author: MOTLEY, Chief Judge.

text:
    ESTEE LAUDER, INC., Plaintiff, v. HARCO GRAPHICS, INC., Harry Aronson, and Perry Printing Corporation, Defendants.
    No. 82 Civ. 8188 (CBM).
    United States District Court, S.D. New York.
    March 21, 1984.

      Hendler & Murray by Michael Maillet, New York City, for plaintiff.
    Lankenau Kovner & Bickford by John C. Lankenau, New York City, for defendant Perry Printing Corp.
   MEMORANDUM OPINION

MOTLEY, Chief Judge.

Plaintiff Estee Lauder, Inc. (Estee Lauder) has brought this action charging three defendants with violating the civil provisions of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961 et seq., as well as with common law fraud. Specifically, Estee Lauder has charged defendants Harco Graphics (Harco), Harry Aronson (Aronson) and -Perry Printing (Perry) with engaging in a pattern of racketeering activity predicated on violations of the federal mail fraud, federal racketeering and New York commercial bribery statutes, 18 U.S.C. § 1962(c). The defendants are also charged with conspiring to engage in a pattern of racketeering activity, 18 U.S.C. § 1962(d).' Only Perry has appeared in this action.

This case is now before the court on Perry’s motions to dismiss the complaint and for summary judgment, Fed.R.Civ.P. 12(b) and 56(b). For the reasons set forth below, the court denies these motions.

BACKGROUND

Estee Lauder is a New York corporation which manufactures, distributes and sells cosmetics in interstate commerce under a variety of trademarks. Perry Printing is a Wisconsin corporation doing business as a commercial printer. Harco is a New York corporation; Aronson is an officer, shareholder and employee of Harco.

In order to promote the sale of its cosmetic products, Estee Lauder invests substantial sums of money on direct mail and point-of-sale promotional materials. To that end, Estee Lauder purchases millions of dollars of printing from commercial printers like Perry Printing.

This action arises out of the alleged misconduct of Stephen Juda (Juda), who ran Estee Lauder’s production department from 1973 until June 1979. Juda’s responsibilities included arranging for the printing of promotional materials by contracting with commercial printers. Estee Lauder contends that Juda initiated a scheme whereby he received kickbacks in exchange for awarding printing contracts. Under this scheme, printers would overcharge Es-tee Lauder for work performed. Juda then would authorize payment of the overcharges. Once paid, the printers would funnel money to High Street Graphics (High Street), a dummy corporation owned by Juda. In this vein, Estee Lauder alleges that Perry Printing overcharged it by over $500,000. This sum was then passed from Perry to Harco. Harco, in turn, passed part of the overcharge, nearly $150,000, on to High Street.

As indicated, Estee Lauder maintains that this scheme resulted in violations of the RICO statute as well as in common law fraud. In addition to this litigation, Estee Lauder filed suits against Juda and other printers.

DISCUSSION

1. Motion to Dismiss the Complaint

Perry moves to dismiss the complaint on three grounds. First, Perry argues that Estee Lauder has failed to allege the requisite association between Perry and a RICO enterprise. Second, Perry urges adoption of a narrow definition of RICO enterprise which would exclude Perry. Third, Perry argues that Estee Lauder’s complaint does not allege the appropriate sort of injury under RICO. The court finds no merit in any of these contentions.

To establish a violation of section 1962(c), Estee Lauder must demonstrate that Perry was “employed by or associated with any enterprise ... to conduct or participate ... in the conduct of a ... pattern of racketeering activity.” Perry contends that Estee Lauder’s failure to allege that Perry was “associated with” a RICO enterprise renders the complaint fatally defective. For support, Perry looks to Judge Pollack’s dismissal of a RICO count in Moss v. Morgan Stanley, 553 F.Supp. 1347 (S.D.N.Y.), aff'd, 719 F.2d 5 (2d Cir.1983). The court finds Moss readily distinguishable from this case. The complaint in Moss contained no allegation of Morgan Stanley’s direct or indirect participation in the activities of other defendants. Id. at 1362. Thus, the plaintiff in Moss failed to supply the allegations necessary to cross even the low threshold established by the Supreme Court’s decision in Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957). See also Strobl v. New York Mercantile Exchange, 561 F.Supp. 379, 383 (S.D.N.Y.1983).

By contrast, Estee Lauder’s complaint alleges existence of a scheme “devised by Harco, Aronson and Perry to defraud [Estee Lauder] through the submission of inflated bids and the creation of false invoices.” As Perry concedes, the complaint also alleges Perry’s active participation in this scheme. The court, therefore, finds that Estee Lauder’s complaint describes circumstances which, if proved, could constitute a violation of section 1962(c). See also Moss v. Morgan Stanley, 719 F.2d at 20-23.

Perry would have the court adopt the position that the complaint must allege that Estee Lauder was involved in the operation or management of the RICO enterprise. Perry’s position, however, stands at odds with the clear weight of authority. Although the Second Circuit has not addressed this issue, this court finds persuasive the reasoning of the Fifth Circuit in United States v. Elliott, 571 F.2d 880 (5th Cir.), cert. denied, 439 U.S. 953, 99 S.Ct. 349, 58 L.Ed.2d 344 (1978):

The substantive prescriptions of the RICO statute apply to insiders and outsiders — those merely “associated with” an enterprise — who participate directly and indirectly in the enterprise’s affairs through a pattern of racketeering activity. 18 U.S.C. § 1962(c).

571 F.2d at 903 (emphasis in original). See also United States v. Bright, 630 F.2d 804, 830 (5th Cir.1980); United States v. Forsythe, 560 F.2d 1127, 1135-36 (3rd Cir. 1977); but see United States v. Bledsoe, 674 F.2d 647, 661 (8th Cir.1982), cert. denied, 459 U.S. 1040, 103 S.Ct. 456, 74 L.Ed.2d 608 (1983). Therefore, the court declines Perry’s invitation to narrow the definition of a RICO enterprise.

Section 1964(c) permits recovery of treble damages for injuries arising from racketeering activity perpetrated in violation of section 1962. Perry maintains that Estee Lauder’s complaint should be dismissed because the complaint fails to allege that Estee Lauder’s injuries were the result of racketeering activity. Instead, Perry reads the complaint to allege crimes arising from only predicate offenses.

The court is satisfied that Estee Lauder has made the requisite allegation of injury from racketeering activity. The complaint clearly alleges injury from the scheme of bribes and kickbacks defining the racketeering activity- in this ease. That those injuries are the same sort of injuries which result from the commission of the predicate offenses does not render the complaint invalid. See, e.g., Meineke Discount Muffler Shops, Inc. v. Noto, 548 F.Supp. 352, 354 (E.D.N.Y.1982); Hellenic Lines, Ltd. v. O’Hearn, 523 F.Supp. 244, 248 (S.D.N.Y. 1981). It may well be that Estee Lauder will fail to prove that injuries were suffered as a result of racketeering activity. That failure, however, will appear only later in this litigation when Estee Lauder's proof is set against a higher threshold than that raised by Rule 12(b)(6).

In a related vein, the court notes that under Rule 12(b)(6), a motion to dismiss which looks beyond the face of the pleadings to the merits of the case may be treated as a motion for summary judgment. 6 Moore’s Federal Practice, ¶ 56.03 (2d ed. 1983). See also Boro Hall Corporation v. General Motors Corporation, 124 F.2d 822, 823 (2d Cir.1942); McKee v. Southern Railway Company, 50 F.R.D. 502, 506 n. 2 (N.D.Ga.1970). By its submission of a lengthy affidavit with attached exhibits, Perry has clearly gone beyond the face of the pleadings. Even so, the court finds material issues of fact as to all issues raised in Perry’s 12(b)(6) motion. This finding mirrors that made by Judge Pollack in denying a motion for summary judgment arising out of the same scheme which is the subject of this litigation. Estee Lauder, Inc. v. Harco Graphics, Inc., 558 F.Supp. 83, 84 (S.D.N.Y.1983).

The court concludes that Estee Lauder’s complaint satisfies the liberal pleading requirements contained in the Federal Rules of Civil Procedure. Therefore, the court denies Perry’s motion to dismiss the complaint.

2. Motion for Summary Judgment

Perry has moved for summary judgment on the ground that Estee Lauder’s suit is barred by New York’s statute of limitations. The RICO statute carries no statute of limitations. It is well settled that where there exists no applicable federal statute of limitations, courts will apply the most closely analogous state statute of limitations. Johnson v. Railway Express Agency, Inc., 421 U.S. 454, 464, 95 S.Ct. 1716, 1722, 44 L.Ed.2d 295 (1975); Berry Petroleum Company v. Adams & Peck, 518 F.2d 402, 407 (2d Cir.1975). Perry argues that the statute of limitations for civil RICO actions is the three-year limitation on suits “to recover upon a liability, penalty or forfeiture created or imposed by statute.” N.Y.Civ.Prac.Law § 214(2) (McKinney Supp. 1983-84). Since this suit commenced in December 1982, over three years after the cause of action accrued, application of section 214(2) would bar this suit.

Perry reasons that since RICO is a new statute creating new opportunities for enforcing existing statutes, section 214(2) is applicable. Support for Perry’s position comes from Ingram Corp. v. J. Ray McDermott & Co., Inc., 495 F.Supp. 1321, 1324 n. 4 (E.D.La.1980), in which a federal district court assumed that RICO should be covered by the statute of limitations for newly created causes of action. In the alternative, Perry cites language from cases determining statutes of limitations for civil rights and securities claims. Similar language appears in New York state court decisions. See, e.g., City of New York v. Kingsview Homes, Inc., 70 A.D.2d 866, 418 N.Y.S.2d 62 (1st Dep’t 1979). Then, too, Perry mentions certain policies such as uniformity which would be effectuated by selecting section 214(2) as the applicable statute of limitations.

In this case, the alternative to section 214(2) is the six-year limitation for actions based upon fraud, N.Y.Civ.Prac. § 213(8) (McKinney Supp.1983-84). Estee Lauder’s action is clearly one based upon fraud. The scheme allegedly created by Juda was designed to steal money from Estee Lauder through various misrepresentations — inflated bids, fictitious invoices and transfers to dummy corporations. The essential question before the court, then, is whether to accept Perry’s argument that RICO should qualify as a statute creating or imposing liability as defined in section 214(2).

Perry’s arguments have been rejected by other district courts. In Durante Brothers v. Flushing National Bank, 571 F.Supp. 489 (E.D.N.Y.1983) (Nickerson, J.), the court refused to allow a plaintiff to lengthen the statute of limitations for some of its RICO claims by invoking section 214(2). Judge Nickerson reasoned that the action before him was analogous to “an action to recover any overcharge of interest or to enforce a penalty for such overcharge” and, therefore, fell within the ambit section 215(6). Id. at 492-93. At the same time, he observed that by its terms section 214(2) applies “except as provided in sections 214 and 215.” Since section 215(6) provides a statute of limitations, section 214(2) was rendered inapplicable. Judge Nickerson also noted the applicability of the six-year limitation to a fraud count in plaintiff’s complaint. Id. at 492.

Similarly, in Prudential Lines v. McKeon, No. 83 Civ. 5833, slip op. (S.D.N.Y. April 21, 1982), Judge Lowe found section 213(8) rather than section 214(2) applicable to a RICO claim. In McKeon, as in this case, plaintiff’s complaint alleged a series of kickbacks designed to defraud the plaintiff. Cf. State Farm Fire & Casualty Company v. Estate of Catón, 540 F.Supp. 673, 688 (N.D.Ind.1982) (finding that applicable limitation period in case brought under RICO for fraud against insurance company was limitation period for relief against fraud rather than for statutorily imposed liability). These cases reveal a reticence to view RICO as imposing or creating new liability. Thus, this court concludes .that section 214(2) is not applicable. Rather, section 213(8) applies in the instant case.

The reticence of district courts to view RICO as creating new liability is hardly unjustified. Aside from the problem of statutory construction noted by Judge Nickerson in Durante Brothers, it is clear as Perry emphasizes that the RICO statute differs from other statutes. What distinguishes RICO, however, is that it offers new opportunities for enforcing existing statutes. See Blakey and Gettings, “Racketeer Influenced and Corrupt Organizations (RICO): Basic Concepts — Criminal and Civil Remedies,” 53 Temple L.Q. 1009, 1013-14 (1980). By contrast, the federal civil rights statute, 42 U.S.C. § 1983, represents a wholly new form of liability. As the Second Circuit noted in Pauk v. Board of Trustees of City University of New York, 654 F.2d 856 (2d Cir.1981), cert. denied, 455 U.S. 1000, 102 S.Ct. 1631, 71 L.Ed.2d 866 (1982), section 1983 is not a statute “that provides only ‘additional’ remedies for well-established liabilities.” Id. at 864. This court rejects Perry’s suggestion that RICO creates or imposes liability in the same manner as section 1983.

Finally, Perry inveighs against the possible confusion engendered by multiple statutes of limitation for RICO claims. Accepting the principle of multiple statutes of limitation, however, gives the RICO statute a flexibility which comports with its spirit. 53 Temple L.Q. at 1014. Imposition of a single statute of limitations for all RICO offenses would ignore considerable differences in the severity of various patterns of racketeering activity. Moreover, the court notes the impropriety of imposing judicial restrictions on the RICO statute in the form of a uniform statute of limitations. See generally Note, “Civil RICO: The Temptation and Impropriety of Judicial Restrictions,” 95 Harv.L.Rev. 1101 (1982). Therefore, the court accepts the possibility of widely varying statutes of limitation for actions brought under RICO.

In sum, the court finds section 213(8) applicable to this lawsuit. Since Estee Lauder brought suit within six years of accrual of the cause of action, its claim is properly before the court. Accordingly, Perry’s motion for summary judgment is denied.

CONCLUSION

For the reasons stated above, the court denies Perry’s motions to dismiss and for summary judgment. The next pre-trial conference in this case will occur on March 23, 1984, at 2:00 p.m. in Courtroom 906.

      . Estee Lauder has moved to sever its claim against Harco and to amend the complaint to assert diversity jurisdiction as an addition basis of subject matter jurisdiction. The court will address these motions at the next pre-trial conference.

      . Juda apparently set up dummy corporations other than High Street. Estee Lauder’s complaint, however, mentions only High Street.

      . Estee Lauder sued Juda in New York state court. A suit similar to this one was filed against Harco, Aronson and Spencer Press, Inc. in the Southern District. See Estee Lauder, Inc.
        v. Harco Graphics, Inc., 558 F.Supp. 83 (S.D.N.Y. 1983).

      . Estee Lauder has also alleged that defendants conspired to violate section 1962(c).

      . Perry argues that with the other counts against it dismissed, the common law fraud count must be dismissed because of lack of complete diversity between the parties. Of course, the court’s refusal to dismiss the other counts renders Perry’s argument moot.

      . Obviously, a statute like a securities statute creates new liability of the sort intended by section 214(2).


source: Caselaw Access Project

author: CURTIN, Chief Judge.

license: Public Domain

text:
    Elsie M. PARADISE, Plaintiff, v. Michael C. O’LAUGHLIN, Individually and as Mayor of the City of Niagara Falls, New York, and also as a voting member of the City Council of Niagara Falls, New York; Leo Martel, Individually and as a Councilman of the City Council of Niagara Falls, New York; and Michael V. Redding, Individually and as a Councilman-Elect of the City Council of Niagara Falls, New York, Defendants.
    No. CIY-83-1461C.
    United States District Court, W.D. New York.
    May 4, 1984.
    Jaeckle, Fleischmann & Mugel (J. Edmund deCastro, of counsel), Buffalo, N.Y., for plaintiff.
    Carl E. Mooradian, Corp. Counsel of City of Niagara Falls (William W. Zarr, Asst. Corp. Counsel, of counsel), Niagara Falls, N.Y., for defendants.
   CURTIN, Chief Judge.

In this action brought pursuant to 42 U.S.C. § 1983 and 28 U.S.C. § 1343(a)(3), plaintiff Elsie Paradise seeks to permanently enjoin and restrain defendants O’Laughlin, Martel, and Redding, individually and as voting members of the City Council of the City of Niagara Falls, from taking any action to terminate or replace her as City Clerk of Niagara Falls, New York. A hearing was held, and summations have been concluded. The following constitutes the court’s findings of fact and conclusions of law.

Plaintiff, a Republican, was chosen as City Clerk in February of 1982 by the City Council of Niagara Falls, which at that time was composed of a Republican majority (three Republicans and two Democrats). The vote which placed her in her present position was 4-1: three Republican Councilmen and one Democrat voting in favor of her selection, and one Democratic Councilman voting against her. She has served as City Clerk since that time.

Mayor Michael C. O’Laughlin, who is also a member of the Council, Leo Martel, and Michael V. Redding now comprise the Democratic majority of the Council. May- or O’Laughlin and Mr. Martel had been reelected, and Mr. Redding was elected in the fall of 1983, with his term to commence on January 1, 1984. At present, the remaining members of the Council, Mervin J. Cook and Joseph J. Smith, are Republicans.

During November and December of 1983, newspaper articles and rumors circulated in the Niagara Falls community that Mrs. Paradise was to be replaced as City Clerk. Because of that, she commenced this action on December 27, 1983, contending that the Democratic majority on the Council was trying to replace her solely for political reasons in violation of her first amendment rights. She contends that:

[t]he position of Clerk of the City Council is a non-policy making, non-confidential governmental position for which political party affiliation is not required for the effective performance of the duties of the said office.

Amended Complaint, ¶ 11.

The court met with the parties in early January, 1984, and issued a temporary order restraining the City Council from removing Mrs. Paradise as City Clerk. Evidence was heard on January 30, 1984, and February 17, 1984, and after several adjournments, summations were heard on April 3, 1984. I delayed hearing summations until after March 24, 1984, when the Council formally voted to terminate the plaintiff and appoint Rita Buchalski as City Clerk in her place. The action against Councilmen Cook and Smith was dismissed by order of January 26, 1984. The action against Francis A. Soda, Chairman of the Niagara Falls Democratic City Committee, was also dismissed.

The duties of City Clerk are set forth in section 45 of the Charter of the City. A review of that section reveals that the City Clerk’s duties are ministerial, with discretion given in only minor matters. The City Clerk cannot hire or fire employees, upgrade or downgrade them in salary, or change their classification. The City Clerk issues various licenses but must grant the applications if the papers are in proper order. Budget requests go from the Clerk to the Budget Department and, finally, to the Manager and Council for approval. The Charter does not provide a term for the Clerk’s position but states that the Clerk serves “during the pleasure of the Council ...” (Def.Ex. A, City Charter § 7(3)) and “may at any time be arbitrarily removed or discharged by the Council____” (Id. at § 20).

A few days after the November 1983 election, in which the Democrats gained control of the Council, articles appeared in the press indicating that a change in the City Clerk’s position was contemplated by the Democratic majority. On November 10, 1983, the Niagara Gazette quoted May- or O’Laughlin. When asked if Elsie Paradise might be replaced, the Mayor said:

That is a position we will certainly look at closely. I have nothing against Elsie Paradise, but will we replace her as city clerk? I’d have to say realistically, we will think about that, yes.

(Plaintiff’s Ex. 12B.)

On December 1, 1983, Mayor O’Laughlin and incumbent Democratic Councilmen Martel and Redding received a letter from Chairman Soda of the Democratic City Committee which recommended that “qualified Democrats be considered for the positions of City Clerk, etc.” (Plaintiff’s Exhibit 9.) Mayor O’Laughlin informed Mr. Soda that he would not be bound by party dictates (Defendants’ Ex. C — letter to Soda, 12-16-83). He and other Councilmen insisted that Soda’s directions did not control their decision with respect to filling the City Clerk slot.

A radio station WEBR broadcast of December 29, 1983, represented Councilman Martel as stating that: “Whether Elsie did a good job or not isn’t the point. He [Martel] says party politics brought her in two years ago, and now the republicans find the shoe’s on the other foot.” (Plaintiff’s Ex. 2.)

The WEBR reporter also spoke about an interview with incoming Democratic Councilman Michael Redding.

He [Councilman Redding] says that in 1982 Elsie Paradise was brought to the City Clerk’s post when the GOP ousted Daniel White in what Redding calls a coldhearted way.

(Id.) Furthermore, Redding said that job performance was not important, since this was an issue of party politics, and unfortunately, performance does not always play a large part in such a decision (Tr. at 135).

It appears that Councilman Martel was the prime mover with respect to the termination of Mrs. Paradise. During his testimony, he stated that he wanted her terminated and that he discussed the problem with Mayor O’Laughlin and Councilman Redding and introduced a resolution to end her service. He was in favor of Rita Buchalski, who served as his campaign manager in the November election.

The resolution presented by Councilman Martel to remove Mrs. Paradise remained under consideration until March 12, 1984, when the City Council voted to terminate her and to appoint Rita Buchalski as City Clerk.

No evidence was offered to show that party affiliation was an important requirement for the effective performance of the City Clerk post. To the contrary, the May- or testified that the position of City Clerk could be performed equally well by a Republican, Democrat, Conservative, Liberal, or a person with no party affiliation. Councilman Redding agreed with this statement.

At the hearing, defendants attempted to show that her removal was not brought on by political considerations but because of various activities she carried out while in office. This is an afterthought, because while she served as City Clerk, the City Council was satisfied with her performance on the whole, and at times, some of the Council members, including the Mayor, commended her for her good work. Furthermore, when this matter was first brought on in early January, no mention was made at that time of any complaints about her work as City Clerk. Instead, defendants’ counsel submitted an affidavit on January 3, 1984, in opposition to injunctive relief, which characterized the City Clerk’s position as a policy-making position not deserving of first amendment protections. That affidavit further represented that the City Clerk’s position could be changed upon the whim of the City Council. Nowhere does it mention that Mrs. Paradise performed less than adequately in her position.

However, on January 11, 1984, the affidavit of Mayor O’Laughlin introduced the controversy over dog licenses. He stated that he had become aware of the controversy during the summer of 1983. Although O’Laughlin’s statements to the press neglected mention of any shortcoming in Mrs. Paradise’s work, he stated in an affidavit that the licensing problem was sufficiently serious to warrant dismissal of Mrs. Paradise. Councilman Martel’s affidavit, filed along with O’Laughlin’s, joined in this personal criticism of Mrs. Paradise’s job performance. Councilman Redding also objected to Mrs. Paradise being maintained as City Clerk, but did so on the theory that this lawsuit would preclude a “working relationship with plaintiff and ... [would be] detrimental to building a mutual confidence and rapport necessary between elected officials and their appointees.”

During the hearing, the defendants reiterated that Mrs. Paradise’s inquiries about the Niagara City Court procedures about handling dog license fees had caused confusion and unnecessary tension between the Chief City Court Judge and the City Council. She had begun to make inquiry about this problem in the late summer of 1983 at the request of the City Council. Inquiries by the State Department of Agriculture about the City’s procedures for collecting dog license fees prompted this investigation. Correspondence from the Chief City Court Clerk to both Mrs. Paradise and the City Manager represents that Mrs. Paradise’s “investigation” had caused an upset in the City Court (Def.Ex. B and D).

This correspondence about the dog license fees took place in September of 1983, and from that time until the end of the year, no complaint was made by the Council about plaintiff’s conduct relating to this matter. In reporting to the City Manager, William Sdao, Mrs. Paradise had given him a note which told him of the problems she had had with the City Court in regard to the collection of dog license fees and her perceived failure of the court system to prosecute those individuals who were not paying their fees. This memorandum went back to the City Court, which caused the court officials to protest.

At the hearing, Mayor O’Laughlin complained that the plaintiff had gone over the head of the City Court Judge and had contacted the Office of Court Administration. However, testimony revealed that Mrs. Paradise simply contacted a clerk in the Office of Court Administration to find out how the City Court was staffed in order to determine whether there was adequate personnel to process dog license fee complaints. She did not make a formal complaint to the Office of Court Administration on her own.

Councilman Joseph Smith, a Republican, testified that Paradise had been asked by the Council to find out what fees were being charged by neighboring municipalities so that the Niagara Falls fees could be brought up to date. This was done. Voting on the raising or lowering of any fees was done by the Council, and Mrs. Paradise had no discretion in that regard.

Councilman Martel, a tavern owner, blamed plaintiff for raising and collecting fees levied on amusement devices in taverns, but it was then revealed that the City Council had voted in favor of the measure and that she had no discretion with respect to fee increases. It was conceded by Councilman Martel that license fees comprised anticipated revenue of the City, and it was part of the job of the City Clerk to collect them. He also conceded that checking the fees of other cities, if requested by a councilman, would be part of her duties. Councilman Redding agreed that Paradise had done a good job at collecting license fees. He was aware that she had been commended for superior performance by the Niagara Gazette. Mayor O’Laughlin agreed that such fees were part of the anticipated City revenue and that the Clerk’s duty was to collect them.

Councilman Smith also testified that there had never been any charges of incompetency or inefficiency leveled against Mrs. Paradise. He testified that she had performed well in the office of the City Clerk and had typed up the minutes of Council proceedings, which her predecessor had not done. No Councilman had ever publicly criticized her, and there were no discussions among the Councilmen formally or informally about her performance.

The Supreme Court has recognized that the first amendment protects non-policy-making public employees from political dismissal. Branti v. Finkel, 445 U.S. 507, 100 S.Ct. 1287, 63 L.Ed.2d 574 (1980); Elrod v. Burns, 427 U.S. 347, 96 S.Ct. 2673, 49 L.Ed.2d 547 (1976). As City Clerk, Mrs. Paradise performed non-policy-making tasks. She has also demonstrated that her political affiliation was the “substantial” or “motivating” factor behind dismissal. Mt. Healthy City School Board of Education v. Doyle, 429 U.S. 274, 97 S.Ct. 568, 50 L.Ed.2d 471 (1977). .If the defendants are unable to demonstrate that legitimate, nonpolitical reasons exist to substantiate dismissal, Visser v. Magnarelli, 530 F.Supp. 1165, 1167 (N.D.N.Y.1982), or that political loyalty is a legitimate job qualification, McBee v. Jim Hogg County, Texas, 703 F.2d 834, 837 (1983), then Ms. Paradise is entitled to prevail on her claim.

Mrs. Paradise has adequately shown that political overtones infected the decision to remove her from office. The defendants have not argued that party affiliation is a necessary job qualification. Instead, they have presented evidence of non-political reasons to get rid of Mrs. Paradise.

The two complaints about Mrs. Paradise’s work which the defendants claim as reasons for her dismissal are insufficient as a basis for dismissal. The canine problem was resolved within a couple of months and did not become a matter of concern until the time of the hearing (Tr. at 17, Martel; at 54, O’Laughlin). The additional complaint that Mrs. Paradise improperly raised licensing fees for recreational machines in taverns is equally insubstantial. She was not responsible for license increases, but only for collection. The fees were increased as a result of a vote by the City Council — a vote which Martel, a tavern owner, opposed.

Because neither of these “reasons” rises to the level of a believable basis for dismissal, and because the City Council has already voted to replace Paradise with Councilman Martel’s Election Campaign Chairman, Rita Buchalski, it is apparent to the court that her dismissal was substantially motivated by the kind of political reasons suggested by the newspaper and radio items introduced as evidence by the plaintiff.

Recently, Judge John T. Elfvin in the case of Boyd v. Niagara County (CIV-83775E) permitted the removal of Ms. Boyd as Clerk in Niagara County. In the Boyd case, however, the defendants were able to offer evidence showing unsatisfactory performance, giving good reason for her termination and replacement. In this case, the performance of the plaintiff in her office was satisfactory as a whole, and replacement came about for political reasons.

I note the reservations expressed by Justice Powell in Elrod, supra, 427 U.S. at 380-81, 96 S.Ct. at 2692-3 and by the Honorable Howard G. Munson in the Northern District of New York in Visser, supra at 1173-74. See also Dusanenko v. Maloney, 560 F.Supp. 822, 828 (S.D.N.Y.1983). As Judge Munson pointed out, there are salutary features in the patronage system. Furthermore, most citizens in the community have their only contact with their City government through the City Clerk’s Office. The image that the party in power desires to put before the public is revealed day in and day out by the activities of the City Clerk. Nevertheless, I must respect and follow the principles set forth in the Supreme Court decisions.

I emphasize that this does not give a permanent appointment to the City Clerk. The Council can always dismiss or fail to rehire the Clerk for legitimate, apolitical reasons.

Plaintiff is entitled to injunctive relief. The Council is directed to take up the problem of the City Clerk appointment again. They are enjoined from removing and replacing the plaintiff on the present record. Because I had directed that the hearing in this matter be consolidated with trial on the merits in accordance with Rule 65(a)(2) of the Federal Rules of Civil Procedure, the Clerk is directed to enter final judgment accordingly.

So ordered.


author: MILTON POLLACK, Senior District Judge.

text:
    UNITED STATES of America, Plaintiff, v. William SHEPPARD, Defendant.
    82 Cr. 464 (MP).
    United States District Court, S.D. New York.
    Jan. 7, 1985.

      Rudolph W. Giuliani, U.S. Atty., New York City, for plaintiff; by Barry A. Bohrer of counsel.
    Morton Berger, Spring Valley, N.Y. and Shereff, Friedman, Hoffman & Goodman, New York City, for defendant; by Richard D. Weinberg and Cary R. Clewley of counsel.
   OPINION

MILTON POLLACK, Senior District Judge.

The defendant, William Sheppard, moves pursuant to Rule 33, Fed.R.Crim.P., to set aside his conviction on grounds of new evidence and fault of the government in producing documents before trial. He was convicted in September, 1982, of partnership in a scheme whereby $1,256,356.80 was embezzled from Bankers Trust Company by employees of the bank and laundered through Sheppard. The funds were embezzled in the form of two official bank checks and deposited in a bank account opened for purposes of the scheme by Sheppard. The money was converted into gold coins, then into cash, and finally divided among the co-conspirators.

Sheppard’s five partners in the embezzlement all pleaded guilty to the conspiracy prior to trial; two pleaded guilty to one count of embezzlement, and one to the count of wire fraud. Three of Sheppard’s business partners testified at the trial as government witnesses. Through their testimony, the testimony of a bank investigator, a questioned document examiner, and documentary evidence, as well as the testimony of Sheppard himself, who took the stand, he was firmly planted in the criminal partnership. Sheppard’s conviction was unanimously affirmed by order of the Court of Appeals on May 19, 1983, 742 F.2d 1444.

This motion was made almost a year later, on the unsworn assertions of trial counsel for Sheppard, portions of the trial record, and documents which counsel had collected. The government responded promptly, pointing out the insufficiency of the attack on the judgment. A series of requests for an extension of the time for the defendant to reply were granted, and ultimately a new set of attorneys supplied papers comprising an affidavit of the trial lawyer, and a brief designed to set up their principal argument that the government’s discovery before trial was faulty and had violated Sheppard’s right to due process. Curiously, some of the allegedly undisclosed material was actually produced and used by Sheppard’s counsel at the trial. The government has responded to the reply, both by affidavit and a brief.

The government’s affidavit and analyses of the issues, which are made part of this ruling, adequately demonstrate that the attempt to set aside the conviction lacks legal merit and is based on speculations which fail utterly to show that the jury would probably have acquitted Sheppard if the points now made had been additionally developed at trial. None of the points now made could possibly have overcome the solidly based record firmly planting the defendant in the embezzlement and laundering operation. The evidence of Sheppard’s guilt was overwhelming.

No fault on the part of the government has been shown with respect to data that Sheppard now claims was newly discovered and should have been furnished to him, for the reasons that: a) the government either never had such data; or, b) the data was not requested by Sheppard at any time, or fairly identified in any request for data by the defendant; or, c) could have been discovered sooner by the defendant himself with the exercise of due diligence in order to avail himself of Rule 33. The second-guessing which is now presented does not relate to anything for which Sheppard’s counsel had made a sufficiently “specific request” for “particular” information. A request for corporate records in general could hardly constitute a “specific request” for a particular bank deposit slip, or particular checks deposited into a corporate bank account of the business in which he was engaged, especially so where the defendant himself was an authorized signatory of that bank account, and ultimately obtained information from the Bank, by himself, without difficulty. A careful scrutiny of the government’s obligations under the informal open discovery suggestions of the court and the compliance therewith in advance of the trial show, unquestionably, that the government fairly and fully disclosed what it could anticipate the defendant might require during the trial. No Brady or apparent Agurs data was withheld. The best evidence of ample disclosure lies in the fact that no motion for further information was made.

No Order Directing Discovery Exists

Although defendant’s papers speak of a “court order” to the parties to engage in discovery, in fact no such order was made. The discovery by the defendant came about through voluntary compliance by the government without any requests from defendant or need for intervention on the part of the Court. This hardly warrants charges of suppression of evidence by the government. The charge now that a few isolated pieces of documentary evidence would have been useful additionally for impeachment, or support of credibility, as the case may be, in isolated aspects of the overall case which could not be foreseen until particular witnesses had testified, gives little support for invoking a Rule 33 remedy.

When the isolated matters complained of are placed in proper focus from which to evaluate the scattershot and unsupportable complaints which ground this motion, it readily can be seen that they have no bearing on the ultimate disposition of the case by the jury. The case against the defendant was too strong to have been influenced by these isolated matters.

Overview

The speciousness and shallowness of the matters on which the Rule 33 motion is made are at once made apparent by a review of the enormity of Sheppard’s criminal conduct. The embezzlement and laundering operations charged in the indictment came about as follows.

Bankers Trust Company held securities for customers on which interest or dividends were paid, to be distributed to the parties entitled thereto. The Depository Trust Company (“DTC”) made payments thereof to Bankers Trust on behalf of corporations whose securities were being held by the Bank as custodian for the true owners to whom payments would be distributed. The items collected were reflected in a ledger or journal maintained by DTC containing thousands of bookkeeping or journal entries.

Faulty allocation by Bankers Trust of those dividend and interest payments created in its hands a “pool” of money representing excess funds paid by DTC that had not been accounted for by Bankers Trust; the “pool,” in 1981, as reflected in the DTC Dividends Received ledger, was in excess of $50 million. That “pool” was unclaimed money for which the holders of record were unknown.

Certain New York employees of the Bank in the Securities Operations Division perceived that, were entries in the DTC ledger purged, there would be, pro tanto, an elimination of the source and amount of such collections and leave the Bank holding amounts attributable to the purged entries without identification of their owners or true claimants.

The criminal scheme of embezzlement and laundering of the funds abstracted from the Bank developed around this situation.

An employee of the Bank was to eliminate enough of the ledger records of the collected interest and dividends to permit the Securities Operations Division of the Bank to issue the official bank checks hereafter described against the “pool” and the moneys so embezzled would be passed to the New Jersey defendants — Sramowicz, Sheppard and Burke — who would deposit them in a gold broker’s bank account and launder the proceeds by gold coin purchases made by Sheppard; the coins would be delivered to Sheppard and they would then be cashed among the criminal partners and sold by them in whole or in part.

Sheppard readied the New Jersey end of the embezzlement by allegedly setting up such a bank account for “Engelhard Industries,” which was given the “A/C # 7322461” at Summit Elizabeth Trust Co. (the “Trust Company”), located in Clark, New Jersey. Sheppard had told Sramowicz that he had a former associate in the brokerage business whose identity remained anonymous and who could be instrumental in opening a bank account with the Trust Company, ostensibly for Engelhard Industries, a gold broker. It became known to his partners for ■ the first time when the thefts were investigated by Bankers Trust that Sheppard had actually only used his own name in opening that account. Sheppard also executed a further step in the scheme; he obtained a Post Office Box at the Post Office in Clark, New Jersey, to receive delivery of the gold coins to be purchased with the embezzled funds.

Accordingly, the investment ledger of DTC was purged of entries, as planned, by a compliant employee of Bankers Trust, making it possible for the criminal participants in the Bank to draw two official bank checks on the “pool,” each drawn to: “Summit Elizabeth Trust Co. A/C 7322461” as the payee, dated, respectively, September 3, 1981 for $600,970.75, and November 12, 1981 for $655,386.09. The account number of the Trust Company account that Sheppard had opened was given by him to Sramowicz and this had been passed on to his New York confederate at the Bank. The latter had the checks drawn accordingly, and delivered each check to Sramowicz, who in turn hand-delivered each to Sheppard, who then deposited each check (without endorsing it) in the Trust Company which collected the funds and credited their A/C 7322461.

In preparation for the next step, Sheppard had communicated with the manager of Manfra, Tordella & Brookes (“MTB”), dealers in gold coin, and apprised him that he would be placing orders for gold coins and gave the Trust Company as reference. After the official checks deposited in the Trust Company had cleared, an employee of the Trust Company, on Sheppard’s instructions, placed orders contemporaneously with the collection of each check for gold Krugerrands or for Canadian Maple Leafs with MTB to be purchased on behalf of the numbered account with the Trust Company. Payments for the coins were made by wire transfer directly from the Trust Company to MTB’s bank account. The two transactions in gold coins, made respectively on September 16, 1981 and November 25, 1981, amounted, respectively, to $538,-487.50, and $638,750.

On Sheppard’s instructions, the gold coins were then shipped by MTB to Sheppard’s Post Office Box in installments. Sheppard picked up the coins at the local Post Office and brought them to the NRG Industries office, where Sheppard, Sramowicz and Burke (“the three”), made their offices, and placed them in the safe bought by Sheppard at about that time.

The New York employees of the Bank participating in the scheme were allotted % of the first purchase of coins, and the New Jersey group kept V3 of the coins; these proportions were reversed in distributing the avails of the second purchase, with the effect that each group ultimately obtained half of the coins, or the sale proceeds thereof.

The coins retained by the New Jersey conspirators — the three — were in part converted to cash by Burke, who sold a majority of them to Ray’s Coin Exchange in Elizabeth, New Jersey. Burke brought the money to NRG, and it was kept in the safe there. A good part of the money was periodically deposited in the NRG bank account maintained at United Counties Trust Company in Clerk, New Jersey, over which Sheppard held signature power, as did the others. The deposits, on instructions to the Company’s accountant, from the three, were recorded in the accounting records of NRG as their capital investments. Sheppard had instructed that one such deposit be recorded in the name of Donald Sheppard, his nephew, who worked at NRG, and that another be recorded in his name, William Sheppard.

The division of the New Jersey share of the embezzlements was lk each to the “three” and lk was given to Sheppard for delivery to “his man,” the anonymous person who, Sheppard said, had set up the arrangements for the “Engelhard Industries” bank account with the Trust Company. Sheppard received $150,000 as his share, and $150,000 for “his man” (who has never surfaced, if, indeed, he existed).

This is the framework of the overwhelming case proved against Sheppard, omitting unnecessary detail. Further illumination to flesh out the story in more detail may be found in the two memoranda and two affidavits of the government which are filed herein. No exception has been taken, or could properly be taken, to the recitals of proven fact contained therein. It is against this broad background, solidly established by credible evidence, witnesses and documents, and corroborated by circumstances, that the isolated straws of purportedly “new” evidence, largely on matters of credibility and all relating to factual questions collateral to the issue of defendant’s guilt or innocence, are to be evaluated for purposes of the Rule 33 application.

The specific matters complained of hereon will be examined in greater detail as follows.

1. Fekete’s Testimony and the November Telephone Bill of NRG Industries

Unusually large cash deposits in the NRG Industries account at United Counties Trust Co. were made in September and October, 1981. The capital of the corporation had been increased between July 11 and October 31, 1981 from $44,000 to $130,000. Mr. Fekete, the accountant for NRG, testified that each month he went through the checkbook stubs, compared them to the bank statements, and inquired of Sheppard, Sramowicz and Burke where the money had come from, and made his book entries accordingly. He was told, for example, that a $9,300 deposit in NRG was a capital investment by Donald Sheppard, (the defendant’s nephew, who was an employee of NRG), and that a $9,600 deposit in NRG was a capital investment by the defendant. Fekete testified that he was told to make such notations at a meeting attended by Sramowicz, Sheppard and Burke. On the basis of that information, he wrote next to the deposits mentioned that they were capital investments attributable to those named. He testified that he went over all of the deposits several times because there were so many alleged capital investments he wanted to ascertain how much was to be attributed to each of the four individuals mentioned above. He recalled asking the question “Do we have to issue the shares of stock to Donald Sheppard as a result of his capital investment?”, and the defendant told him “No.”

The dispute engendered on this motion concerns the date on which Fekete’s conversation with the “three” took place. Fekete testified that it had occurred on November 11, 1981, at the offices of NRG. The defendant denied the conversation and now challenges that date as a result of November telephone bills of NRG that he requested for the first time and obtained after the trial, which purport to indicate that Burke was in fact in Troy, New York, on November 11, 1981. Among the voluminous documentary items that the government had provided for the defendant before the trial were some of the telephone records of the company. NRG continued as a going concern well after those dates.

The initial papers on this motion made by defendant’s trial attorney did not allege nor does the record reflect that he made any discovery request for November, 1981 records of NRG Industries, either before or during trial. The September and October, 1981 telephone records (the period where the scheme was hatched and the Trust Company account and Post Office box were opened by Sheppard and the arrangement for gold coin purchases was made by Sheppard), were introduced by the government (GX 5, 18). Copies of those records were provided to Sheppard before the trial. No specific request was made by the defendant for any other telephone records. That an issue would arise on the trial as to the date of Fekete’s meeting with Sramowicz, Burke and Sheppard was problematical; the issue, of course, that could arise was whether such a meeting took place. Sheppard denied the accounting instructions to Fekete. Sramowicz and Burke, in their testimony at the trial, confirmed that those instructions were given to the accountant.

Fekete is a Certified Public Accountant and an Associate Professor of Accountancy at St. Peter’s College, and had been the accountant for NRG from October, 1980 through May, 1982. He testified that he conferred with management of NRG monthly for the purpose of recording the receipts and disbursements. He was a totally neutral, disinterested witness, and no claim has been made that he had any motivation to falsify the instructions as to how to record the unusual deposits in the NRG account or from whom they had come. At all events, the actual date of those instructions was of no great moment; the significant matter was the fact that such instructions were given and that the records recorded the same accordingly. The controversy over the defendant’s failure to obtain the telephone records for November 10 to 15, 1981, until after the trial fails to raise any matter of significance on the totality of the case itself, or even of Fekete’s independence and motivation as a witness.

Sheppard can hardly be said to have made a pretrial request for “specific evidence” within the context of Brady and Agurs for the November telephone records. Even assuming that counsel was interested in “the records of NRG Industries,” this surely did not become a “specific request” for those telephone records as Sheppard now claims. It did not provide the prosecutor with notice of anything or exactly what the defense desired. See, e.g., United States v. Agurs, 427 U.S. 97, 106, 96 S.Ct. 2392, 2398, 49 L.Ed.2d 342 (1976).

2. NRG Industries Bank Records

The defendant now complains that he was not furnished, before the trial, with (a) a deposit slip dated February 19, 1982 reflecting a deposit of $15,200 into the NRG Industries account at United Counties Trust Co.; (b) the Currency Transaction Report with respect to that deposit on February 19, 1982; and, (c) checks deposited to the account of NRG Industries drawn on the account of, one Jaspar Parella.

The short answer to items (a) and (c) is that they were not in the possession of the government. The prosecutor’s affidavit clearly shows that NRG’s bank did not supply the government with any deposit slips or with any cancelled checks that had been deposited into the NRG account. As a matter of fact, Sheppard had received those deposit slips. Indeed, he utilized many of them in cross-examining the government witness, William Sramowicz, on September 13, 1982.

Apparently, while the United Counties Trust supplied Sheppard with the NRG deposit slips — many of which he used at trial — the bank records reflect that it did not supply him before trial with a copy of the disputed deposit slip dated February 19, 1982 reflecting a deposit of $15,200. Indeed, the bank’s records reflect that on September 27, 1982 a copy of that deposit slip was forwarded to a bank branch manager for transmittal to Sheppard — pursuant to Sheppard’s request. This disclosure strongly suggests that Sheppard surely could have discovered the $15,200 deposit slip sooner than he did had he exercised due diligence. Thus, this evidence may not be even charitably described as newly discovered.

Significantly, while neither the government, nor Sheppard, had possession of the $15,200 deposit slip at trial, Sheppard did produce in his defense at trial the original customer receipt for the $15,200 deposit made on February 19, 1982. It was Sheppard himself who injected the matter of the February 19, 1982 deposit of $15,200 into the NRG account. Sheppard, of course, was an authorized signatory of that account at the United Counties Trust Co., and readily could obtain any information that he wanted from that bank, and he cannot demonstrate that the disputed information “could not have been discovered sooner with the exercise of due diligence.” United States v. Dukes, 727 F.2d 34, 38 (2d Cir.1984); United States v. Alessi, 638 F.2d 466, 479 (2d Cir.1980).

Contrary to Sheppard’s claim, item “(b)” above, regarding the government’s failure to furnish Sheppard with a copy of the Currency Transaction Report (“CTR”) prepared by the bank, though utilized by the government in cross-examining Sheppard, presents no reasonable likelihood that a pretrial discovery of the CTR would have influenced the jury’s assessment of his credibility. Wholly apart from a fleeting impeachment with the CTR, the jury reasonably could have rejected Sheppard’s version of events as utterly implausible, based on, among other things, Sheppard’s self-serving preservation of, and introduction into evidence, of a copy of a torn check and torn deposit slip — which the jury requested during its deliberations. The government was not required to fish out and disclose the CTR to Sheppard prior to trial. The document became relevant for impeachment purposes only after Sheppard testified on direct that he and not Burke “deposited the $15,200 in the NRG account,” thus seeking to corroborate his defense that he was open and forthright in his financial dealings. See United States v. Gleason, 616 F.2d 2, 24 (2d Cir.1979, cert. denied, 444 U.S. 1082, 100 S.Ct. 1037, 62 L.Ed.2d 767 (1980)). There was no obligation on the part of the government to anticipate Sheppard’s testimony and then furnish him with otherwise irrelevant material that might conflict with that testimony.

Even after he was confronted with the CTR, Sheppard did not request a continuance to permit preparation of a more plausible reconciliation between the documents and his direct testimony. Any claim of prejudice in his failure to have the document in advance of trial is purely gossamer. The deposit of $15,200 was raised solely by Sheppard at trial, and until he injected the matter into the trial, from all appearances the CTR reflected a transaction of Burke’s about which Burke did not testify. And while Sheppard raised the matter of the $15,200 deposit, he also corroborated his testimony by introducing an original customer’s receipt that he had received upon making the deposit and produced at the trial. On cross-examination, the government merely, in a single question or two, inquired about the apparent discrepancy between Sheppard’s testimony and the CTR reflecting the transaction. By no stretch of the imagination could the fleeting possible impeachment with the CTR affect the outcome of the trial.

3. Legible Copies of the NRG Checking Account Statements

The moving party complains that the government failed to supply copies of the NRG checking account statements that were “legible.” The copies supplied were xerox copies of copies in the possession of the government. On the government’s copy, Burke had underlined in yellow the deposits representing embezzled funds. The yellow underscoring apparently did not show up when the copy was xeroxed.

The belated claim that the government failed to provide Sheppard with “clear copies” of the NRG checking account statements, reflecting emphasis supplied by Burke in preparing for trial, is considerably short of a reasonable complaint. At the time, when the government turned over the copy of the checking account statements, the defendant’s attorney made no complaint and didn’t request a better copy. Sheppard does not claim that the government failed to disclose the deposits as shown by the bank — they were clearly reflected on the monthly statements provided to him. Rather, he complains that the government failed to identify those to which the witness would particularly address himself or to identify the source of the funds deposited. The government had no such obligations.

4. Burke’s Understanding with the Government

The defendant raises a question concerning Burke’s trial testimony that he had no understanding with the government concerning an indictment pending against him in New Jersey. He had testified that his cooperation in this case would be pointed out to this Court at the time of sentencing in this Court.

The attorney for the defendant claims that, on July 13, 1984, he encountered the lawyer for Burke in the New Jersey matter, who told Mr. Berger, the lawyer in this case, that there was an understanding with the federal government in New York that they would bring to the attention of the New Jersey authorities Burke’s cooperation in the Sheppard case. The Berger affidavit further says that he was advised that following the Sheppard trial the federal government wrote a letter to the New Jersey Court advising the New Jersey Court of Burke’s appearance in this Court. The moving papers hereon say that the government simply failed to discharge one of its essential Brady obligations — to provide the defendant with a complete understanding of any agreement between the government and one of its witnesses.

On the contrary, Burke testified that he had entered into an agreement with the government when he pleaded guilty to one count of conspiracy; that his agreement was that in exchange for his cooperation, that would be pointed out to the Judge in this Court at the time of his sentencing. The agreement was marked as Government Exhibit 13 for identification. The government’s affidavit asserts that through both Burke’s testimony and the cooperation agreement, Exhibit 13, to which Sheppard had ready access, Sheppard had been provided with the “complete understanding” between Burke and the government. There is no evidence to the contrary.

Conclusion

The strands of additional possible proof that the defendant might have brought to the jury’s attention, here euphemistically described as “newly discovered evidence,” present no probability that the introduction thereof at trial would have resulted in Sheppard’s acquittal. No fault may be legitimately ascribed to the prosecution concerning the pre-trial discovery or the failure to have supplied the “new” material to the defendant.

The motion is, on analysis, highly frivolous, lacking in factual and legal merit and based on unworthy and insufficient claims.

Motion Denied.


text:
    UNITED STATES of America, Plaintiff, v. William SHEPPARD, Defendant.
    No. 82 Cr. 464 (MP).
    United States District Court, S.D. New York.
    Nov. 15, 1985.

      Rudolph W. Giuliani, U.S. Atty., S.D. N.Y., New York City, for U.S. of America.
    Jon M. Kaufman, P.C., New York City, for defendant.
   MEMORANDUM

MILTON POLLACK, Senior District Judge.

Defendant William Sheppard moves, pursuant to Rule 32(c)(3)(D), Federal Rules of Criminal Procedure, and 28 U.S.C. § 2255, to correct alleged factual errors in the presentence report prepared by the United States Probation Office at the time of his sentencing on December 17, 1982. Sheppard claims that his trial attorney, Morton Berger, Esq., failed to take the steps necessary at the time of sentencing to correct the report; Sheppard asserts that this alleged error by his trial lawyer amounts to ineffective assistance of counsel at the time of sentencing. Sheppard boldly asserts on this motion that he did not have the opportunity to review the report before sentencing, nor was he informed of his right to review and correct the report.

Sheppard is now represented by his fourth privately retained attorney. As stated above, he was represented at the trial by Morton Berger of Spring Valley, New York; Mr. Berger was supplanted on Sheppard’s unsuccessful appeal by Richard D. Weinberg, Esq., of the firm of Shereff, Friedman, Hoffman & Goodman in New York City; Mr. Weinberg, in conjunction with Mr. Berger, subsequently represented Sheppard in his motion for a new trial. They, in turn, were supplanted on Sheppard’s unsuccessful appeal from the denial of a new trial by Barry A. Fisher, Esq., of the Los Angeles, California firm of Fisher & Moest; Mr. Fisher now is replaced by Sheppard’s present counsel, Jon M. Kaufman, P.C., of New York City, on this application.

The background of Sheppard’s conviction has been set forth in more detail in this Court’s unreported opinion, dated January 7, 1985, denying Sheppard’s motion for a new trial. Briefly, that background is as follows:

Sheppard was convicted in September 1982 of partnership in a scheme whereby $1,256,356.80 was embezzled from Bankers Trust Company by employees of the bank, and laundered through Sheppard. The funds were embezzled in the form of two official bank checks which Sheppard, on behalf of the co-conspirators, deposited in a bank account he opened for purposes of the scheme. The money was converted into gold coins, ordered and received by Sheppard, then into cash, and finally divided among the co-conspirators.

Sheppard’s five partners in the embezzlement all pleaded guilty to the conspiracy prior to trial; two pleaded guilty to one count of embezzlement, and one to the count of wire fraud. Three of Sheppard’s business partners testified at the trial as government witnesses. Through their testimony, the testimony of a bank investigator, an examiner of questioned documents, and documentary evidence, as well as the testimony of Sheppard himself, who took the stand, he was firmly planted in the criminal partnership. Sheppard’s conviction was unanimously affirmed by order of the Court of Appeals for the Second Circuit on May 19, 1983. He surrendered for confinement on April 10, 1984.

Sheppard specifically states in his moving papers on this motion that “[n]o hearing of this motion is requested.” The papers submitted in support of this motion consist of an affidavit by Carol Sheppard, wife of the defendant, a “certification” by Sheppard, some photocopies of documents submitted as exhibits in support of the motion, and a memorandum of law.

The thrust of Sheppard’s claims on this motion, as stated in the moving papers, is that “Sheppard did not have the opportunity to review the [pre-sentence] report before sentencing, nor was he informed of his right to review and correct the report.” Probation records, however, establish that Mr. Berger, Sheppard’s attorney of record at that time, reviewed and commented upon the pre-sentence report on November 5, 1982, well in advance of sentencing. When the report was handed to Mr. Berger it was accompanied by a disclosure form used by the Probation Department. The disclosure form reads “Please indicate on the bottom of this form agreement with or objection to the facts as submitted in the report. Those specific parts of the report to which you object should be listed thereafter.”

To acknowledge disclosure of the presentence report to him, Mr. Berger signed the form at 9:45 on November 5, 1982. In the section provided for comments, he wrote, with regard to the statement that medical coverage existed from “the defendant’s employment as a teacher with the Scotch Plains, New Jersey Board of Education:”

Page 5 — regarding medical coverage — insurance — not defendant’s employment as a teacher — wife’s employment as a teacher.

That objection was reviewed and the following change and correction was recommended by the Probation Department to the report:

As noted correctly by defense counsel, the reference on page 5 to medical coverage pertains to the defendant’s wife’s employment as a teacher, not the defendant.

The correction, not really material on the sentencing, was duly considered by this Court.

Subsequently, after Sheppard had surrendered at the Federal Prison Camp, Dan-bury, and pursuant to his request to prepare himself for a pre-parole hearing, Sheppard himself reviewed the probation report. No objection was voiced by Sheppard during the intervening eighteen months between that date, May 17, 1984, and the present attack on the content of the report.

On another occasion, November 12, 1984, Mrs. Sheppard communicated with this Court concerning the report because of her husband’s prospective appearance before the Parole Board. She stated, in general legalistic terms regarding “the presentence report prepared by (sic) the Court,” “that there are substantial misstatements of relevant fact contained in the report,” and she requested a copy “to determine whether it does or does not include errors of fact.”

In response to Mrs. Sheppard’s communication, this Court called attention to Mr. Berger’s review of the report in November 1982, noting that medical coverage was the only exception Mr. Berger lodged, information he had undoubtedly obtained from Sheppard. The Court further reminded her that Mr. Sheppard had personally reviewed the report prior to his parole hearing. Mrs. Sheppard responded to the Court’s letter by stating that “the variable of communicated pertinence is at issue.” Nothing further was heard from the Sheppards on this subject other than a communication from the “Committee for the Continuing Defense of William Sheppard,” asserting that Sheppard was being punished without having been connected to the crimes for which he had been convicted by the Jury.

The objections to the pre-sentence report raised on this motion are:

1. that the report states that Sheppard has not returned any of the $1,256,356.80 embezzled;

2. that the report states that Sheppard received a larger portion of the proceeds of the criminal conspiracy because of his daughter’s medical expenses; and

3. that the report’s accounting of the proceeds of the embezzlement is inaccurate.

Regarding the first objection, the moving papers assert that the government subsequently has admitted that Sheppard returned approximately $15,000, upon advice of counsel, after an interview with Bankers Trust investigators in 1982, by depositing the funds into a bank account with the understanding that it would be returned to Bankers Trust; subsequently, that transfer was made. But the facts surrounding this $15,000 were matters the Court was fully aware of at the time of sentencing as a result of pretrial and trial disclosures. No reliance, therefore, was placed on the statement in the pre-sentence report that it was the government’s version that “Sheppard has not returned any money.” The balance of the government’s version, in part, to which no exception has been voiced, either now or at any time previously, reads “[h]e maintains that the total amount he received was $43,000, which was his finder’s fee for a business service rendered to Mr. Sramowicz, and that this $43,000 was earned legitimately.” The report states that it is the government’s version that approximately $450,000 had been recovered in cash and gold from co-conspirators other than Sheppard and that “[ajpproximately $800,000 remains unrecovered.”

The government’s version in the report also contains the following comment which is pertinent to Sheppard’s second objection concerning the expenses of his daughter’s illness:

It remains unclear exactly how the remaining $450,000 was actually divided among the three in New Jersey. It has been proposed that $125,000 was placed by SRAMOWICZ and BURKE into NRG Industries, Inc., SHEPPARD was given $125,000 to give to his anonymous “contact man,” $150,000 given to SHEPPARD for himself, and BURKE and SRAMOWICZ received $50,000 cash apiece. The reason SHEPPARD was alleged to have been given the lion’s share was because his infant daughter was seriously ill and outstanding hospital and medical bills were approximately $100,-000.

Sheppard now claims that the medical bills were, at most, only $38,000 and had been virtually completely paid “before the embezzlement was even conceived.”

Again, the conjecture as to where a substantial portion of the funds had disappeared was viewed by the Court at the time of sentencing as pure speculation by the government. The only significance that the Court drew from this portion of the report was that the disposition of the loot was unknown and the Court thus placed no reliance at the time of sentencing on these concededly unknown factors. At sentencing, the Court acted on its own perception of the facts and circumstances that had been adduced in evidence at trial, including the testimony of Sheppard, totally unworthy of belief, concerning his denial of any complicity in the scheme or of any personal profit. The trial testimony showed that Sheppard had a substantial hand in the laundering of the stolen funds; Sheppard was the one who opened a numbered bank account at the Summit and Elizabeth Trust Company, who arranged for the transmission of the embezzled checks from the Bankers Trust Company to that numbered account, who arranged for the purchase of gold coins, who instructed that the gold coins be charged to the numbered account, who instructed that the funds to pay for the gold coins be wired to the sellers of the coins, and who received the coins in the first instance. Sheppard’s explanations of his participation in the embezzlement were weird and thoroughly unbelievable.

Regarding Sheppard’s third objection to the report, suffice it to say that no one, to this day; has been able to establish an accurate accounting of the embezzled funds. This whole inquiry is filled with accusations, recriminations, and cross-accusations by the co-conspirators among themselves.

Sheppard’s moving papers assert that the manner in which the proceeds of the embezzlement were divided could substantially affect parole and, therefore, should have been accurately summarized. Any such summary is known only to the co-conspirators; neither the Probation Department nor the Court were able to ascertain accurately the underlying facts except that $1,256,356.80 was embezzled, that everyone but Sheppard admitted sharing the ill-gotten gains, and that no one was able to furnish an account that all agreed upon. This was the posture in which, together with the trial evidence, the Court imposed sentence. No reliance was, or could have been, placed on anyone’s accounting of the proceeds and nothing included in the presentence report rendered any substantive support or reliance by the Court to the detriment of Sheppard.

In short, it is fair to say that, based on the Jury’s unequivocal verdict convicting Sheppard and on the facts and circumstances adduced at trial, with which the Court was thoroughly familiar, the Court sentenced Sheppard without reliance on speculative hypotheses. The pre-sentence report was couched with clear statements by the Probation Department regarding the source of the versions included in the report and did not provide any assistance beyond reference to the trial record itself.

The motion is, in all respects, meritless and is, in all respects, denied.

So Ordered.


author: ROVNER, District Judge.

text:
    Charlene EVANS, individually and on behalf of a class, Plaintiff, v. CITY OF EVANSTON and Director of Personnel, City of Evanston, Defendants.
    No. 84 C 2718.
    United States District Court, N.D. Illinois, E.D.
    Jan. 16, 1985.

      Kenneth N. Flaxman, Chicago, Ill., for plaintiff.
    Jack M. Siegel, Chicago, Ill., for defendants.
   MEMORANDUM OPINION AND ORDER

ROVNER, District Judge.

Plaintiff, Charlene Evans has sued defendants, the City of Evanston and the Director of Personnel of the City of Evans-ton, in a two-count Amended Complaint alleging (1) violation of Title VII of the Civil Rights Act, as amended, (“Title VII”) 42 U.S.C. § 2000e, et seq. (Count One); and (2) deprivation of plaintiffs liberty in violation of the due process clause of the fourteenth amendment to the United States Constitution (Count Two). Defendants now move to dismiss under Fed.R.Civ.P. 12(b)(6). For the reasons stated in this Memorandum Opinion and Order, defendants’ motion is denied.

Facts

In 1981, Charlotte Evans applied for the job of firefighter with the City of Evans-ton. At that time, she took a physical agility test, consisting of five events which are intended to simulate the normal duties of a firefighter: (1) aerial ladder climb, (2) ladder climb, (3) ladder carry and set-up, (4) hose connect, and (5) obstacle course. The test was scored by the total time in which an applicant completed the five events. Evans completed the physical agility test within twenty minutes and received a passing score. She then passed a written examination and was placed on a final list of eligible candidates, but her name was not reached.

Evans reapplied for the position of firefighter with the City in 1983, when the next firefighter examination was given. The 1983 physical agility test consisted of the same events used in the 1981 examination. Prior to taking the physical agility test, Evans attended an orientation session sponsored by the City of Evanston. At this session, Evans was informed that any applicant who successfully completed all events would receive a passing score and be permitted to take the written examination. Also prior to the test, Evans received a two-page written “Firefighter Applicant Information Summary” which described the physical agility test and stated: “Whether you pass or fail the [physical agility] examination will be determined by the total time to complete all of the exercises, including rest time.”

Evans completed the 1983 physical agility test in a total time of fourteen minutes and forty seconds, improving by more than five minutes upon her 1981 time. Even so, Evans was informed that she had failed the 1983 physical agility test. The cut-off passing time was determined upon the application of standard deviations to the 1983 scores. The 1983 physical agility test was taken by 793 males, of whom 738 (or 93%) passed, and 39 females, of whom 5 (12.38%) passed.

On January 16, 1983, Evans filed a formal grievance with the City of Evanston, which was denied in a written finding dated March 19, 1984. Evans filed a timely charge of employment discrimination with the EEOC and a “right to sue” letter was issued on September 14, 1984.

The Title VII Claim

Count Two of the Amended Complaint alleges that plaintiff and other female applicants who took the 1983 physical agility test were denied equal employment opportunities in violation of Title VII because the test was not job related and it had a disparate impact upon female applicants. Defendants move to dismiss Count Two on the grounds that plaintiff has failed to properly allege intentional and purposeful discrimination and thus, they argue, has failed to state a cause of action under Title VII.

Defendants have misinterpreted the requirements of Title VII. Although Evans does not specify which section of Title VII she relies upon, the Amended Complaint states a cause of action under Section 703(a)(2) of Title VII, which provides in pertinent part:

It shall be an unlawful employment practice for an employer—
(2) to limit, segregate, or classify his employees or applicants for employment in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s race, color, religion, sex, or national origin.

42 U.S.C. § 2000e-2(a)(2). Under the Supreme Court’s construction of this provision, relief is provided based upon disparate impact alone. E.g., Griggs v. Duke Power Co., 401 U.S. 424, 91 S.Ct. 849, 28 L.Ed.2d 158 (1971); Dothhard v. Rawlinson, 433 U.S. 321, 97 S.Ct. 2720, 53 L.Ed.2d 786 (1977); Connecticut v. Teal, 457 U.S. 440, 102 S.Ct. 2525, 73 L.Ed.2d 130 (1982).

Griggs and its progeny have established a three-prong analysis for disparate impact claims. To establish a prima facie case of disparate impact, a plaintiff need only show that a facially neutral policy had a disproportionate impact on a protected group. If the plaintiff succeeds, then the employer must demonstrate that the policy is job related. Even in such a case, however, the plaintiff may prevail by showing that the policy is a mere pretext for discrimination. Connecticut v. Teal, 457 U.S. at 447, 102 S.Ct. at 2531 (and cases cited therein). Proof of discriminatory motive is simply not required under a “disparate-impact,” as opposed to a “disparate treatment,” theory. International Brotherhood of Teamsters v. United States, 431 U.S. 324, 335 n. 15, 97 S.Ct. 1843, 1854 n. 15, 52 L.Ed.2d 396 (1977).

Plaintiff in the instant case has pled satisfactorily a disparate impact claim under Title VII. She has shown that the administration and grading method of the physical agility test had a disproportionate effect on women applicants: in 1983, 93% of the male applicants passed the test, as compared to less than 13% of the female applicants. Defendants argue that the test is job related because it consists of tasks required to be performed during normal firefighting duties. The plaintiff, however, asserts in the Amended Complaint that the test, at least as it was graded, is not job related because it measures only speed and fails to take into account foresight, endurance, and pacing, which are also essential to performance of the job of firefighter. On the pleadings, then, the City of Evanston has failed to rebut the plaintiff’s prima facie case of a Title VII violation. For this reason, defendant’s motion to dismiss Count Two is denied.

The Due Process Claim

Count One of the Amended Complaint alleges that plaintiff Evans was deprived of her liberty without due process of law in violation of the fourteenth amendment. Defendants move to dismiss the fourteenth amendment claim on two separate grounds. First, defendants confuse the two branches of the fourteenth amendment. They devote an inordinate amount of effort to citing cases which establish that purposeful discrimination is an essential element of an equal protection claim and arguing that plaintiff has failed to allege facts necessary to prove intentional discrimination. Because the fourteenth amendment claim in the Amended Complaint is based solely on the due process clause, defendants’ argument on this ground is irrelevant.

Defendants also, however, imply that the due process claim should be dismissed because the “liberty interest” of which plaintiff claims she was deprived does not exist. Plaintiff alleges that she has a “liberty interest” in being permitted to take the written examination after successful completion of the physical agility test. Because an instructor at the orientation session allegedly informed the class that any applicant who completed all of the events in the physical agility test would receive a passing grade and be permitted to take the written examination, plaintiff claims she was deprived of her liberty without due process of law by the Director of Personnel’s actions in either changing the manner of grading the physical agility test or, in the alternative, failing to train or supervise the orientation session instructor.

The courts follow a two-step analysis when assessing due process claims. First, a plaintiff must identify a life, liberty, or property interest within the meaning of the clause; and second, the degree of process due must be determined. Shango v. Jurich, 681 F.2d 1091 (7th Cir.1982). Plaintiff must demonstrate that her claimed liberty interest is grounded in “state law, a well-established understanding between the parties, or a course of conduct which creates substantial limits on the discretion of state individuals.” Bara v. Aurora Civil Service Commission of City of Aurora, Illinois, 580 F.Supp. 212, 214 (N.D.Ill.1983). Although the due process claim may be inartfully pled, this Court finds that plaintiff has a liberty interest in engaging in the occupation of firefighter which the City of Evanston may not arbitrarily take from her.

The Seventh Circuit established in Dilulio v. Board of Fire and Police Commissioners of City of Northlake, 682 F.2d 666 (7th Cir.), cert. denied, 459 U.S. 1038, 103 S.Ct. 451, 74 L.Ed.2d 605 (1982) that there is a liberty interest in “engag[ing] in any occupation” which the government may not arbitrarily take from an individual. Thus, the court found that where police officers are promoted based on a promotion examination, that examination must be rationally related to the qualifications of the police sergeant job. Id. at 669. Defendants’ citation of Bishop v. Wood, 426 U.S. 341, 96 S.Ct. 2074, 48 L.Ed.2d 684 (1976), is inapposite here. In Bishop, the Court held that the discharge of a public employee whose position was terminable at will did not deprive the plaintiff of his liberty. In both Dilulio and the instant case, however, unlike in Bishop, there was a limit to the discretion of the municipal officials making the personnel decisions: here, individuals became eligible for the position of firefighter upon passing two objective examinations.

Thus, in this case, as in Dilulio, plaintiff has a liberty interest in the firefighter position so that the eligibility examinations must be rationally related to the qualifications of the firefighter job. Because the Amended Complaint does allege that the physical agility test, as administered, was arbitrary, defendants’ motion to dismiss Count One of the Amended Complaint is denied.

      . There is presently before this Court a motion for class certification. That motion, however, has not yet been fully briefed.

      . On a motion to dismiss, all well-pleaded allegations of the Complaint are taken as true, and all reasonable factual inferences are drawn in the plaintiffs favor. Mathers Fund, Inc. v. Colwell Co., 564 F.2d 780, 783 (7th Cir.1977). Thus, the facts stated are as pled by plaintiff.

      . Section 4(d) of the Uniform Guidelines on Employee Selection Procedures adopted by the Equal Employment Opportunity Commission provides that a selection rate that is less than 80% of the rate for the group with the highest selection rate is evidence of adverse impact. 29 C.F.R. § 1607.4D (1981). See also Connecticut v. Teal, 457 U.S. 440, 443 n. 4, 102 S.Ct. 2528-29 n. 4 (1982); United States v. City of Chicago, 663 F.2d 1354, 1367 n. 8 (7th Cir.1981).

      . Perhaps this confusion is rooted in the fact that the original Complaint did contain an equal protection claim. Counsel for plaintiff, however, moved for leave to file an Amended Complaint in order to substitute a Title VII "disparate-impact” claim for the equal protection count as soon as plaintiff received an EEOC "right to sue” letter. It is the Amended Complaint which defendants move to dismiss.

      . Defendants have not actually addressed plaintiffs claim of a “liberty interest.” Instead, they argue that plaintiff had no vested "property interest.” Although plaintiff in her briefs also speaks of a property interest, the Amended Complaint only asserts that plaintiff has been deprived of liberty without due process. Because the cited case law still applies, this Court chooses to address the applicable argument.


author: DOWD, District Judge.

text:
    UNITED STATES of America, Plaintiff, v. Edward SELTZER, Defendant.
    No. CR84-238.
    United States District Court, N.D. Ohio, E.D.
    March 26, 1985.
    Robert Becker, U.S. Strike Force, Cleveland, Ohio, for plaintiff.
    Stanley S. Arkin, Mark Bogatin, Mark Arisohn, New York City, Jonathan I. Klein, Berkman, Gordon, Murray & Palda, Cleveland, Ohio, for defendant.
   MEMORANDUM OPINION

DOWD, District Judge.

This case involves the prosecution of the defendant, Edward Seltzer, for allegedly perjuring himself in two separate proceedings before the grand jury on May 21, 1981 and on April 2, 1983. Defendant was given two separate grants of immunity in exchange for his testimony. On December 13, 1984, a two count indictment was returned by the grand jury against the defendant. He was charged with one count of perjury before the grand jury at the 1981 proceeding and one count of perjury before the grand jury at the 1983 proceeding. On February 6, 1985, a superseding indictment was returned by the grand jury, charging the defendant with six counts of perjury. The first two counts charged the defendant with peijury before the grand jury at the 1981 proceeding. Counts three through six charged the defendant with perjury before the grand jury at the 1983 proceeding.

A review of the transcripts of the 1981 and 1983 grand jury proceedings reveals that the grand juries were investigating the defendant's operation of and involvement with a number of businesses in sales and/or merchandising. The six counts of the superseding indictment are all related to the defendant’s role in those operations. Specifically, count one of the superseding indictment involves allegedly false testimony by the defendant in the 1981 grand jury proceeding that he had not used any name besides his given name personally or in business. Count two of the superseding indictment involves the defendant’s allegedly false testimony in the same proceeding that he did not know Sheldon Silver-stone, International Bancorpest, or the Merchants and Shipowners Bank. Counts three to six of the superseding indictment all involve the defendant’s allegedly false testimony at the 1983 grand jury proceeding that he did not recall causing certain transactions involving the wire transfers of monies.

Before the Court are the defendant’s “second set of pretrial motions” in which the defendant moves the Court to dismiss, on various grounds, the six counts of the superseding indictment for perjury. Defendant further moves the Court to preclude the prosecution from introducing evidence of defendant’s employment in the “adult entertainment business” at trial, and to order that defendant’s testimony before the grand jury on two separate occasions “be redacted to eliminate prejudicial and irrelevant references____” For the reasons which follow, defendant’s motions to dismiss counts one and two of the superseding indictment are granted. Defendant’s motions to dismiss counts three through six of the superseding indictment are denied. Defendant’s motion to preclude the prosecution from introducing evidence of defendant’s employment in the “adult entertainment business” is denied. As to defendant’s request for an order requiring the redaction of transcripts, the parties are instructed to comply with the instructions of the Court set out below.

COUNTS ONE AND TWO

The first two counts of the superseding indictment charge that the defendant perjured himself at his appearance before the grand jury on May 21, 1981. Defendant does not contest that the “immunity statute,” 18 U.S.C. § 6002, sets forth an exception permitting the use of “immunized” testimony in a prosecution for perjury as follows:

[N]o testimony or other information compelled under the [immunity] order (or any information directly or indirectly derived from such testimony or other information) may be used against a witness in any criminal case, except a prosecution for perjury, giving a false statement, or otherwise failing to comply with the order.

However, defendant argues that the exception only permits the prosecution to use immune testimony for the purpose of prosecuting perjury committed during the course of the immunized testimony, and not for the purpose of prosecuting perjury allegedly committed during the course of earlier or later immunized testimony.

Defendant’s argument as to the prohibition of the use of immunized testimony to prove perjury allegedly committed during the course of separate and earlier immunized testimony is well taken. In U.S. v. Apfelbaum, 445 U.S. 115, 100 S.Ct. 948, 63 L.Ed.2d 250 (1980), the United States Supreme Court addressed the use of immune testimony to establish prior perjury as follows.

For even if both truthful and untruthful testimony from the immunized proceeding are admissible in a subsequent perjury prosecution, the exception [that a prosecution for perjury may be based on immunized testimony, contra to the principle that a witness who has been granted immunity for his testimony should be treated as if he has invoked the fifth amendment and remains silent] surely would still be properly regarded as “narrow,” once it is recognized that the testimony remains inadmissible in all prosecutions for offenses committed prior to the grant of immunity that would have permitted the witness to invoke his Fifth Amendment privilege absent the grant, (emphasis added).

■Id. at 128, 100 S.Ct. at 955. Immunized testimony from one proceeding may thus not be used to prove perjury on the part of a witness at an earlier proceeding.

Pursuant to its order of March 15, 1985, the Court has reviewed in camera the transcript of the grand jury proceeding which resulted in the superseding indictment. The Court’s review of that transcript has led it to the following conclusions. First, portions of the defendant’s immunized testimony from both the 1981 and 1983 proceedings were introduced for the purpose of establishing the alleged perjury. No limiting instructions were given to the grand jury as to the use of defendant’s immunized testimony in one proceeding to establish that he perjured himself in the other. Second, the selected portions of the 1983 transcript presented to the indicting grand jury focus, in part, on the defendant’s admissions that he had signed, and his implicit admissions that he had, therefore, used, the names of Morton Weiss and Ralph Stelzer in requesting the wire transfers of monies in 1976. Defendant thus conceded, contrary to his 1981 grand jury testimony, that he had used names other than his own. Likewise, selected portions of the 1983 transcript presented to the indicting grand jury focus, in part, on the defendant’s admissions that his signature appeared on wire transfers of monies to the International Bancorpest and the Merchants and Shipowners Bank accounts at the United California Bank of New York, and his implicit admissions that such monies were transferred to those institutions at his request. Such admissions establish, contrary to the defendant’s 1981 grand jury testimony, that defendant did “know” those institutions. Consequently, the Court finds that the grand jury relied upon and' in fact “used” the defendant’s 1983 immunized grand jury testimony in order to find a basis for prosecuting the defendant for the 1981 alleged perjury. The Court holds that this use of the 1983 immunized testimony exceeded the scope of the use permitted under Apfelbaum, and was improper. Defendant’s motions to dismiss counts one and two of the indictment, such counts being based on the use of immunized testimony to establish a prior perjury, are granted.

COUNTS THREE THROUGH SIX

The Court finds that immunized testimony may be used to prove perjury allegedly committed during the course of separate and subsequent immunized testimony. While the Apfelbaum case does not expressly address that situation, the Court in Apfelbaum noted U.S. v. Freed, 401 U.S. 601, 91 S.Ct. 1112, 28 L.Ed.2d 356 (1971), for its rejection of “the argument that a registration requirement of the National Firearms Act violated the Fifth Amendment because the information disclosed could be used in connection with offenses that the transferee of the firearm might commit in the future.” Apfelbaum, supra, 445 U.S. at 129, 100 S.Ct. at 956. The Court in Apfelbaum, citing two statements from Freed that the self-incrimination clause of the fifth amendment does not provide immunity for future crimes, stated “that the Fifth Amendment does not prevent the use of respondent’s immunized testimony at his trial for false swearing because at the time he was granted immunity, the privilege would not have protected him against false testimony that he might later decide to give.” Apfelbaum, supra, at 130, 100 S.Ct. at 957.

In light of the Supreme Court’s failure to expressly prohibit the use of prior immunized testimony to prove perjury allegedly committed during the course of subsequent immune testimony in Apfelbaum, and the fact that the Supreme Court gives some indication that such use of immunized testimony is not prohibited, as well as the fact that there is a dearth of case law on the question and defendant has not cited case law establishing otherwise, the Court finds that the use of the defendant’s immunized testimony in the first (1981) grand jury proceeding to establish that he allegedly perjured himself in the second (1983) grand jury proceeding, was lawful. Defendant’s challenges to counts three to six on those grounds are thus overruled. Further, defendant’s immunized testimony from the 1981 grand jury proceeding may be used at trial to establish his alleged perjury at the 1983 grand jury proceeding, to the extent relevant and subject to the Federal Rules of Evidence.

LIMITATION OF EVIDENCE

Defendant requests a prohibition of evidence as to his employment in the “adult entertainment business”. Defendant argues that “the unfair prejudice of such proof would greatly outweigh its value.” The Court has reviewed defendant’s request and finds it to be without merit. The Court will entertain any challenges to specific submissions of such evidence at trial.

REDACTION OF TRANSCRIPTS

The plaintiff government is directed to submit to the defendant Edward Seltzer, on or before Thursday, March 21, 1985, by 4:00 p.m., a notice of what portions of the transcript of the 1981 and 1983 grand jury proceeding, as relevant, it intends to introduce at trial to prove the alleged 1983 perjury. Defendant is directed to respond to the plaintiff’s notice on or before Tuesday, March 26, 1985 by 4:00 p.m., as to what portions of the transcripts of the 1981 and 1983 proceedings he objects to being used at trial, and as to what portions of the transcripts he does not object to being used at trial, reserving to defendant his right to object to the introduction of the entirety of the transcript of the 1981 and 1983 grand jury proceedings to establish perjury by the defendant in the 1983 grand, jury proceeding. Both parties are directed to inform the Court, on or before Tuesday, March 28, 1985, by 4:00 p.m., as to the sections of the 1981 and 1983 transcripts the parties dispute should be admissible at trial.

CONCLUSION

Defendant’s motions to dismiss counts one and two of the superseding indictment are granted. Defendant’s motions to dismiss counts three through six of the superseding indictment are denied. Defendant’s motion for a prohibition against the introduction of evidence of defendant’s employment in the “adult entertainment business” is denied. As to defendant’s request for a redaction of transcripts of the 1981 and 1983 grand jury proceedings, the parties are instructed to comply with the schedule set out by the Court herein.

IT IS SO ORDERED.

      . Both are substantial. The transcript of the 1981 proceeding is 187 pages long; the transcript of the 1983 proceeding is 81 pages long.

      . The court finds that the facts in the instant case provide an even stronger case for disallowing the use of defendant's immunized testimony to prosecute for perjury allegedly committed prior to the grant of immunity than in a prosecution for an offense committed prior to the grant of immunity as to which a witness could have but did not invoke his fifth amendment privilege against self-incrimination. In this case, the charged perjury allegedly occurred during the course of defendant’s earlier and separate testimony which was also immunized.

      . Having so found, the Court need not address defendant’s remaining challenges to counts one and two of the superseding indictment.

      . The Court first cited the following statements from Justice Douglas' majority opinion, see Freed, supra, 401 U.S. at 606-607, 91 S.Ct. at 117,
      Appellees’ argument assumes the existence of a periphery of the Self-Incrimination Clause which protects a person against incrimination not only against past or present transgressions but which supplies insulation for a career of crime about to be launched. We cannot give the Self-Incrimination Clause such an expansive interpretation.
      and then cited the following statement of Justice Brennan in his concurring opinion:
      I agree with the Court that the Self-Incrimination Clause of the Fifth Amendment does not require that immunity be given as to the use of such information in connection with crimes that the transferee might possibly commit in the future with the registered firearm.

        Freed, supra at 611, 91 S.Ct. at 1119.

      . Defendant also challenges counts three and four as duplicitous. The court reserves ruling on that challenge at this time.

      . The Court emphasizes its use of the word relevant, noting that in Apfelbaum, Justice Rehnquist addressed the exception to the immunity statute, that immune testimony may be used in a prosecution of a witness for perjury, in terms of the admissibility of relevant evidence.