 457 n.8 (J. Stevens, concurring) (1984). In limiting Wade, the court reasoned that a higher standard of proof was appropriate in a suppression hearing involving an illegal line-up because a constitutional defect in a pretrial identification could cast doubt on the reliability of the subsequent in-court identification. Here, there is no contention that Mr. Pelullo's in-court testimony was rendered unreliable by the Brady violation.

 After reviewing the above cases together with the briefs submitted by Mr. Pelullo's counsel, I am convinced that the government is required to prove by a preponderance of the evidence that Leonard Pelullo would have testified at the first trial even if the Brady material had been supplied to him. I now make these following findings of fact and conclusions of law:

 FINDINGS OF FACT

 1. On July 3, 1991, a jury convicted Mr. Pelullo of 49 counts of mail fraud and one count of racketeering (Count 55). (For the purpose of these findings, the 1991 trial will be referred to as the "first trial.") On appeal, the Third Circuit vacated 48 of the 49 wire fraud counts and Count 55. The Third Circuit affirmed one wire fraud count, Count 54.

 2. Count 54 charged Mr. Pelullo with conducting a fraudulent scheme involving the diversion of $ 114,000 in funds belonging to Palm Beach Heights & Development Corporation ("PBH"), a wholly owned subsidiary of the Royale Group Limited Corporation ("Royale"). The indictment charged that in February 1986, Mr. Pelullo used these corporate funds to repay a personal debt Mr. Pelullo owed to Anthony DiSalvo, a loanshark associated with the Philadelphia mafia. Racketeering Act ("RA") 60 of Count 55 charged this same scheme as a predicate act of Mr. Pelullo's racketeering activity.

 3. At a second trial, on January 29, 1993, a jury convicted Mr. Pelullo of 49 wire fraud counts and one RICO count. On January 24, 1994, the Third Circuit of Appeals reversed that conviction on all counts. In October 1994, Mr. Pelullo was tried for a third time. That trial ended when the jury was unable to reach a verdict. Following a retrial in January 1995, the jury again convicted Mr. Pelullo of 46 counts of wire fraud and Count 55. (For the purpose of these findings, the 1995 trial will be referred to as the "1995 retrial")

 4. On appeal of the 1995 retrial, Mr. Pelullo challenged both the original conviction on Count 54 and the convictions on the other counts from the 1995 retrial. The Third Circuit vacated Mr. Pelullo's conviction on Count 54 on the ground that the government had failed to produce evidence constituting Brady material which Mr. Pelullo could have used to impeach government witnesses regarding Count 54 at the first trial. See United States v. Pelullo, 105 F.3d 117 (1997). These items consisted of: (i) rough notes of a June 14, 1990 interview of Mr. Pelullo written by FBI Special Agent Randall Wolverton during which Mr. Pelullo discussed the $ 114,000 transaction; (ii) a memorandum of an interview of Phillip Leonetti, the former underboss of the Philadelphia mafia, by an IRS agent and the agent's rough notes of the interview; and (iii) FBI surveillance logs of the Florida residence of Nicodemo Scarfo, the former boss of the Philadelphia mafia.

 5. Mr. Pelullo obtained the Brady material before the 1995 retrial. Thus, the Brady convictions found by the Third Circuit with respect to the first trial did not require reversal of the convictions from the 1995 retrial. However, Mr. Pelullo asserted that the Brady violation tainted his convictions from the 1995 retrial because the government used a portion of his testimony from the first trial at the 1995 retrial. As the Third Circuit noted, Mr. Pelullo contended the court should have suppressed his testimony from the first trial because:

 
He was forced to take the stand at the first trial due solely to the government's failure to abide by its obligation under Brady. In other words, Mr. Pelullo argues that because he had no other way to impeach the government witness (sic) he was compelled to take the stand himself and rebut their testimony.

 Id, at 124.

 6. The Third Circuit agreed that Mr. Pelullo's testimony from the first trial would be subject to suppression if the district court determined on remand that it was the "inadmissible fruit of a poisonous tree" of the Brady violation. Id. at 125. The Third Circuit remanded for an evidentiary hearing to give the government the opportunity to establish "whether Mr. Pelullo would have testified in the first trial anyway even if the government had complied with its Brady obligations." Id. at 125. The Third Circuit identified the relevant portion of Mr. Pelullo's testimony from the first trial as follows:

 
Q: So, there was a debt to Tony DiSalvo?
 
A: Yes.
 
Q: And that debt was repaid?
 
A: Yes.
 
Q: When was it repaid?
 
A: Well, it was paid, my brother gave me $ 55,000 in September and he has the cashier's check.
 
I think I gave it to you and then my dad gave me a $ 180,000 out of the closing on the restaurant and his property and that was $ 230,000, then I gave Pete $ 20,000. It must have been some time in '87 that we paid it off. Okay, now and Pete gave the money to, I guess it ended up with DiSalvo.
 
Q: Okay, we've heard testimony from a man named Leonetti about the use of the Mafia to collect on this loan.
 
First of all, did you ever have any contact with Mr. Leonetti?
 
A: I have knowledge of who Mr. Leonetti is. I grew up in South Philadelphia. I know these people from seeing them on the street and maybe running into them at a restaurant. Do I know them? Do I associate with them? No.
 
Q: Okay. Did he contact you about this loan?
 
A: Never.
 
Q: Did he contact your family?
 
A: Yes, what happened was my brother has a business in South Philadelphia, he had a recording company at 20th and Wyomissing. Most of these people are from that area and they walked into Pete and told him that hey had been assigned to collect the loan and Pete got in touch with me and said we have a problem and that's how it came about.
 
Q: Okay, did you have any concern for your family at that point?
 
A: Absolutely, they are dangerous people.
 
Q: And what was the time period again that the loan was repaid, September of '86, August and them '87, sometime in January?
 
A: Okay, I think it was about that time.
 
Q: Do you know a man named Nicodemo Scarfo?
 
A: I know who he is. I know him from South Philadelphia. I could have run into him at a restaurant, I know who he is. Do I?
 
Q: Do you?
 
A: Associate with him, no.
 
Q: Did you have any conversations with him about this loan?
 
A: Never.
 
Q: Okay, have you ever been to his home?
 
A: Yes.
 
Q: How did that come about?
 
A: What happened was, I was in Miami and a man by the name of Sam LaRusso. Sam had worked for my father about 30 years ago as a laborer. And he told me he had a job in Fort Lauderdale, would I come up and help him? I said sure, Sam, I'll be up to see it.
 
I went up to Fort Lauderdale and when I get there he tells me where I'm at. I didn't know it was Scarfo's house. And he said Leonard, he said, I need some help here. There's a construction job. I don't have any people here and I need to get a permit. I said, Sam, I don't want to get involved. Don't put me in this position.
 
And I wasn't threatened, but the situation with Sam was that Sam was a prisoner, basically, until this work was done and he asked me to get him a permit, get him some contractors to get the work done, otherwise he was going to have a problem with these people. And I looked at the job, I sent Keith Swenson there and I said see what you can do about getting him a permit and get him some plans and get the job done and let's get the hell out of here. That's what I told him.
 
Q: Is that the only time you were ever at his house?
 
A: I might have been there twice with Sam, because he needed some technical help on how to do something and I tried to limit my exposure there, yes.

 United States V. Pelullo, 105 F.3d at 120-21.

 7. As noted, the Third Circuit found that the government's failure to disclose rough notes taken by Agent Wolverton during a June 14, 1990 interview with Mr. Pelullo constituted a Brady violation. The facts regarding this interview are relevant to the analysis of the remand issue.

 8. During the investigation leading up to his indictment, Mr. Pelullo requested a meeting with the prosecutor and Agent Wolverton. As Mr. Pelullo stated, he wanted "to speak to them and try and straighten this out." GX 12 at 196. Mr. Pelullo was accompanied by his attorney, Fred Schwartz. According to the testimony of Agent Wolverton, and FBI Agent Michael Leyden, during this interview Mr. Pelullo stated that he had used the $ 114,000 in funds belonging to PBH to repay his personal loan to DiSalvo. At the first trial, Mr. Pelullo denied making this statement.

 9. On January 23, 1998, the Court conducted an evidentiary hearing to give the government the opportunity to establish that Mr. Pelullo's testimony from the first trial was not inadmissible "fruit of the poisonous tree." At the hearing, the government offered evidence consisting primarily of excerpts of the testimony from the first trial and statements of Mr. Pelullo from other proceedings, for the purpose of ...


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