Sometimes in criminal defense, you come across cases that have a certain level of academic interest. One of the cases that our firm handled that has an academic interest involvea client of ours who retained us post-conviction to review his conviction related to filing false statements during a bankruptcy proceeding.  

This particular case involved a client who was successful music producer and had an interest in real estate.  This client made a deal with Manhattan property owners regarding a property that the client wished to live in with his family.  

The Manhattan Property 

The basics of the deal included the client completing renovations to the entirety of the buildingbuilding a recording studio in a part of the building that he would utilize for his music production and, most importantlyborrowing hundreds of thousands of dollars from his wife which she had received as an inheritance. 

Since the money used for the renovations and materials belong solely to the wife, the defendant essentially entered into the deal on his wife’s behalf that would have allowed the family to live in the property for five years. 

First Right to Purchase the Property Upon Sale 

They were also given the first right to purchase the property, in the event of the property being sold, with the wife having the authority to exercise that right. 

The defendant owned joint marital properties in Pennsylvania – where he had grown up – and ultimately found himself in a financial bind because for years music production had been the family’s primary source of income. 

Property Sold to Third-Party w/o Notice 

During the interceding timethe defendant learned that the Manhattan property – that he had utilized his wife money to renovate – had in fact been sold for approximately $5,000,000 dollars tthird-party buyer.  In addition, the defendant’s wife did not receive any proceeds from the sale, nor was she given an opportunity to exercise her first right of purchase.  

Getting the Money Back 

Initially, the defendant tried to figure out ways to recover hundreds of thousands of dollars of his wife’s money that he had invested in this deal – which was now all but lost. 

The reason the deal was all but lost was that major portions of the deal relied on what the client referred to as a handshake agreement. 

Our client was repeatedly told that he had a very small chance of recovering his wife’s money and that any attorney who represented him would need substantial amounts of money upfront in order to pursue the matter – which the defendant nor his wife had.  

After pursuing the owners of the property for approximately two years and having consulted various attorneys with no success the defendant believed that he had lost his wife’s money – which was also a factor that added to the strain in their marital relations. 

Along with the strains in marital relations with his wifethe defendant’s production business was not producing enough income to maintain other mortgages that the defendant had on Pennsylvania properties that belonged to him, as well as providing for his families day-to-day living expenses, so the defendant filed for bankruptcy.  

Filing for Bankruptcy 

Several years passed between the time of the original agreement related to the Manhattan property and the defendant filing for bankruptcy. 

Failure to File Promissory Note Related to Manhattan Property 

A total of four (4) bankruptcy applications had been filed on the defendantbehalf by counsel and in none of the bankruptcy, applications did the defendant declare a promissory note related to his agreement regarding the Manhattan property. 

At the inception of the defendant’s attempt to file for bankruptcy – and while he attempted to also figure out ways to provide for his family – the defendant’s wife was introduced to an attorney who practices civil litigation 

After hearing the wife’s story, the attorney agreed to take on the wife’s cause on a contingency basis.  However, the attorney needed the defendant who actually made the agreement using his wife’s money to agree to participate in the litigation and be listed as a plaintiff in the matter. 

Despite the defendant believing that it was a waste of time and that his wife’s money would not be recovered – and under pressure from his wife – he agreed to be a plaintiff to allow her to pursue the individuals that he had given her money to. 

In sum, to satisfy his wifeour client agreed to be listed as a plaintiff and signed off on the affidavit regarding the facts and had not heard from the attorneys since.  His wifehowever, did hear from his attorney with regular updates. 

Opposing Party Discovers the Failure to File Promissory Note 

During the pendency of the bankruptcy litigationthe defendants in the civil litigation related to the Manhattan property learned that the defendant (our clients) had filed for bankruptcy and was able to obtain a copy of our clients bankruptcy petition – which hadn’t been fully approved by the bankruptcy court.   

They were able to ascertain that the promissory note was not listed as an asset nor listed as litigation in any one of the multiple bankruptcy petitions that our client has filed. 

Counsel for the defendant in the Manhattan litigation contacted the bankruptcy court and the U.S. Attorney’s Office in order to alert them to the pending litigation that had been disposed of by summary judgment and eventually reinstated because a third party had entered. 

At the point where counsel for the defendants in the Manhattan litigation notified the U.S. Attorney’s Office in the bankruptcy court the litigation regarding the Manhattan property was still pending since it had been restored to the calendar – none of which our client was fully aware of and in his mind after years of attempting to recover his wife’s money he felt that it was a lost cause. 

Indictment for Four Counts of Filing a False Statement 

After receiving a letter from counsel, The United States Attorney’s Office investigated and ultimately indicted our client on at least four counts of filing false statements during a bankruptcy proceeding. 

At the time that our client was charged criminally (in related to his bankruptcy petitions and the failure to declare the Manhattan litigation – which the client did not believe he had an individual right too in the slim chance that it was successful) the defendant’s son was also receiving daily treatments regarding leukemia.  

Since our client had been the primary caregiver for his son – who was very young at the time – the client attended daily radiation sessions with his son in New York and made appearances in the Federal District Court of Pennsylvania when required.  

Our client always maintained his innocence.  The fact that he did not include the promissory note for the Manhattan property was primarily based on the Manhattan litigation not even being on his mind during the time of the bankruptcy filing due to his son’s illness. 

Most importantly, is that the money would belong to his wife anyway (since she had received it from an inheritance) it was not the defendant’s personal property. 

Options for the Client to Consider 

Defense counsel for our clients in the federal criminal matter ultimately persuaded our client that he had two options: 

Option #1: The first option would be to plead guilty and almost certainly not go to prison which would allow him to continue to be there for his son during his son’s radiation treatment for leukemia. 

Option #2: In the alternativethe client could go to trial – which would require him to miss a week or two of his sons daily leukemia treatments (despite no other parent being present for that treatment) – and ultimately be incarcerated during his son’s recovery.  

The client obviously did not list the litigation on the promissory note in either of his bankruptcy petitions.  At that pointour client pled guilty because he fully believed that, even though he was in fact innocentthat he would have been convicted if he went to trial. 

In addition, the trial would have required him to miss some of his son’s treatment and ultimately his sons recovery (at which point he would have been incarcerated.) 

Our Firm’s Review of the Sentence 

After being sentenced to fiveyears postrelease supervisionthe client eventually came to our firm to have his conviction reviewed. 

Since the client was adamant that he was factually innocentand as an innocent man he should not have to continue his life with a felony conviction.  In addition, this conviction would also prohibit him from receiving funding from a number of financial institutions – because he’s been convicted a financial fraud. 

“Specific Intent” 

Having conducted an indepth review of the client’s casewhat we realized first and foremost is that making false declarations during bankruptcy proceedings is a crime that requires a specific intent. 

What that means is that the government would have had to prove that it rounds that our client being fully conscious of the facts that he could potentially receive recovery from The Manhattan litigation regarding the apartment building that our client made a conscious decision to withhold that information. 

Applying Federal Rule of Civil Procedure – Rule 17 

Most importantly, during our discussions with our client, we asked if his criminal defense attorney in the federal criminal case ever discussed with him Federal Rule of Civil Procedure, Rule 17.  Our client looks at us puzzled and had no idea what we were talking about.  

Subsection EWe explain to the client that, under the Federal Rules of Civil Procedure, Rule17Section 1subsection E, allows for a trustee of an express trust to maintain litigation on behalf of the trust. 

Subsection FIn addition, subsection F allows a party with whom what in whose name a contract has been made for another party benefit to maintain litigation on that person’s behalf. 

Under the facts of this casewe developed he position that our clients conduct was what was referenced in rule 17 Section 1 F.  This meant that our client had entered into a contract on his wife’s behalf anultimately maintaining litigation related to that contract on his wife bath and for her benefit.  

When looking at this case and applying rule 17, our client was not legally required to declare an asset that belonged to his wife in his personal bankruptcy petitiondespite the fact that he didn’t consider it an asset because he never thought his wife would be successful in recovery. 

What was one of the Most Challenging Aspects of this Case? 

One of the biggest hurdles with cases like this (where the defendant is not incarcerated and is either serving a term of probation or habeen released from prison) is that the post-conviction remedies or collateral attacks on criminal convictions in the federal court are very limited. 

For example, most federal inmates have a direct appeal after their conviction which, in the case of a pleais very limited and waived in most contexts.   

However, after the direct appeal (or before) a defendant has an opportunity to file: 

  • a petition for writ of federal habeas corpus; or 
  • a motion to vacate, set aside, or correct a sentence by a person in federal custody. 

Petition for Writ of Habeas Corpus 

28 U.S.C. § 2254 – Federal Writ of Habeas Corpus is a petition asking the court to review a constitutional remedy or constitutional claim that occurred or was not fully vetted in the trial court records.  Besides the direct appeal and federal habeas corpus, there are limited opportunities to attack a federal criminal conviction. 

Motion to Vacate, Set Aside, or Correct a Sentence by a Person in Federal Custody 

28 U.S.C. § 2255 – This motion is available for a prisoner in custody under sentence of a court.  After looking at several possibilities of how to attack the defendant’s conviction, our firm realized that the only avenue available for the defendant would be what’s known as the federal writ of “Coram Nobis.” 

What is the Federal Writ of “Coram Nobis?” 

The Federal Writ of Coram Nobis is an order allowing a court to correct its original judgment upon the discovery of a “fundamental error” that did not appear in the records or the original proceedings. 

A writ of Coram Nobis is rarely used and is considered a writ of last resort.  It is used when no other vehicle is available for the defendant to challenge his criminal conviction.  What makes it an option of last resort is that the motion has a very high standard in regard to the burden of proof that the defendant must meet. 

What Must a Defendant Prove When Filing a Writ of Coram Nobis? 

Among the things that a defendant has to prove in order to file a writ of Coram Nobis is a showing that there is no other vehicle available to the defendant that would allow them to challenge the conviction. 

Once a defendant had satisfied the multipronged test for having the court consider the writ of Coram Nobis, the defendant must then proceed to satisfy the court that his primary allegation is substantive and worthy of his or her conviction being reversed.  

In a case like thisthe primary argument would be that the defendant’s constitutional right to effective assistance of counsel was violated – which resulted in the defendant’s plea not being made knowingly voluntarily and intelligently. 

What Does This Mean for the Attorneys? 

This means that we had to prepare a statement proving that our client’s prior counsel’s failure to pursue FRCP, Rule 17, (and other issues related to the case), and inform the defendant of the viability of those issues was improper.  Especially given the fact that it was clear that the defendant in this particular case was more than willing to proceed to trial, if necessary. 

What doean Attorney have the Duty to Inform the Client of? 

 The defendant has the right of being informed by counsel in order to thereby make an intelligent decision regarding whether to plead guilty or not. 

This is one of the major distinctions (among many) that both criminal defendants and practitioners will find when comparing a state prosecution and conviction to federal prosecution and conviction.  

What About State v. Federal Prosecutions and Convictions? 

At this stage, when a federal defendant is limited to the writ of last resort” (or the writ of Coram Nobis)New York State defended at this same stage would have a clear vehicle to challenge his conviction before the court in a CPL 440 which can be filed at any time after conviction – without the strict time limits set on federal postconviction litigation.  

State prosecutions may involve a writ of Corum Nobis in New York is also used to raise issues when there is no other vehicle.  However, it has traditionally been used in challenging criminal convictions solely on the issue of ineffective assistance of appellate counsel. 

What are the Benefits to Criminal Defendants in State Cases? 

Anyone that reviews the CLP 440 statue would realize that it’s very broad and inflexible.  This gives defendants in state proceedings an advantage of having their convictions reviewed well after they are released from custody or supervision.  

Like federal defendants, after direct appeala state prisoner or defendant also has the opportunity to use the federal writ of habeas corpus to have constitutional issues related to their conviction in a federal forum reviewed. 

What is the Takeaway? 

In sum, federal litigation requires a lot of heavy lifting for criminal defense attorneys and there are very few attorneys who have taken the time to learn the ins and outs of the system in order to effectively navigate the very strict and limited federal guidelines with a high level of expertise. 

It is cases such as these that highlight the necessity of a criminal defense attorney being well-rounded.  This is especially true in federal prosecutions because of the issues when dealing with a white collar criminal defense case cover both federal and state civil and criminal statutes.