In Re: USA v.
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<pre> <br> United States Court of Appeals <br> For the First Circuit <br> <br> <br> <br> <br> <br>No. 98-1765 <br> <br> IN RE: UNITED STATES <br> (LORENZO MUNOZ FRANCO, ET AL.), <br> <br> Petitioner. <br> <br> <br> <br> <br> ON PETITION FOR MANDAMUS TO THE UNITED STATES DISTRICT COURT <br> <br> FOR THE DISTRICT OF PUERTO RICO <br> <br> [Hon. Carmen Consuelo Cerezo, U.S. District Judge] <br> <br> <br> <br> Before <br> <br> Torruella, Chief Judge, <br> Selya and Boudin, Circuit Judges. <br> <br> <br> <br> <br> J. Douglas Wilson, Attorney, Criminal Division, U.S. <br>Department of Justice, with whom Guillermo Gil, United States <br>Attorney, was on brief, for petitioner. <br> Michael S. Pasano, with whom Zuckerman Spaeder Taylor & Evans, <br>LLP, Graham A. Castillo Pagan, Joseph J. Rucci, Jr., and Rucci, <br>Burnham, Carta & Edelberg were on brief for respondents Ariel and <br>Enrique Gutierrez. <br> Harry Anduze Montao, with whom Jorge L. Arroyo Alejandro was <br>on brief, for respondent Lorenzo Muoz Franco. <br> <br> <br> <br> <br> <br> <br> <br>October 13, 1998 <br> <br> <br>
SELYA, Circuit Judge. After Chief Judge Cerezo of the <br>United States District Court for the District of Puerto Rico set a <br>firm trial date in a case presently pending before her, United <br>States v. Lorenzo Muoz Franco, et al., No. 95-386, the government <br>moved at the eleventh hour to disqualify the judge from further <br>involvement. The judge denied the motion following a three-day <br>evidentiary hearing. The government then sought a writ of mandamus <br>from this court directing Judge Cerezo to recuse herself. We <br>provisionally stayed the impending trial, set an expedited briefing <br>schedule, and entertained oral argument. We now conclude that the <br>government failed to prove what it had alleged vis--vis the judge, <br>and therefore deny the petition. <br> At the outset, it is important to note the narrowness of <br>the government's position: it does not contend that the judge has <br>any actual bias or prejudice in this case and it does not seek her <br>recusal under 28 U.S.C. 144 (1994). It likewise eschews the <br>mandatory bases for disqualification limned in 28 U.S.C. 455(b) <br>(1994). Instead, the government premises its mandamus petition <br>(and the underlying recusal motion) exclusively on 28 U.S.C. <br>455(a) (1994), which provides: <br> Any justice, judge, or magistrate of the <br> United States shall disqualify himself in any <br> proceeding in which his impartiality might <br> reasonably be questioned. <br> In cases involving section 455(a), the recusal <br>determination inevitably turns on the facts. See Liljeberg v. <br>Health Servs. Acquisition Corp., 486 U.S. 847, 865 (1988). <br>Consequently, we describe the pertinent events in some detail. We <br>then discuss the applicable law and, finally, undertake an analysis <br>of the recusal question. <br>I. BACKGROUND <br> United States v. Muoz Franco stems from the May 1990 <br>failure of Caguas Central Federal Savings Bank (Caguas), reputed to <br>be the largest bank failure in the history of Puerto Rico. The <br>government tells us, without demurrer by the respondents, that <br>Caguas's collapse resulted in aggregate losses exceeding <br>$120,000,000. <br> The defendants in Muoz Franco include two former Caguas <br>officials, namely, Lorenzo Muoz Franco (Muoz), Caguas's chief <br>executive officer, and Francisco Snchez Arn (Snchez), Caguas's <br>chief lending officer. The indictment charges Muoz and Snchez <br>with misapplying bank funds, making false entries in banking <br>records, and participating in a conspiracy to perpetrate these <br>offenses and to commit bank fraud. See 18 U.S.C. 371, 657, <br>1006, & 1344 (1994). In its narrative portions, the indictment <br>describes a "loan-kiting" scheme that purportedly involved the <br>misapplication of real estate loan proceeds to shore up other <br>(failing) commercial loans, thereby creating the illusion that the <br>latter loans were performing well. The government alleges that one <br>object of the scheme which supposedly persisted for almost the <br>entire decade between 1980 and 1990 was to stave off regulatory <br>intervention and keep Muoz and Snchez in power. <br> The transaction upon which the government bases its <br>recusal initiative took wing in 1986 when the judge's husband, <br>Benny Frankie Cerezo, sought to borrow funds from Caguas. Mr. <br>Cerezo approached Arturo Somohano, Caguas's senior vice-president <br>for commercial lending, and explained that he wished to obtain a <br>loan so that he could develop a twenty-eight acre farm and <br>subdivide it into house lots. The record is tenebrous as to <br>whether Mr. Cerezo furnished appraisal reports in support of the <br>loan application, but we do know that he at least provided Caguas <br>with the cover letters from two appraisal reports prepared in 1984. <br>Both letters subscribed that the acreage had a value of $200,000 or <br>more. <br> Despite the fact that Mr. Cerezo's checking account was <br>overdrawn, Somohano approved the application and the Cerezos <br>obtained a $150,000 loan from Caguas in the autumn of 1986 at two <br>points over prime, secured by a first mortgage on the farm. The <br>loan contract and related documents were signed by Mr. Cerezo <br>(individually and on behalf of his wife, via power of attorney). <br>The promissory note called for eleven monthly interest payments and <br>repayment of the loan principal on the first anniversary. Between <br>November 1986 and November 1987 (when the loan matured), the <br>Cerezos made at most three interest payments. <br> As the note neared maturity, Mr. Cerezo requested a loan <br>of $557,000 as additional financing for his shoe business.
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<pre> <br> United States Court of Appeals <br> For the First Circuit <br> <br> <br> <br> <br> <br>No. 98-1765 <br> <br> IN RE: UNITED STATES <br> (LORENZO MUNOZ FRANCO, ET AL.), <br> <br> Petitioner. <br> <br> <br> <br> <br> ON PETITION FOR MANDAMUS TO THE UNITED STATES DISTRICT COURT <br> <br> FOR THE DISTRICT OF PUERTO RICO <br> <br> [Hon. Carmen Consuelo Cerezo, U.S. District Judge] <br> <br> <br> <br> Before <br> <br> Torruella, Chief Judge, <br> Selya and Boudin, Circuit Judges. <br> <br> <br> <br> <br> J. Douglas Wilson, Attorney, Criminal Division, U.S. <br>Department of Justice, with whom Guillermo Gil, United States <br>Attorney, was on brief, for petitioner. <br> Michael S. Pasano, with whom Zuckerman Spaeder Taylor & Evans, <br>LLP, Graham A. Castillo Pagan, Joseph J. Rucci, Jr., and Rucci, <br>Burnham, Carta & Edelberg were on brief for respondents Ariel and <br>Enrique Gutierrez. <br> Harry Anduze Montao, with whom Jorge L. Arroyo Alejandro was <br>on brief, for respondent Lorenzo Muoz Franco. <br> <br> <br> <br> <br> <br> <br> <br>October 13, 1998 <br> <br> <br>
SELYA, Circuit Judge. After Chief Judge Cerezo of the <br>United States District Court for the District of Puerto Rico set a <br>firm trial date in a case presently pending before her, United <br>States v. Lorenzo Muoz Franco, et al., No. 95-386, the government <br>moved at the eleventh hour to disqualify the judge from further <br>involvement. The judge denied the motion following a three-day <br>evidentiary hearing. The government then sought a writ of mandamus <br>from this court directing Judge Cerezo to recuse herself. We <br>provisionally stayed the impending trial, set an expedited briefing <br>schedule, and entertained oral argument. We now conclude that the <br>government failed to prove what it had alleged vis--vis the judge, <br>and therefore deny the petition. <br> At the outset, it is important to note the narrowness of <br>the government's position: it does not contend that the judge has <br>any actual bias or prejudice in this case and it does not seek her <br>recusal under 28 U.S.C. 144 (1994). It likewise eschews the <br>mandatory bases for disqualification limned in 28 U.S.C. 455(b) <br>(1994). Instead, the government premises its mandamus petition <br>(and the underlying recusal motion) exclusively on 28 U.S.C. <br>455(a) (1994), which provides: <br> Any justice, judge, or magistrate of the <br> United States shall disqualify himself in any <br> proceeding in which his impartiality might <br> reasonably be questioned. <br> In cases involving section 455(a), the recusal <br>determination inevitably turns on the facts. See Liljeberg v. <br>Health Servs. Acquisition Corp., 486 U.S. 847, 865 (1988). <br>Consequently, we describe the pertinent events in some detail. We <br>then discuss the applicable law and, finally, undertake an analysis <br>of the recusal question. <br>I. BACKGROUND <br> United States v. Muoz Franco stems from the May 1990 <br>failure of Caguas Central Federal Savings Bank (Caguas), reputed to <br>be the largest bank failure in the history of Puerto Rico. The <br>government tells us, without demurrer by the respondents, that <br>Caguas's collapse resulted in aggregate losses exceeding <br>$120,000,000. <br> The defendants in Muoz Franco include two former Caguas <br>officials, namely, Lorenzo Muoz Franco (Muoz), Caguas's chief <br>executive officer, and Francisco Snchez Arn (Snchez), Caguas's <br>chief lending officer. The indictment charges Muoz and Snchez <br>with misapplying bank funds, making false entries in banking <br>records, and participating in a conspiracy to perpetrate these <br>offenses and to commit bank fraud. See 18 U.S.C. 371, 657, <br>1006, & 1344 (1994). In its narrative portions, the indictment <br>describes a "loan-kiting" scheme that purportedly involved the <br>misapplication of real estate loan proceeds to shore up other <br>(failing) commercial loans, thereby creating the illusion that the <br>latter loans were performing well. The government alleges that one <br>object of the scheme which supposedly persisted for almost the <br>entire decade between 1980 and 1990 was to stave off regulatory <br>intervention and keep Muoz and Snchez in power. <br> The transaction upon which the government bases its <br>recusal initiative took wing in 1986 when the judge's husband, <br>Benny Frankie Cerezo, sought to borrow funds from Caguas. Mr. <br>Cerezo approached Arturo Somohano, Caguas's senior vice-president <br>for commercial lending, and explained that he wished to obtain a <br>loan so that he could develop a twenty-eight acre farm and <br>subdivide it into house lots. The record is tenebrous as to <br>whether Mr. Cerezo furnished appraisal reports in support of the <br>loan application, but we do know that he at least provided Caguas <br>with the cover letters from two appraisal reports prepared in 1984. <br>Both letters subscribed that the acreage had a value of $200,000 or <br>more. <br> Despite the fact that Mr. Cerezo's checking account was <br>overdrawn, Somohano approved the application and the Cerezos <br>obtained a $150,000 loan from Caguas in the autumn of 1986 at two <br>points over prime, secured by a first mortgage on the farm. The <br>loan contract and related documents were signed by Mr. Cerezo <br>(individually and on behalf of his wife, via power of attorney). <br>The promissory note called for eleven monthly interest payments and <br>repayment of the loan principal on the first anniversary. Between <br>November 1986 and November 1987 (when the loan matured), the <br>Cerezos made at most three interest payments. <br> As the note neared maturity, Mr. Cerezo requested a loan <br>of $557,000 as additional financing for his shoe business. He <br>initially made this request in a Spanish-language letter to Muoz, <br>dated October 26, 1987. The salutation of the letter read <br>"Estimado amigo Lorenzo" ("Esteemed friend Lorenzo"), but the body <br>of the letter employed formal verb forms (conjugated for use with <br>"usted" rather than with the more familiar "tu"). Muoz referred <br>the letter to Somohano and, three days later, Mr. Cerezo wrote <br>directly to Somohano, making essentially the same request and <br>indicating that the earlier letter to Muoz had been sent in error. <br>Caguas never approved the $557,000 loan. <br> Upon maturity, the Cerezos failed to repay the farm loan. <br>During the initial post-default period, which extended from <br>November 1987 (when the note matured) until May 1990 (when control <br>of the note passed into the hands of third parties, see infra), the <br>record does not reflect that either Muoz or Snchez had anything <br>to do with Caguas's collection efforts. We review what transpired. <br> Over the first eight months of the post-default period, <br>Caguas sent Mr. Cerezo three collection letters, each of which <br>demanded immediate payment. Somohano sent a copy of the second <br>letter to Judge Cerezo at the Cerezos' home address because he was <br>concerned that, as a cosigner by power of attorney, she might not <br>have been aware that the loan even existed. The letters did not <br>accomplish their intended purpose. Mr. Cerezo informed Caguas that <br>he did not have liquid funds sufficient to repay the debt. He <br>proposed several alternatives, such as working out a plan to sell <br>the farm or reviving his application for a loan to finance the <br>expansion of his shoe business (combining the existing loan with <br>the new loan). Because Somohano terminated his employment with <br>Caguas shortly after sending the second collection letter, these <br>suggestions were considered by Pedro Suau, Caguas's assistant vice- <br>president for commercial lending. Suau countered with a proposal <br>to rewrite the farm loan for $185,000 in order to cover the accrued <br>interest and create a reserve for interest payments over the <br>following six months. Mr. Cerezo displayed no enthusiasm for this <br>proposal and faxed a letter to Suau in October 1988, with a copy to <br>Muoz, urging approval of his $557,000 loan request. Neither the <br>$557,000 "shoe business expansion" loan nor the $185,000 <br>refinancing of the farm loan ever materialized. <br> By February 1989, the Cerezos owed a total of $185,373.57 <br>in principal plus accrued interest on the delinquent farm loan. At <br>that juncture, Suau recommended transferring the matter to the <br>bank's special loans department (which handled workouts). The <br>transfer did not occur at that time, however, as the document <br>bearing Suau's recommendation also carried an undated, unsigned, <br>handwritten notation that stated: "This case was not authorized to <br>go or to pass into the special department." The next month, Mr. <br>Cerezo sent $5,000 to Caguas in partial payment of accrued interest <br>on the delinquent farm loan. He made no further payments, and <br>Caguas eventually transferred the loan to the workout section. It <br>was then referred to the bank's outside counsel, who sent a dunning <br>letter to Mr. Cerezo (with a copy to Judge Cerezo) on November 21, <br>1989. <br> Mr. Cerezo asked the lawyers for a ninety-day extension, <br>stating that, if he could not sell the farm for an amount <br>sufficient to liquidate the debt within that interval, he would <br>deed the property to Caguas as payment in kind. The law firm <br>approved the extension request, but nothing happened. The <br>attorneys fired off another collection letter. In response, Mr. <br>Cerezo proposed surrendering the farm as payment in kind. Caguas <br>indicated that it would consider the proposal on condition that the <br>Cerezos secure a satisfactory appraisal of the property. Mr. <br>Cerezo acquiesced to this condition and, in May 1990, he retained <br>an appraiser and advised Caguas of the appraiser's identity. <br> On May 25, 1990, Caguas failed. The Resolution Trust <br>Corporation (RTC) moved into the picture, first as conservator and <br>later as receiver. On August 31, the RTC and Banco Santander <br>Puerto Rico (Santander), an unrelated third party, signed a <br>purchase and assumption agreement pursuant to which Santander <br>bought various assets of Caguas, including the farm loan. On <br>February 22, 1991, Santander's attorneys advised Mr. Cerezo that <br>Santander had acquired the note and mortgage, and was willing to <br>accept the farm as payment in kind. Mr. Cerezo did not respond to <br>this communique. <br> On April 3, 1991, Santander brought a foreclosure <br>complaint against the Cerezos, alleging an aggregate debt of <br>$220,175.34 through March 28, 1991. Process was served on both Mr. <br>Cerezo and Judge Cerezo during June of that year. The Cerezos did <br>not contest the allegations and a judgment of foreclosure entered <br>on October 28, 1991. At the ensuing public auction, held on May 6, <br>1992, the farm was sold to CREFISA, Santander's real estate <br>subsidiary. CREFISA held the property for a time and, in 1994, <br>sold it to an unrelated third party, in an arm's-length <br>transaction, for $92,000. Santander never sought to obtain a <br>deficiency judgment against the Cerezos, apparently in keeping with <br>its custom of not pursuing deficiencies on defaulted real estate <br>loans. Neither Muoz nor Snchez had any relationship with <br>Santander, and neither of them participated in any way in the <br>decision not to pursue the deficiency. <br>II. APPLICABLE LEGAL STANDARDS <br> Section 455(a) stands at a crossroads where competing <br>policy considerations frequently intersect. On the one hand, <br>"courts must not only be, but must seem to be, free of bias or <br>prejudice." In re United States, 666 F.2d 690, 694 (1st Cir. <br>1981). On the other hand, recusal on demand would put too large a <br>club in the hands of litigants and lawyers, enabling them to veto <br>the assignment of judges for no good reason. Thus, compulsory <br>recusal must require more than subjective fears, unsupported <br>accusations, or unfounded surmise. See id. <br> Section 455(a) attempts to reconcile these competing <br>policies. The statute requires a judge to step down only if the <br>charge against her is supported by a factual foundation and "the <br>facts provide what an objective, knowledgeable member of the public <br>would find to be a reasonable basis for doubting the judge's <br>impartiality." Id. at 695 (emphasis in the original). While <br>doubts ordinarily ought to be resolved in favor of recusal, seeNichols v. Alley, 71 F.3d 347, 352 (10th Cir. 1995); United Statesv. Dandy, 998 F.2d 1344, 1349 (6th Cir. 1993), the challenged judge <br>enjoys a margin of discretion: <br> [T]he analysis of allegations, the balancing <br> of policies, and the resulting decision <br> whether to disqualify are in the first <br> instance committed to the district judge. <br> And, since in many cases reasonable deciders <br> may disagree, the district judge is allowed a <br> range of discretion. The appellate court, <br> therefore, must ask itself not whether it <br> would have decided as did the trial court, but <br> whether that decision cannot be defended as a <br> rational conclusion supported by [a] <br> reasonable reading of the record. <br> <br>In re United States, 666 F.2d at 695. <br> Inasmuch as this matter comes to us by way of a petition <br>for a writ of mandamus, two additional sets of considerations are <br>implicated. The first is surmountable. For both prudential and <br>practical reasons, we must be slow to "foster piecemeal review and <br>disturb the historic relationship between trial and appellate <br>courts." In re Cargill, Inc., 66 F.3d 1256, 1259 (1st Cir. 1995), <br>cert. denied, 517 U.S. 1156 (1996). It is only in unusual <br>situations that interlocutory review of a judge's refusal to step <br>aside is available through mandamus. See In re Martinez-Catala, <br>129 F.3d 213, 217 (1st Cir. 1997). <br> However, that principle is not ironclad. When "the issue <br>of partiality has been broadly publicized, and the claim of bias <br>cannot be labelled as frivolous," the propriety of judicial <br>disqualification need not await end-of-case review. In re United <br>States, 666 F.2d at 694. This is especially true in a criminal <br>case in which the government seeks the judge's recusal, for a <br>defendant's verdict will terminate the case, thereby rendering the <br>usual remedy, end-of-case appeal, illusory. Cf. United States v. <br>Patterson, 882 F.2d 595, 599-600 (1st Cir. 1989) (holding that <br>mandamus was an appropriate avenue for government to obtain review <br>of district court determination that prior convictions did not <br>qualify as predicate offenses since government could not appeal <br>from an ensuing sentencing order). Here, the issue of recusal velnon has attracted widespread interest and, on its face, the <br>government's allegation cannot be termed frivolous. Thus, mandamus <br>review appears proper. <br> The second set of considerations relates to the fact that <br>mandamus has its own ingrained jurisprudence. An applicant for the <br>writ "must show both that there is a clear entitlement to the <br>relief requested, and that irreparable harm will likely occur if <br>the writ is withheld." In re Cargill, 66 F.3d at 1260. Taking <br>these elements in reverse order, the government's claim of <br>irreparable harm has obvious weight. Unlike situations in which a <br>claim of irreparable harm is undercut by the availability of full <br>end-of-case review, see, e.g., id. at 1264 n.10, the government <br>here will have no effective means of correcting the judge's alleged <br>error her failure to recuse herself on appeal if the case is <br>tried and the defendants prevail. <br> In our view, these same circumstances also affect the <br>application of the "clear entitlement" requirement. In the run-of- <br>the-mine recusal case, "mandamus is almost always withheld we do <br>not say always unless the petitioner demonstrates that it is <br>'clearly' entitled to relief." In re Martinez-Catala, 129 F.3d at <br>218. In other words, "mandamus requires a case not merely close to <br>the line but clearly over it." Id. at 221. We believe it is <br>questionable whether this requirement should be applied stringently <br>when the government seeks a judge's disqualification in a criminal <br>case. Because of the government's inability to press an end-of- <br>case appeal, see supra, we think it would be fairer in such <br>circumstances to use the ordinary abuse-of-discretion standard <br>rather than the more exacting standard usually applicable to <br>petitions for mandamus. We follow this course. <br>III. THE MERITS <br> The question before us is not whether we would have <br>denied the government's recusal motion as Judge Cerezo did, but, <br>rather, whether her denial of it constituted an abuse of <br>discretion. The answer to this question depends on whether a <br>reasonable person, fully informed of all the facts, would doubt <br>Judge Cerezo's impartiality. The standard, of course, is <br>objective, not subjective. <br> A <br> Typically, cases implicating section 455(a) are fact- <br>specific, and thus sui generis. Comparison, therefore, is an <br>inexact construct. Nonetheless, a rough continuum of sorts emerges <br>from a study of the case law. At one end are situations in which <br>the hypothesis of partiality is so compelling that the judge has no <br>real choice but to recuse herself. See, e.g., Fredonia Broad. <br>Corp. v. RCA Corp., 569 F.2d 251 (5th Cir. 1978) (involving a <br>recusal motion based upon one party's representation by the judge's <br>former law clerk, who had served in that capacity during a prior <br>trial of the same action). At the other end are situations in <br>which the hypothesis of partiality is so tenuous that the judge has <br>no real choice but to sit. See Blizard v. Frechette, 601 F.2d 1217 <br>(1st Cir. 1979) (involving a recusal motion based upon nothing more <br>than a judge's criticism of a party and her case in an opinion). <br>Between these two polar extremes lies a zone in which the district <br>judge's discretion holds sway. See In re United States, 666 F.2d <br>at 695. If a case falls within this gray area, a court of appeals <br>ought not to interfere. <br> These categories operate on two levels: what is alleged <br>and what is proven. See Blizard, 601 F.2d at 1221 ("A trial judge <br>must hear cases unless some reasonable factual basis to doubt the <br>impartiality or fairness of the tribunal is shown by some kind of <br>probative evidence."); cf. Liljeberg, 486 U.S. at 865 (admonishing <br>that "it is critically important in a case of this kind to identify <br>the facts that might reasonably cause an objective observer to <br>question [the judge's] impartiality"). Consequently, there are <br>situations in which the hypothesis of partiality sounds compelling <br>to a reasonable listener, but the supposed facts upon which the <br>hypothesis depends are, in the end, not proven. Without facts to <br>substantiate a hypothesis of partiality, a case may well slide from <br>one pole of the continuum to the other, or to some point in <br>between. The case at hand is a perfect illustration of this <br>phenomenon and it is for this reason that the mandamus petition <br>fails. <br> B <br> As we have explained, section 455(a) requires that we ask <br>whether a reasonable person, fully informed of all the relevant <br>facts, would fairly question the trial judge's impartiality. The <br>facts proven below must dictate the answer to this question, not <br>the unverified suspicions harbored by the government or the <br>innuendo interspersed throughout both its recusal motion and its <br>mandamus petition. <br> Stripped of the government's rhetorical gloss, the <br>relevant facts are as follows. The Cerezos had a delinquent loan <br>at Caguas during a period in which Muoz and Snchez headed that <br>bank and allegedly engaged in a fraudulent loan-kiting scheme. <br>There is absolutely no proof that Muoz or Snchez had anything to <br>do with approval of the Cerezos' loan. By like token, there is no <br>basis for suggesting that the Cerezos secured the loan by undue <br>influence or other improper means. Their combined earning power <br>and net worth augured creditworthiness; the bank obtained what <br>appeared at the time to be adequate collateral; the interest rate <br>(two points over prime) did not smack of favoritism; and Somohano's <br>uncontradicted testimony at the recusal hearing verified that <br>nothing in the loan documents indicated any irregularity. While <br>Mr. Cerezo's checking account was underwater at the time, the <br>amounts of the overdrafts were relatively modest, and the record <br>does not contain any evidence that Caguas rejected other <br>prospective borrowers because of modest checking account <br>overdrafts. Similarly, though Caguas may have used bad business <br>judgment in granting the farm loan, no adverse inference reasonably <br>can be drawn from that fact; had Caguas dealt only with rock-solid <br>borrowers and exercised prudence overall, the bank probably would <br>not have failed. <br> The record is likewise bereft of any evidence that Caguas <br>deviated from regular practice in its handling of the loan, or that <br>Muoz and Snchez were involved in the loan's administration after <br>the initial default. There is not a shred of proof that Caguas <br>exhibited less tolerance toward other borrowers who missed interest <br>payments or that Caguas treated other "problem" loans more <br>aggressively. The same is true as to Caguas's actions following <br>nonpayment of the principal. Although a total of almost four years <br>elapsed between default (November 1987) and foreclosure (October <br>1991), the relevant period is slightly over two-and-one-half years. <br>Caguas failed in May of 1990, and anything that transpired after <br>that date had nothing to do with Muoz and Snchez. From that <br>point forward, unrelated third parties namely, the RTC and <br>Santander were in the driver's seat. <br> Moreover, Caguas did not let the matter lie fallow during <br>the post-default period. It promptly sent a series of letters in <br>an effort to collect the debt. Following this battery of letters <br>and a number of related telephone calls, the two sides exchanged <br>proposals for resolution of the impasse. The other pan of the <br>scale is altogether empty: the government adduced no evidence that <br>Caguas employed different stratagems or greater diligence in <br>respect to other defaulted commercial loans. <br> An unknown person did overrule Suau's decision to <br>transfer the delinquent loan to the workout section during this <br>period, but that fact, standing alone and unexplained, proves <br>nothing. The government neither called Suau as a witness nor <br>procured an affidavit from him. It adduced no evidence tracing the <br>undated, unsigned, handwritten notation that upstaged Suau to <br>either Muoz or Snchez. And, finally, it did not show that Caguas <br>customarily shifted loans of a similar age, size, and state to the <br>workout section. <br> After Mr. Cerezo made a $5,000 payment on account, Caguas <br>referred the loan to outside counsel for collection. The Cerezos <br>then were granted an additional ninety-day moratorium. The record <br>does not indicate that this sort of extension was unusual, or that <br>it betokened any sort of special favoritism, or that either <br>criminal defendant was involved in the extension decision. Mr. <br>Cerezo next agreed to obtain a new appraisal before deeding the <br>farm to Caguas in lieu of foreclosure. At that point, Caguas's <br>insolvency intervened. <br> Among the witnesses who testified, those best positioned <br>to know the details of what had happened were Somohano and Angel <br>Alicea Pars (Caguas's outside counsel). After reviewing all the <br>loan documents, Somohano testified without contradiction that he <br>did not believe that Caguas afforded the Cerezos any preferential <br>treatment. He also testified that the loan appeared to have <br>followed Caguas's normal collection procedures. In respect to the <br>period after Caguas referred the loan to outside counsel (but <br>before the conservatorship attached), Caguas's collection attorney <br>testified in a similar vein: no one at Caguas asked him to accord <br>kid-glove treatment to these debtors, and he accorded none. He <br>also vouchsafed that there was nothing out of the ordinary in the <br>manner in which he proceeded in respect to this loan. This <br>testimony, too, was unrefuted. <br> In its only real effort to fill the evidentiary void, the <br>government notes that Mr. Cerezo addressed a request for additional <br>funding to his "friend," Muoz. The letter itself is at best <br>ambiguous as to the extent of any friendship. Moreover, despite <br>the government's claim of a sinister alliance, there is no <br>explanation of what relationship, if any, existed between the two <br>men. Such an undeveloped suggestion, in and of itself, does not <br>mandate recusal. See In re Beard, 811 F.2d 818, 828 (4th Cir. <br>1987) ("'Mere general allegations of intimacy of the judge with <br>opponents' are insufficient to require recusal . . . .") (quoting <br>Morse v. Lewis, 54 F.2d 1027, 1031 (4th Cir. 1932)); TV <br>Communications Network, Inc. v. ESPN, Inc., 767 F. Supp. 1077, 1079 <br>(D. Colo. 1991) ("Mere allegations of a social relationship between <br>a judge and a litigant in his court are not sufficient grounds for <br>disqualification."); cf. In re United States, 666 F.2d at 696-97 <br>("If the receipt by a judge's friend of a favor long ago from one <br>who is a present litigant should disqualify the judge, judges could <br>hope to preside without challenge solely in communities in which <br>they are strangers."). <br> To sum up, there is simply no basis for a founded <br>conclusion that the Cerezos received any sort of preferential <br>treatment or that Caguas treated the Cerezos differently than any <br>other borrowers. The record is equally barren of any evidence that <br>either of the criminal defendants dealt with Mr. Cerezo, had any <br>involvement with the approval or administration of the farm loan <br>(either before or after the Cerezos defaulted), or had anything <br>whatever to do with Santander's decision not to pursue the Cerezos <br>for the deficiency that resulted from its post-foreclosure sale of <br>the property. On this exiguous record, it is surpassingly <br>difficult to see how the government can prevail. <br> C <br> In a last-ditch effort to overcome the paucity of its <br>proof, the government maintains that the district judge's actions <br>during the recusal hearing provide grounds for disqualification. <br>This is new matter, for the government never made this claim in the <br>district court and probably has waived it. In all events, its <br>arguments sound suspiciously like arguments for the proposition <br>that the judge exhibited an actual bias against the government. <br>This does not square with the government's repeated assertions that <br>its case for recusal in no way involves charges of actual bias, but <br>hinges strictly and solely on a professed appearance of bias. <br> Passing this point and turning to what transpired at the <br>hearing, we note first that the substance of this recusal motion <br>which the government hardly can be faulted for bringing touched <br>upon an extremely sensitive subject, involving the financial <br>difficulties of the judge and her husband. Under such <br>circumstances, we think that the judge would have been well-advised <br>either to bow out of the case or to ask that the recusal motion be <br>assigned to a different judge for hearing. Still, the law does not <br>require a judge to step aside whenever a litigant raises a <br>sensitive subject if it did, litigants would have an easy means <br>of disqualifying judges who were not to their taste and this case <br>is no exception to that rule. Indeed, recusal motions under <br>section 455(a), which customarily are decided by the judge whom the <br>movant seeks to disqualify, almost always involve the actions or <br>relationships of the judge and almost always require the judge to <br>appraise her own situation. See In re Martinez-Catala, 129 F.3d at <br>220. <br> We note, too, that the court's inquiry into the <br>timeliness of the government's recusal motion itself a proper <br>subject for scrutiny, see In re Abijoe Realty Corp., 943 F.2d 121, <br>126 (1st Cir. 1991) necessarily involved an exploration into when <br>and how the government sought to substantiate the information it <br>had received about a delinquent Cerezo loan. The judge expressed <br>understandable concern about several abortive attempts by the <br>government to obtain the loan file sub rosa, by employing various <br>artifices, including the issuance of a subpoena, later withdrawn, <br>that did not comply with the notification requirements of the Right <br>to Financial Privacy Act, 12 U.S.C. 3401-3422 (1994). It is <br>evident that the judge's questioning went too far, and that its <br>tone at times was overly confrontational. Yet, we find no basis <br>for concluding that an irredeemable conflict existed between the <br>judge's judicial role and her concerns as a bank customer. As one <br>member of the Court recently observed, <br> 455(a) is triggered by an attitude or state <br> of mind so resistant to fair and dispassionate <br> inquiry as to cause a party, the public, or a <br> reviewing court to have reasonable grounds to <br> question the neutral and objective character <br> of a judge's rulings or findings. I think all <br> would agree that a high threshold is required <br> to satisfy this standard. Thus, under <br> 455(a), a judge should be disqualified only if <br> it appears that he or she harbors an aversion, <br> hostility or disposition of a kind that a <br> fair-minded person could not set aside when <br> judging the dispute. <br> <br>Liteky v. United States, 510 U.S. 540, 557-58 (1994) (Kennedy, J., <br>concurring in the judgment). We do not believe that the manner in <br>which Judge Cerezo conducted the evidentiary hearing, though <br>inappropriate in certain respects, revealed anything that would <br>necessitate her recusal under these criteria. <br> Our dissenting brother raises an argument that the <br>government eschews. He charges that Judge Cerezo abused her <br>discretion by hearing the recusal motion. See post at 30-31 & <br>n.10. This is a startling proposition, unsupported by any <br>authority and all the more startling because no party to the case <br>suggested below that a different judge should hear the motion. <br>Although a trial judge faced with a section 455(a) recusal motion <br>may, in her discretion, leave the motion to a different judge, seeUnited States v. Heldt, 668 F.2d 1238, 1271 & n.69 (D.C. Cir. 1981) <br>(per curiam); 13A Charles Alan Wright, Arthur R. Miller, & Edward <br>H. Cooper, Federal Practice and Procedure 3550 (2d ed. 1984), no <br>reported case or accepted principle of law compels her to do so <br>especially where, as here, all the litigants apparently are content <br>to have her hear the motion. We conclude, therefore, that Judge <br>Cerezo acted within her proper role in conducting the hearing <br>herself. See In re Martinez-Catala, 129 F.3d at 220; In re United <br>States, 666 F.2d at 695. <br> D <br> This is a vexing case. In its recusal motion, the <br>government painted a picture of coziness and preferential treatment <br>which, if proven, plainly would have created an appearance of <br>partiality and thus have demanded recusal. But those allegations <br>were not proven. Then, in its mandamus petition, the government <br>renewed its charges, but with variations designed to account for <br>the wide disparity between what it had alleged and what it had <br>succeeded in proving. Like the government's original scenario, <br>these rhetorical improvisations do not withstand scrutiny. <br> In the end, we are left with nothing more than these few <br>facts: the Cerezos, during a small part of the relevant decade, <br>borrowed money from Caguas at a standard rate and on conventional <br>terms; they were unable to repay the loan; and the bank, acting <br>with a ponderousness that frequently characterizes large <br>bureaucratic institutions, took its time about instituting <br>collection proceedings. Apart from the loan itself, the Cerezos <br>received no special benefit from Caguas and there is no proof <br>that Muoz or Snchez either facilitated the loan or contributed to <br>the delays that marked the collection process. These facts do not <br>transport the case into the zone of obligatory recusal, but, <br>rather, bring it within the "range of discretion" in which a <br>decision either way can "be defended as a rational conclusion <br>supported by [a] reasonable reading of the record." In re United <br>States, 666 F.2d at 695. Thus, although Judge Cerezo could have <br>chosen to withdraw indeed, we think that may have been the wiser <br>course and that many judges would have taken it and may yet <br>choose to do so, she was not duty bound to disqualify herself from <br>presiding over the criminal trial. <br> This conclusion is reinforced by the history of Caguas's <br>difficulties. The RTC brought a civil suit in May 1993 against <br>Muoz, Snchez, and several former directors of Caguas, alleging <br>that these persons caused the extravagant losses that Caguas <br>experienced. Judge Cerezo presided over this litigation from the <br>start and continues to do so. A bench trial is scheduled to <br>commence before her on May 11, 1999. The government, which is a <br>party to that parallel litigation, has never sought her recusal, <br>and apparently is satisfied that the judge's participation does not <br>give rise to any appearance of impropriety. The government cannot <br>have it both ways. See United States v. Tierney, 760 F.2d 382, 388 <br>(1st Cir. 1985) ("Having one's cake and eating it, too, is not in <br>fashion in this circuit."). <br> The other asseverations advanced by the government and <br>the dissent require no further response. It suffices to say that <br>we have given deliberate consideration to the claims raised in this <br>mandamus petition, but find them largely unproven and therefore <br>unpersuasive. Just as a judge must assiduously avoid participating <br>"in any proceeding in which h[er] impartiality might reasonably be <br>questioned," 28 U.S.C. 455(a), so, too, a judge must avoid <br>yielding in the face of unfounded insinuations. A party cannot <br>cast sinister aspersions, fail to provide a factual basis for those <br>aspersions, and then claim that the judge must disqualify herself <br>because the aspersions, ex proprio vigore, create a cloud on her <br>impartiality. See FDIC v. Sweeney, 136 F.3d 216, 219 (1st Cir. <br>1998) (per curiam); 13A Charles Alan Wright, Arthur R. Miller & <br>Edward H. Cooper, Federal Practice and Procedure 3542 (2d ed. <br>1984). To hold otherwise would transform recusal motions into <br>tactical weapons which prosecutors and private lawyers alike could <br>trigger by manipulating the gossamer strands of speculation and <br>surmise. <br> We need go no further. On this meager record, Judge <br>Cerezo acted within her discretion in concluding that a reasonable <br>person, fully informed of all the facts, would not fairly question <br>her impartiality. Consequently, the government has failed to <br>establish that the judge's failure to remove herself from the <br>pending criminal case warrants our intervention. <br> <br> The petition for writ of mandamus is denied and <br>dismissed. <br> <br> <br> <br> <br> <br> <br> Dissenting Opinion Follows
TORRUELLA, Chief Judge (dissenting). This is not an <br>opinion that I embark upon with much enthusiasm. However, because <br>I am firmly convinced that Chief Judge Cerezo's continued <br>participation in the underlying criminal case imparts an appearance <br>of impropriety that runs contrary to the proscriptions of 455(a), <br>even applying this Circuit's present abuse of discretion standard <br>of review, I am forced to respectfully dissent. <br>I. THE CIRCUIT'S PRECEDENT <br> Although judicial discipline requires that I bow to <br>circuit precedent, and I do, I believe that the precedent relied <br>upon by the majority, to the effect that review of Chief Judge <br>Cerezo's refusal to recuse herself is subject to appellate review <br>only for abuse of discretion, runs contrary to both the letter and <br>spirit of 455(a). This provision leaves no discretion to the <br>judge if he or she comes within its purview. <br> Lest the language of this statute be somehow overlooked <br>in the turmoil of this appeal, I believe it appropriate to restate <br>its content: <br> Any judge . . . of the United States shalldisqualify himself in any proceeding in which <br> his impartiality might reasonably be <br> questioned. <br> <br>28 U.S.C. 455(a) (emphasis added). I can detect nothing <br>discretionary or equivocal in this language. To the contrary, this <br>is a directive that allows for no deviation. The judge must recuse <br>him or herself if his or her impartiality might reasonably be <br>questioned. <br> This Circuit's precedent, which provides for abuse of <br>discretion review of district court rulings on 455(a) questions, <br>is particularly disconcerting because it departs from the standard <br>of review universally applied to mixed questions of law and fact, <br>according to which legal conclusions are reviewed de novo. See,e.g., Servicios Comerciales Andinos, S.A. v. General Electric del <br>Caribe, Inc., 145 F.3d 463, 469 (1st Cir. 1998). There does not <br>seem to be any principled reason for reviewing this particular type <br>of mixed question of law and fact differently. In fact, the rule <br>established by precedent, which favors the discretion of the <br>challenged judge over the appearance that his or her actions might <br>reasonably convey to the citizenry, is particularly egregious <br>considering that it directly conflicts with Congress's purpose in <br>enacting 455(a). See In re Hatcher, 150 F.3d 631, 637 (7th Cir. <br>1998); see also In re United States, 666 F.2d 690, 694 (1st Cir. <br>1981)("[I]n drafting 455(a) Congress . . . changed the previous <br>subjective standard for disqualification to an objective one; no <br>longer [is] disqualification to be decided on the basis of the <br>opinion of the judge in question, but by the standard of what a <br>reasonable person would think."). <br> I concede, however, that I am bound by the majority's <br>standard until such time as it is corrected by an en banc court. <br>Thus, for the time being, the record must be reviewed for abuse of <br>discretion. However, even under this relatively deferential <br>standard, 455(a) mandates Chief Judge Cerezo's recusal because <br>her continued participation in the underlying criminal proceeding <br>creates an appearance of impropriety. <br>II. THE APPEARANCE OF IMPROPRIETY <br> Section 455(a) goes beyond actual bias, for as the <br>Supreme Court has pointedly stated, "[t]he very purpose of 455(a) <br>is to promote confidence in the judiciary by avoiding even the <br>appearance of impropriety whenever possible." Liljeberg v. Health <br>Services Corp., 486 U.S. 847, 865 (1988) (emphasis added). The <br>paramount and most obvious policy underlying 455(a) is, as we <br>ourselves have stated, that "courts must not only be, but must seemto be, free of bias or prejudice." In re United States, 666 F.2d <br>at 694 (emphasis added). Moreover, 455(a) imposes an independent <br>and continuing obligation on a judge to recuse him or herself sua <br>sponte if facts within his or her knowledge make it reasonable for <br>his or her impartiality to be questioned. See United States v. <br>Cerceda, 139 F.3d 847, 852-53 (11th Cir. 1998) (quoting United <br>States v. Kelly, 888 F.2d 732, 744 (11th Cir. 1989)); Taylor v.O'Grady, 888 F.2d 1189, 1200 (7th Cir. 1989). And most <br>importantly, "if the question of whether 455(a) requires <br>disqualification is a close one, the balance tips in favor of <br>recusal." Nichols v. Alley, 71 F.3d 347, 352 (10th Cir. 1995); <br>accord United States v. Dandy, 998 F.2d 1344, 1348 (6th Cir. 1993). <br> These are unchallenged standards as to which there is no <br>contrary circuit precedent. It is these unquestioned canons that <br>force me to part company with my colleagues in the majority, even <br>pursuant to abuse of discretion review, for I propose that it is <br>difficult if not impossible to read the record of this appeal <br>without at least the appearance of impropriety emanating from its <br>content. At the very least, this is "a close [case]." Nichols, 71 <br>F.3d at 352. As much is conceded by the majority's statement that <br>the facts of this case "bring it within the 'range of discretion' <br>in which a decision either way can 'be defended as a rational <br>conclusion supported by [a] reasonable reading of the record.'" <br>Supra, at 23 (emphasis added) (citation omitted). This conclusion <br>alone is sufficient to "[tip] the balance . . . in favor of <br>recusal." Nichols, 71 F.3d at 352. <br> Additionally, the record is not as benign as my brethren <br>have found it to be. <br>III. ANALYSIS <br> <br> A. Chief Judge Cerezo's husband was a potential <br> material witness in the recusal hearing <br> <br> The government's allegations in its motion to recuse <br>implicated Chief Judge Cerezo's husband as a potential material <br>witness in the recusal hearing. This is not far-fetched <br>speculation. The government was claiming that the Cerezos received <br>special treatment in the handling of their loan as a result of a <br>special relationship that existed between Chief Judge Cerezo's <br>husband and one of the defendants, Lorenzo Muoz-Franco. At a <br>minimum, the Chief Judge had to interpret her husband's intentions <br>when he wrote said defendant directly, in a familiar tone. Seeinfra. Her conflict, however, was much broader as she ultimately <br>had to pass upon the conduct of her husband and determine the <br>nature of his relationship to Muoz-Franco. <br> Only her husband, defendant Muoz-Franco, and possibly <br>Chief Judge Cerezo herself, had direct knowledge of the <br>relationship. Calling the defendant as a witness on this point <br>would have been ineffectual as he could refuse to testify. Calling <br>Mr. Cerezo as a witness was thus a real possibility. The fact that <br>this contingency did not materialize is irrelevant, particularly if <br>one considers that the failure of the government to call Mr. Cerezo <br>to the stand could very well have been influenced by the chilling <br>effect of Chief Judge Cerezo's participation in the proceedings. <br>Moreover, both this potential conflict and the manner in which <br>Chief Judge Cerezo conducted the recusal hearing lead me to <br>conclude that she should not have presided over the hearing. <br> <br> B. The nature of the underlying case <br> The underlying criminal charges in the subject case, <br>which at the very least imply the gross mismanagement of real <br>estate and commercial loans, involve the very bank to which Chief <br>Judge Cerezo and her husband owed substantial uncollected, <br>delinquent sums, during the same period of time that the defendants <br>are alleged to have committed their criminal acts. Although there <br>are obviously no allegations of criminal wrongdoing on the part of <br>Chief Judge Cerezo or her husband in this respect, and none should <br>be in any way inferred from anything said in this dissent, is it so <br>far-fetched to surmise that their significantly overdue debt may <br>have at least contributed in some degree to the bank's catastrophic <br>failure, even if in the total picture it was not of major impact? <br>Is that not alone sufficient cause to hesitate before deciding to <br>act as the presiding judicial officer over the criminal trial of at <br>least two of the principal executive officers of that ill-fated <br>institution? <br> I posit the following questions: Had the Caguas Federal <br>Bank expeditiously filed a collection and foreclosure action <br>against the Cerezos, would it have been proper for the Chief Judge <br>to sit on the criminal trial of that bank's two principal executive <br>officers? I think not. Does it make any difference that <br>collection letters were sent to the Cerezos, but that no suit was <br>filed expeditiously against them? No. <br> C. The Cerezos' windfall <br> Although the loan was principally the result of <br>Mr. Cerezo's dealings while acting under a power of attorney <br>granted by Chief Judge Cerezo, the record shows that she had actual <br>knowledge of the nature of the debt they owed and of the loan's <br>delinquency record. <br> In 1986, at the time the Cerezos obtained the loan from <br>defendants' bank in the amount of $150,000, Mr. Cerezo's checking <br>account with this bank was overdrawn by more than $2,000, a <br>condition that persisted in similar or larger amounts throughout <br>all relevant periods. This commercial loan was secured by real <br>estate allegedly valued at $230,000 but for which no appraisal is <br>found in the loan file, although reference is made to one in <br>correspondence. The principal was to be repaid within one year, <br>with monthly installments of interest to be paid in the meantime. <br>Within three months after the loan was granted in November 1986, <br>the Cerezos became delinquent in their interest payments, making no <br>further payments after February 1987, so that by the due date of <br>the loan in November 1987, they owed the bank in excess of $15,000 <br>in accrued interest, in addition to the outstanding principal <br>balance. <br> The bank failed on May 25, 1990. As of March 1991, the <br>Cerezos owed about $70,000 in delinquent interest payments alone. <br>A second bank eventually purchased the Cerezos' obligation and in <br>1994 was able, after an uncontested foreclosure, to sell the real <br>estate in question for $92,000. No delinquency judgment has ever <br>been sought against the Cerezos for the $128,000 still owed at the <br>time of the foreclosure. <br> While it is true that the second bank, Banco Santander de <br>Puerto Rico, acquired the Cerezo loan after the failure of Caguas <br>Federal Savings Bank and that it was Santander that failed to claim <br>a deficiency from the Cerezos, the fact remains that the Cerezos <br>received a $128,000 windfall as a result of their loan transaction <br>with Caguas. Specifically, the Cerezos received a $128,000 <br>windfall as a direct result of Caguas' mismanagement during the <br>almost three years that the Cerezos failed to make payments on <br>their loan. <br> D. Chief Judge Cerezo's conduct during the recusal <br> hearing <br> <br> The recusal hearing took the form of a two-phased <br>inquiry, with the first phase being directed principally at issues <br>related to the government's timing in the filing of the recusal <br>motion, intertwined with questions relating to the Right To <br>Financial Privacy Act. See 12 U.S.C. 3401. The second phase <br>dealt more with the core issue of whether the Cerezos received <br>special treatment regarding their loan. <br> In an unusual method of proceeding, the first five <br>witnesses (out of a total of eight heard), Juan Baralt Bentez, <br>Guillermo Gil, Gustavo A. Gelp, Bernard M. Brodsky, and Arturo <br>Somohano, Jr., were all called as witnesses by Chief Judge Cerezo, <br>and their direct examinations, often extensive in nature, were <br>conducted by her. Although one of the witnesses' examinations, <br>that of Juan Baralt Bentez, was perfunctory in nature, in that he <br>just produced and identified the Cerezos' loan file, which up to <br>then had been denied to the goverment by various means, the <br>examinations of the other four were anything but perfunctory, and <br>were carried out in an often adversarial, perhaps even <br>inquisitorial, fashion, particularly those of Guillermo Gil and <br>Bernard M. Brodsky. <br> The calling of Guillermo Gil as a witness by Chief Judge <br>Cerezo is itself remarkable, as he is, and has been for the last <br>six years, the Acting United States Attorney for the District of <br>Puerto Rico. According to her statement at the commencement of the <br>hearing, Mr. Gil was called as a witness because "there are some <br>questions that I [Chief Judge Cerezo] have to ask you because you <br>are the person who signed that motion." Although it is not unheard <br>of for a lawyer to be called to testify in a proceeding in which he <br>is acting in his professional capacity, lawyers usually argue their <br>positions to the court without appearing as witnesses to justify <br>their contentions. <br> More troubling, however, is the tenor of Chief Judge <br>Cerezo's interrogation of the Acting U.S. Attorney. A reading of <br>even the cold letter of the transcript of these proceedings raises <br>genuine questions as to the Chief Judge's impartiality. Indeed, <br>one might reasonably question whether she was defending a personal <br>predetermined position, rather than engaging in an unbiased fact- <br>finding inquiry. The impression of partiality is reinforced by the <br>manner in which Chief Judge Cerezo questioned Mr. Gil, conducting <br>a paragraph by paragraph inquiry as she sought an explanation of <br>the various arguments contained in the Memorandum of Law that had <br>been submitted in support of the motion for recusal. I, for one, <br>find totally inappropriate this testimonial interrogation into what <br>are essentially either legal issues or the thought processes behind <br>them. <br> I also find disconcerting the vein of Chief Judge <br>Cerezo's examination of Mr. Gil on the issue of the production of <br>the Cerezos' loan file, because the questioning at times resembled <br>more the cross-examination of a hostile witness than an inquiry of <br>disputed facts by an impartial arbiter. Although I cannot attempt <br>to reproduce the entire record of the case to prove this point, a <br>smattering will suffice. <br> For example, in questioning the Acting U.S. Attorney <br>about the allegations in the motion to recuse, the following <br>exchange took place: <br> THE COURT: What was your purpose, sir, in <br> stating that the [loan] application is <br> unsigned when there is no place there for the <br> applicant to sign it, and for highlighting the <br> fact that my profession is that of a federal <br> judge? <br> <br> MR. GIL: Well, because it's not that -- I <br> mean, we know now that your husband had a <br> power of attorney from you, that it's not <br> something that he filled out, this is <br> something that the bank did. <br> <br> THE COURT: Let's go one by one. Why is it <br> emphasized that this application is unsigned <br> when there is no place there to sign it? <br> <br> MR. GIL: Well, that's -- I don't know. It's <br> just that some banks in the application <br> require the customer to sign, others don't. <br> <br> THE COURT: And this one didn't. Why does the <br> motion say "an unsigned application" as if <br> there was an irregularity? <br> <br> MR. GIL: I did not mean that it was irregular. <br> <br> THE COURT: So then why is something mentioned <br> that is irrelevant? <br> <br> . . . <br> <br> THE COURT: Mr. Cerezo's profession is <br> mentioned there, lawyer by profession. Then <br> they say his wife, they don't even give my <br> name, federal judge. And the motion says that <br> my profession [is] . . . mentioned and <br> Mr. Cerezo's profession is not mentioned at <br> all in the motion. Any reason for <br> highlighting my profession and not his? <br> <br> MR. GIL: Well, Your Honor, because if <br> there's allegations that there was <br> preferential treatment because who you were, <br> your name appears in the name of this <br> application and your relationship to <br> Mr. Cerezo appears, too, in the first page. <br> <br> THE COURT: And do you understand that saying <br> that my profession, the one that I've had for <br> 28 years, as that of a judge, is a sign of <br> preferential treatment? <br> <br> Mr. GIL: No, no. <br> <br> THE COURT: Do you think they should have put <br> some other kind of profession for me? <br> <br> MR. GIL: No, Your Honor. <br> <br> This contentious situation was exacerbated by Chief Judge <br>Cerezo's apparent preoccupation with whether her rights and those <br>of her husband under the Right To Financial Privacy Act had been <br>violated by the government's investigation into their financial <br>dealings. We thus have this colloquy, among others, involving a <br>subpoena issued by the FDIC to retrieve these records: <br> THE COURT: Therefore, do you understand that <br> Mr. Benny Frankie Cerezo was entitled, as a <br> bank customer whose records were being <br> requested by government authority, to <br> challenge that subpoena for lack of compliance <br> with the requirements of the Right To <br> Financial Privacy Act? <br> <br> MR. GIL: He has all the right to do that. <br> Chief Judge Cerezo's interrogation of Bernard M. Brodsky, <br>an attorney with the F.D.I.C. in Washington, D.C., is also highly <br>contentious, her questioning bordering on badgering. Again much of <br>the controversy centered around the subpoena issued and the Privacy <br>Act implications: <br> THE COURT: Are you aware or have you read the <br> Right to Financial Privacy Act? <br> <br> MR. BRODSKY: I'm aware of it, yes, ma'am. <br> <br> THE COURT: Have you read it? <br> <br> MR. BRODSKY: Not recently. <br> <br> THE COURT: At any time? <br> <br> MR. BRODSKY: At some point in time. <br> <br> THE COURT: Did you discuss with Ms. Domnguez <br> [the Assistant U.S. Attorney handling this <br> case] or did she raise with you any concerns <br> about the requirements of the Right to <br> Financial Privacy Act? <br> <br> MR. BRODSKY: She expressed concerns about <br> that, yes . . . . <br> <br> THE COURT: . . . Was that subpoena issued as <br> it would have been issued -- as any other <br> subpoena would have been issued in that case? <br> <br> MR. BRODSKY: I'm not sure I understand the <br> question, Your Honor. <br> <br> THE COURT: If you had documents of a witness, <br> would you have done it the same way that you <br> did with the Judge's loan file from the <br> financial institution? <br> <br> MR. BRODSKY: Yes. There was no distinction <br> . . . . <br> <br> THE COURT: Did you at that time discuss with <br> her, when the decision was made to issue the <br> subpoena, did you discuss in any detail the <br> Right to financial Privacy Act and the <br> requirements of that law? <br> <br> MR. BRODSKY: No. <br> <br> THE COURT: Why not? <br> <br> MR. BRODSKY: We were issuing the subpoena <br> because we believed, or I believed that the <br> facts that had been brought to my attention <br> were sufficiently relevant to the civil <br> litigation, and therefore I was issuing that <br> subpoena because of our concern . . . . <br> <br> THE COURT: . . . I ask you, since she had <br> mentioned to you the Right to Financial <br> Security Act, if at any point thereafter both <br> of you looked into the Right to Financial <br> Privacy Act before issuing that subpoena? <br> <br> MR. BRODSKY: Well, I didn't discuss it with <br> her . . . . <br> <br> THE COURT: But you didn't discuss that with <br> Ms. Domnguez? <br> <br> MR. BRODSKY: No. No, Your Honor, I did not. <br> <br> THE COURT: And she didn't ask to discuss it <br> with you? <br> <br> MR. BRODSKY: No, not after she mentioned that <br> there was a concern for the Financial Privacy <br> Act, that's correct. <br> <br> THE COURT: After that, you didn't discuss it <br> with her -- <br> <br> MR. BRODSKY: No, Your Honor. <br> <br> THE COURT: -- at any point? Did she ask you <br> later to discuss it with her before the <br> subpoena was issued? <br> <br> MR. BRODSKY: No. <br> <br> Shortly after this line of questioning, Chief Judge <br>Cerezo proceeded to read the witness large portions of the Right to <br>Financial Privacy Act, particularly 12 U.S.C. 3403 & 3413, the <br>recitation of which alone takes up 10 pages of the transcript <br>whereupon the following exchange took place: <br> THE COURT: . . . Now I ask you, knowing that, <br> under what authority was this subpoena issued <br> in this case? <br> <br> MR. COSTELLO [counsel for F.D.I.C.]: Excuse <br> me, Your Honor, I guess I have to object and I <br> am very troubled. The difficulty I have, Your <br> Honor, as you make the recitation to the Right <br> to Financial Privacy Act, is you're claiming <br> certain rights vis-a-vis a subpoena that was <br> issued in a civil case, your rights under the <br> Right to Financial Privacy Act, the <br> beneficiary under the statute. Now we are <br> here today on a motion, a hearing, <br> evidentiary, in a criminal proceeding on a <br> motion to recuse in which my client, <br> Mr. Brodsky, was asked by the Clerk of the <br> Court to appear voluntarily or in lieu of a <br> subpoena, and he chose to come voluntarily and <br> he is very happy to do so, but is [sic] now <br> finds himself in the anomalous position where <br> the beneficiary under a federal statute, who <br> implicitly is claiming that the statute isn't <br> followed, is asking him questions as to <br> whether he and his agency violated the <br> statute, but the person asking the questions <br> isn't a private litigant, it's a federal <br> judge. <br> <br> THE COURT: No, it's a customer. <br> <br> MR. COSTELLO: Well, its a customer, Your <br> Honor, I agree. <br> <br> THE COURT: It's a customer whose loan files <br> were requested by the F.D.I.C. and it's the <br> customer upon whom the Banco Santander [which <br> purchased the Cerezo loan from the F.D.I.C., <br> which had in turn acquired it from the defunct <br> bank] received a request from the F.D.I.C. to <br> release those loans [sic]. <br> <br> . . . <br> <br> MR. CLABAULT [counsel for the government]: <br> Your Honor, we would also object on the <br> grounds that it's irrelevant because the <br> subpoena was withdrawn. It was never <br> responded to, it was never litigated. It was <br> filed, objection was made by Bank Santander <br> and your husband that it failed to comply with <br> the Right to Financial Privacy Act, and it was <br> then withdrawn . . . . <br> <br> Chief Judge Cerezo, after hearing further argument, <br>desisted from additionally questioning Mr. Brodsky, although she <br>interrupted his cross-examination by the government to further ask <br>about discussions between him and Ms. Domnguez regarding the Right <br>to Financial Privacy Act. <br> Lastly, I believe, a reading of Mr. Brodsky's cross <br>examination by counsel for defendants, particularly by counsel for <br>defendant Lorenzo Muoz-Franco, reveals not only that the continued <br>badgering of this witness was permitted by the Chief Judge, but <br>that erroneous rulings were prevalent throughout. A reading of <br>this examination reasonably gives rise to questions as to Chief <br>Judge Cerezo's impartiality. <br> One of the most crucial interjections by Chief Judge <br>Cerezo in the recusal hearing took place during the government's <br>cross-examination of Mr. Somohano regarding an October 26, 1987, <br>letter from her husband to defendant Lorenzo Muoz-Franco. The <br>government's lawyer had asked Mr. Somohano to compare that <br>communication, in which Chief Judge Cerezo's husband addressed <br>Mr. Muoz-Franco as "Esteemed Friend Lorenzo," with one dated <br>October 29, 1987, to Mr. Somohano in which he had addressed the <br>latter as "Esteemed Mr. Somohano." The following exchange took <br>place: <br> GOVERNMENT: So Mr. Cerezo addressed the <br> president of the bank, the Defendant in this <br> case, as his friend, but you're just <br> Mr. Somohano, is that correct? <br> <br> THE WITNESS: Yes, sir. <br> <br> THE COURT: Let me ask him a question. The <br> rest of the letter, does Mr. Cerezo "tutea" <br> Mr. Muoz-Franco or does he call him "su" and <br> "usted"? <br> <br> THE WITNESS: I'm sorry? <br> <br> THE COURT: In English, people are referred to <br> always as "you," there's no distinction. In <br> Spanish, you can refer to a person as "tu" or <br> as "usted." Can you look at that letter and <br> see if he was using the "usted" or the "su" <br> form of addressing the Estimado Amigo Lorenzo? <br> <br> . . . <br> <br> THE WITNESS: As "usted." <br> <br> THE COURT: As "usted." In Spanish is that the <br> formal way of addressing a person? <br> <br> THE WITNESS: Yes, it is. <br> <br> THE COURT: Okay. Go ahead. <br> <br> This interjection by Chief Judge Cerezo during this <br>pivotal segment of the cross examination, together with her benign <br>interpretation of this communication, contribute to the overall <br>appearance of partiality in two ways. First, her questions avoid <br>explaining or even addressing the question of why her husband would <br>address defendant Muoz-Franco not only as his "esteemed friend," <br>but by his first name, "Lorenzo," to boot. <br> Perhaps equally important, but somehow overlooked by the <br>majority, is the fact that there is at least one other documented <br>instance in the record of direct communication by Mr. Cerezo with <br>defendant Muoz-Franco. The record contains a copy of a letter <br>dated October 18, 1988 from Mr. Cerezo to Pedro Suau, the Bank's <br>Assistant Vice President in charge of commercial loans after <br>Mr. Somohano left the Bank early in 1988, with whom Chief Judge <br>Cerezo's husband was attempting to restructure the loan obligation. <br>Mr Cerezo sent a copy of his letter to Mr. Suau to "Attorney <br>Lorenzo Muoz-Franco, President." <br> Why Chief Judge Cerezo's husband chose to address <br>Mr. Muoz-Franco as his "[e]steemed friend Lorenzo," and why he <br>decided to send him a copy of the Suau letter, can only be <br>definitively answered by Mr. Cerezo. In lieu thereof, however, the <br>matter cannot be passed over as cavalierly as it was by the <br>district court without creating an appearance of impartiality. <br>Furthermore, I am of the opinion that the "[e]steemed friend <br>Lorenzo" language, which is unequivocal when compared to the <br>strained, over-subtle nuances which Chief Judge Cerezo reads into <br>this communication, requires an uncomplicated, direct construction: <br>there appears to be some type of personal relationship involved. <br> Perhaps the ultimate problem is that too many complicated <br>explanations are required to set the mind at ease. The appearances <br>in this case, including those relied on by the majority for <br>concluding otherwise, clearly lead a reasonable observer, <br>particularly after reading the full record of the hearing, to <br>harbor well-founded doubts about the propriety of Chief Judge <br>Cerezo's sitting as trial judge in the underlying proceedings. The <br>Chief Judge's conclusion to the contrary was thus an abuse of <br>discretion, in my opinion. Indeed, the majority unmistakably <br>questions her judicial participation in this case ("[W]e think that <br>the judge would have been well-advised either to bow out of the <br>case or to ask that the recusal motion be assigned to a different <br>judge for hearing . . . .", infra, at 19, "It is evident that the <br>judge's questioning went too far, and that its tone at times was <br>overly confrontational.", infra, at 20, "Thus, although Judge <br>Cerezo could have chosen to withdraw--indeed, we think that may <br>have been the wiser course and that many judges would have taken it <br>. . . .", infra, at 23). What could they be referring to except an <br>appearance of impartiality? <br> I am sorry to say, but say I must, that Chief Judge <br>Cerezo does not advance the cause of justice or promote confidence <br>in the federal judiciary by continuing to sit in this case. <br> I respectfully dissent.</pre>
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