United States v. Labovitz

Opinion

USCA1 Opinion

March 28, 1995
                                [NOT FOR PUBLICATION]

                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                 ____________________

No. 94-1725 

                              UNITED STATES OF AMERICA,

                                 Plaintiff, Appellee,

                                          v.

                                  STANLEY LABOVITZ,

                                Defendant, Appellant.

____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF MASSACHUSETTS

                   [Hon. Nathaniel M. Gorton, U.S. District Judge]
                                              ___________________

                                 ____________________

                                        Before

                                Torruella, Chief Judge,
                                           ___________
                          Boudin and Stahl, Circuit Judges.
                                            ______________

                                 ____________________

            Stanley Labovitz on brief pro se.
            ________________
            Donald  K. Stern, United  States Attorney, and Mark J. Balthazard,
            ________________                               __________________
        Assistant United States Attorney, on brief for appellee.

____________________

____________________



Per Curiam.   On  December  6, 1993,  appellant  Stanley
                 __________

            Labovitz  pleaded guilty  to  thirteen  counts of  bankruptcy

            fraud.    Approximately  eleven  weeks  later,  still  before

            sentencing, appellant moved to withdraw his plea pursuant  to

            Fed.  R.  Crim. P.  32(d).   The  district court  denied this

            motion  and  subsequently  imposed  sentence.    This  appeal

            followed.  For the following reasons, we affirm.

                                      BACKGROUND

                 During the 1980's, appellant  was an attorney practicing

            bankruptcy and debt-collection law.   Appellant also invested

            in  real  estate, and  he  owned or  controlled  various real

            estate   entities   including  Hartwell   Realty  Corporation

            ("Hartwell"), 316 Main Street, Inc. ("316 Main"), and S.S.L.,

            Inc. ("S.S.L.").   On April  27, 1993, a  federal grand  jury

            returned  an indictment charging  appellant with twenty-three

            counts  of bankruptcy  fraud.   See  18  U.S.C.    152.    In
                                            ___

            particular, the indictment charged appellant with engaging in

            a scheme  to  defraud  by  filing  bankruptcy  petitions  for

            Hartwell,  316  Main,  S.S.L.,  and  himself  personally, and

            thereafter   transferring   and  concealing   assets.     The

            indictment also charged him  with providing materially  false

            information in connection with these petitions.  

                 On  December  3, 1993,  appellant  entered  into a  plea

            agreement with the government under  which he agreed to plead

            guilty  to counts 1, 3, 7-8, 10, and 16-23 of the indictment.

            The change of plea hearing was held on December 6,  1993.  At

            the hearing,  the  prosecutor  summarized  the  evidence  the

            government would have presented at trial.  The district court



accepted  the change of plea  and set a  date for sentencing.

            On  February 24, 1994,  appellant filed a  motion to withdraw

            his guilty plea.  In his motion, he primarily argued that the

            district  court's plea  colloquy  failed to  comply with  the

            requirements of Fed.  R. Crim. P. 11.  Following a hearing on

            March 25, 1994, the district court orally denied  this motion

            on  the grounds that  there is no  "fair and just  reason" to

            allow the withdrawal.

                   A  sentencing hearing was  conducted, and sentence was

            imposed, on June 16, 1994.  In the course of the hearing, the

            district court made specific findings that the amount of loss

            was $137,217.00 on Count 1; $34,356.67 on Count 7; $26,758.26

            on Count 20, $5,206.89  on Count 21; and $25,000.00  on Count

            22.   As  a result,  the district  court, acting  pursuant to

            U.S.S.G.   2F1.1, adjusted  appellant's base offense level of

            6 upward by 8 levels to reflect a loss of between $200,000.00

            and  $350,000.00.1    The   court  imposed  a  fifteen  month

            sentence of  imprisonment, the  bottom end of  the applicable

            guideline range, followed by  a period of supervised release.

            The court also ordered restitution of $231,573.67.    

                                      DISCUSSION

____________________

            1.  The  court then made a two level increase to reflect more
            than minimal planning and a two level downward adjustment for
            acceptance of responsibility, to  reach a total offense level
            of 14.  Based on appellant's criminal history category I, his
            sentencing range was fifteen to twenty-one months.

                                         -3-
                                          3



A.   THE DENIAL OF  APPELLANT'S MOTION  TO WITHDRAW  HIS
                 GUILTY PLEA.

                 A district  court "may  permit" a defendant  to withdraw

            his guilty plea prior  to sentencing for any "fair  and just"

            reason.   United States v. Daniels, 821 F.2d 76, 78 (1st Cir.
                      _____________    _______

            1987); Fed. R. Crim.  P. 32(d).  We have  recently reiterated

            that:

                 There   are   several   factors  to   consider   in
                 determining  whether  a  defendant  has   met  this
                 burden, the  most significant  of which is  whether
                 the  plea was  knowing,  voluntary and  intelligent
                 within the meaning  of Rule 11.   The other factors
                 include:   1)  the  force and  plausibility of  the
                 proffered reason; 2) the  timing of the request; 3)
                 whether  the  defendant  has  asserted   his  legal
                 innocence; and 4) whether the parties had reached a
                 plea agreement.  

            United  States v. Cotal-Crespo, 1995 WL 27378 at *1 (1st Cir.
            ______________    ____________

            Jan.  30, 1995)  (citations omitted).   We  will reverse  the

            district court only for  an error of law or  for demonstrable

            abuse of  discretion.   Id.  at *3.   We  do  not think  that
                                    ___

            reversal is warranted here.2

                 Appellant  argues  that  the  district  court  erred  in

            requiring him to  provide a  "strong" rather  than "fair  and

            just" reason for withdrawal, and that it unfairly held him to

            this  higher standard because he was an attorney.  We find no

            error.   Appellant had  argued  below, inter  alia, that  the
                                                   _____  ____

                                
            ____________________

            2.  Arguably, an outright violation  of Rule 11 might require
            the court to allow the withdrawal of a guilty plea unless the
            violation was found  to be  harmless.  See  United States  v.
                                                   ___  _____________
            Raineri, 42 F.3d 36,  41 (1st Cir. 1994).   Here, however, we
            _______
            find no violation of Rule 11 at all.

                                         -4-
                                          4



district  court  failed  to  adequately inform  him  of,  and

            determine that he understood, the nature of the charges.  See
                                                                      ___

            Fed. R. Crim.  P. 11(c).  The district court  was entitled to

            consider   appellant's   background  and   sophistication  in

            determining  whether  these core  concerns  of  Rule 11  were

            satisfied.   See United States v. Allard, 926 F.2d 1237, 1245
                         ___ _____________    ______

            (1st Cir. 1991) ("The manner in which the charge is explained

            and the method for determining  the defendant's understanding

            necessarily  vary  from  case  to  case  depending  upon  the

            capacity of the defendant and the attendant circumstances.").

            The  court's ruling on the motion to withdraw leaves no doubt

            that  it  evaluated  the   motion  under  the  correct  legal

            standard, and that it  denied the motion because it  found no

            "fair and just" reason for withdrawal.

                 Appellant also  argues that he should  have been allowed

            to withdraw  his guilty  plea because there  was insufficient

            factual  basis  for it.   See  Fed. R.  Crim.  P. 11(f).   In
                                      ___

            support of this argument,  he draws our attention to  various

            statements  he made at the change of plea hearing which could

            be  construed as denials  by him  that he  had the  intent to

            defraud.   See United States v. Grant, 971 F.2d 799, 802 (1st
                       ___ _____________    _____

            Cir.  1992) (discussing  elements of  bankruptcy fraud).   In

            addition,  appellant cites to  various documents, appended to

            his brief,  which he  suggests demonstrates his  innocence of

            the crimes charged in counts 1 and 20.

-5-
                                          5



It is well-settled  that the  prosecutor's statement  of

            facts  on the record can satisfy the requirement of a factual

            basis for  the plea.   See, e.g.,  United States v.  Ray, 828
                                   ___  ____   _____________     ___

            F.2d  399, 405-06 (7th Cir. 1987), cert. denied, 485 U.S. 964
                                               ____________

            (1988).  This statement of  facts need not be uncontroverted.

            A  court may accept a  plea even when  the defendant protests

            his innocence if there is a strong evidence in the record  of

            the defendant's actual guilt.  North Carolina  v. Alford, 400
                                           ______________     ______

            U.S. 25, 37 (1970); United States v. Walsh, 7 F.3d 1064, 1066
                                _____________    _____

            (1st  Cir.  1993).     Similarly,  when  the  district  court

            establishes  a sufficient factual  basis for the  plea at the

            Rule  11 hearing,  the  guilty plea  may  stand even  if  the

            defendant  later claims  innocence and  challenges the  plea.

            See United States v. Keiswetter, 860 F.2d 992, 998 (10th Cir.
            ___ _____________    __________

            1988)  (Moore, J.,  dissenting); United  States v.  Owen, 858
                                             ______________     ____

            F.2d 1514, 1516-17 & n.2 (11th Cir. 1988). 

                 In the  instant case, the  prosecutor's proffer provided

            ample factual basis for  accepting the guilty plea.   In this

            proffer,  the   prosecutor  detailed  a  lengthy  pattern  of

            omissions,   material   misstatements,   and   transfers   of

            bankruptcy  estate property  by appellant.   Given  the sheer

            number of  "mistakes," the size of the  assets concealed, and

            appellant's  many years  of experience  practicing bankruptcy

            law,  we  think the  judge was  entitled  to conclude  that a

-6-
                                          6



substantial  basis existed  for  believing  that  appellant's

            actions were knowing and fraudulent.3

                 The  documents that  appellant  cites do  not alter  our

            conclusion.     Count  1,  which  relates   to  the  Hartwell

            bankruptcy,  charged  appellant  with  failing   to  disclose

            approximately  $350,000.00 in  loans owing  to Hartwell  from

            appellant and his business  partner.  Appellant contends that

            there can be no fraudulent intent since the final decision to

            treat the  $350,000.00 as  a loan  to  officers (rather  than

            compensation) was  not made until November  1991, roughly ten

            months  after  he  filed  Hartwell's   bankruptcy  petition.4

            However, appellant  should have  disclosed the asset  even if

            its status at the time  of filing was uncertain.   See United
                                                               ___ ______

            States v. Cherek, 734 F.2d 1248, 1254 (7th Cir. 1984) ("It is
            ______    ______

            a reasonable reading of 18 U.S.C.   152 to conclude  that the

____________________

            3.  We  add that  the district  judge made  a finding  on the
            record  that defendant's plea  of guilty is  "supported by an
            independent  basis  in  fact"  for  each  of  the  "essential
            elements" of the offense charged.   We do not think that  the
            judge's   question  about  the  requisite  mental  state  for
            bankruptcy fraud,  asked at  a later proceeding,  warrants an
            inference that he was confused about this element and did not
            fulfill his duty under Rule 11(f).

            4.  In support  of this claim, appellant  draws our attention
            to two affidavits of Curtis Feldman, accountant for Hartwell.
            Although these affidavits are outside the record, we consider
            the information  they contain because it was proffered to the
            district court  at sentencing.   We  note, however,  that the
            remaining documents appellant cites in connection  with count
            1--Hartwell's   bankruptcy  petition   and  amendment--cannot
            inform our decision because  they are not part of  the record
            on direct appeal.  See Fed. R. App. P. 10(a).
                               ___

                                         -7-
                                          7



statute  requires a  bankrupt  to disclose  the existence  of

            assets whose immediate status is uncertain."),  cert. denied,
                                                            ____________

            471 U.S. 1014  (1985).  Moreover, appellant  did not disclose

            the  asset  even  after  November 1991,  and  the  indictment

            charged him  with a "continuing failure"  to disclose through

            October 1992.   Under  the circumstances, the  district court

            could reasonably conclude that he was guilty.

                 Count   20,  which   relates  to   appellant's  personal

            bankruptcy,   charged   him    with   failing   to   disclose

            approximately  $25,000 worth  of  Keystone Fund  money market

            shares  which  he owned.    Appellant  contends that  various

            documents,  submitted to  the district  court  at sentencing,

            prove  his  lack  of  fraudulent  intent.    These  documents

            indicate  that in  February  1986,  appellant requested  that

            these shares  be  transferred  to  his wife.    However,  the

            government proffered evidence that appellant received monthly

            statement and interest payments  from Keystone, mailed to his

            law  office,  both before  and  after  filing his  bankruptcy

            petition in May 1992.   Under the circumstances, there  was a

            strong basis for concluding  that appellant knew the transfer

            had not occurred and intended to conceal the asset.  The fact

            that appellant  reported the asset to  the bankruptcy trustee

            in February  1993, two months  prior to his  indictment, does

            not  alter our conclusion.   There is evidence  in the record

            which  suggests  that  he knew  by  then  that  he was  under

-8-
                                          8



criminal  investigation in connection with several bankruptcy

            filings.

                 Finally,  having  determined that  appellant's principal

            points are without merit, we consider the traditional factors

            relevant  to the  review of  a change  of plea request.   The

            record reveals that appellant understood the substance of the

            charges  against him, and suggests  that he made a calculated

            decision that it was  in his interest to  plead guilty.   The

            plea  was  part  of  a  quid  pro  quo  negotiated  with  the
                                    ____  ___  ___

            government.  See United  States v. Pellerito, 878  F.2d 1535,
                         ___ ______________    _________

            1541  (1st  Cir.  1989).   A  defendant  is  not entitled  to

            withdraw  his  guilty  plea   simply  because  he  asserts  a

            subjective  belief in  his innocence.   See United  States v.
                                                    ___ ______________

            Ramos, 810 F.2d 308, 312 (1st Cir. 1987).  Given the totality
            _____

            of the circumstances, we cannot say the district court abused

            its  discretion  in finding  no  "fair and  just  reason" for

            retraction.

             B.  INEFFECTIVE ASSISTANCE OF COUNSEL.

                 Ordinarily, we  do not address ineffective assistance of

            counsel  arguments  on  direct  appeal.    This  case  is  no

            exception.     Appellant  argues   that  trial   counsel  was

            ineffective because he pressured him into pleading guilty and

            misinformed him that it was too late to change his mind after

            signing  the  plea  agreement.   These  charges  depend  upon

            evidentiary matters which are best considered by the district

-9-
                                          9



court in  the first instance.   See United States  v. Mala, 7
                                            ___ _____________     ____

            F.3d  1058,  1063  (1st   Cir.  1993)  (holding  that  absent

            extraordinary circumstances, fact  specific claims  asserting

            ineffective assistance  of  counsel  are  not  cognizable  on

            direct  appeal),  cert.  denied,  114  S.  Ct.  1839  (1994).
                              _____________

            Accordingly,  appellant's claim  of inadequate  assistance is

            not properly before us.

            C.   SENTENCING.

                 1.  The District Court's Loss Calculation.

                 Appellant  argues  that  the  district  court  erred  in

            determining  the amount  of loss.   He  does not  contest the

            district court's loss determination  of $34,456.67 for  count

            7.   However, he  contends  that there  was  no loss  at  all

            involved in counts  1, 20, 21, and 22.   Based on appellant's

            own calculation, the district  court should have adjusted the

            base offense level  upward by 4 levels  to reflect a  loss of

            between $20,000.00  and $40,000.00,  rather than 8  levels to

            reflect a  loss of between  $200,000.00 and $350,000.00.   We

            find no basis for a remand.

                 The  district court's loss  determination of $137,217.00

            for  count  1  was  based   on  appellant's  portion  of  the

            $350,000.00  loan,  owing to  Hartwell,  which  he failed  to

            disclose in Hartwell's bankruptcy documents.   Appellant does

            not dispute that he  owed this amount to Hartwell.   Instead,

            he contends that there was no  intended loss since it was not

-10-
                                          10



finally determined that the $137,217.00 was a loan and, thus,

            a  corporate   asset,  until  some  months   after  he  filed

            Hartwell's bankruptcy petition.  He further argues that there

            was no actual loss to creditors because Hartwell's assets, at

            least at the time of filing, exceeded its debts.

                 We  think the  district court  could properly  determine

            that   there  was  both  an   intended  and  actual  loss  of

            $137,217.00.    The  court  could find  an  intended  loss of

            $137,217.00 because appellant continued to conceal this asset

            even  after,  by  his  own admission,  the  final  accounting

            determination  was made.  The court could find an actual loss

            of $137,217.00 because, independent of any loss to creditors,

            that much remained owing to the debtor and bankruptcy  estate

            at the time  of sentencing.  See United States  v. Edgar, 971
                                         ___ _____________     _____

            F.2d  89, 95 (8th Cir. 1992)  (recognizing that in bankruptcy

            fraud, the three entities that can be injured are the debtor,

            the bankruptcy estate, and the creditors).5

                 The district court's loss determination of $26,758.26 on

            count  20 was  based  on the  value  of the  Keystone  shares

            appellant  failed  to  disclose in  his  personal  bankruptcy

            documents.   Appellant does  not dispute  the value  of these

____________________

            5.  There might  be some complications with  the loss finding
            because  of appellant's  own stake  in Hartwell,  although we
            think  those complications  might be  answered in  this case.
            The  issue need  not  be pursued  because appellant  does not
            advance  his ownership interest  in Hartwell as  a ground for
            limiting the amount of loss.

                                         -11-
                                          11



shares.   Rather, he argues  that there was no  loss since he

            disclosed  the  Keystone  Fund  to the  bankruptcy  court  in

            February 1993,  two months before  his indictment.   We think

            the district court  could properly find  an intended loss  of

            $26,758.26  for the  same reasons,  discussed above,  that it

            could properly find an intent to defraud.  

                 Since appellant did not object at sentencing to the loss

            determination  of $5,206.89 on  count 21, we  review only for

            plain error.   Fed. R. Crim. P. 52(b).   Based on facts which

            were uncontested below, the  court was entitled to  find that

            appellant  concealed his  one hundred  per cent  ownership of

            Bass  River  Management,  Inc.   when  filing  for   personal

            bankruptcy, and  that he  later transferred this  amount from

            Bass River for  his personal use.6   Under the circumstances,

            there  was no  plain error in  determining the  loss to  be $

            5,206.89.  

                 We need not reach appellant's argument that the district

            court erred  in finding a loss  of $25,000 on count  22.  The

            total amount  of loss  involved in  counts 1,  7, 20, and  22

____________________

            6.  Appellant  does  attempt to  dispute  on  appeal that  he
            transferred  these funds  from  Bass River.   This  challenge
            comes too late.   We have repeatedly held that  "facts stated
            in presentence reports  are deemed admitted  if they are  not
            challenged  in  the  district   court."    United  States  v.
                                                       ______________
            O'Connor, 28  F.3d 218, 222  (1st Cir. 1994)  (quoting United
            ________                                               ______
            States v. Bregnard, 951 F.2d  457, 460 (1st Cir. 1991)).   We
            ______    ________
            add that  the documents  appellant cites, copies  of canceled
            checks written on Bass  Rivers' account, are not part  of the
            record on direct appeal. 

                                         -12-
                                          12



already   falls   between   $200,000.00    and   $350,000.00.

            Accordingly, any error  in determining the loss for  count 22

            is harmless.

                 2.  Restitution.

                 Appellant  argues  that  the  district  court  erred  in

            failing   to  determine   that  he   could  afford   to  make

            restitution.   He  points out  that he  is  currently without

            employment  and has limited assets.  Since this issue was not

            preserved below, we review  for plain error.  When  issuing a

            restitution  order, the  district  court must  "consider" the

            financial condition of  the defendant.  18 U.S.C.    3664(a).

            However, there is no requirement  that the defendant be found

            able to pay now.  United States v. Lombardi, 5  F.3d 568, 573
                              _____________    ________

            (1st  Cir.  1993).   Appellant  is  well-educated and  worked

            successfully for many years.  There is every reason to expect

            that he will be gainfully employed  in the future even if  he

            is unable to return  to the practice of law.   Significantly,

            the district court left the payment schedule to be determined

            by  probation.   We  are  satisfied that  the  district court

            considered appellant's  financial situation, and that  it did

            not abuse its considerable  discretion.  Accordingly, we find

            no plain error in the court's restitution order.

                 Affirmed.
                 ________

-13-
                                          13