habeas 3-11-2015 petitioner reply corrected

. UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY Elizabeth T. Foster, Attorney at Law, LLC NJ Bar 009152006 22 E. Quackenbush Ave. Dumont, NJ 07628 201 290 5761 201 215 9574 (fax) [email protected] Attorney for Petitioner -----------------------------------------x DAVID CONNOLLY Civ. No. 14-3574 (WJM) Petitioner Crim No. 12-343 (WJM) vs. Hon. William J. Martini UNITED STATES OF AMERICA Respondent Petitioners Reply to Answer ------------------------------------------x Background Facts

(This section specifically responds to the Governments statement of facts which

is highly inaccurate.) Petitioner ran a successful business investing in and managing

apartment complexes from 1996 until the real estate market crashed in 2007. 1 At that

time, the American economy fell into a near depression. This caused many of Connollys

residential tenants to lose their jobs, resulting in evictions and vacancies. The banks,

under pressure themselves for flagrant violations of the laws regulating the mortgage

lending business, were unwilling to loan money on Connollys real estate properties in

1 It is not correct to call Connollys business a Ponzi scheme. A Ponzi scheme lacks any relationship to legitimate business because it is completely based on fraud and insolvent from the start. See Lerner v. Fleet Bank, NA, 459 F. 3d 273 (2d Cir. 2006) (no real business purpose for Ponzi scheme investment, which was designed purely to fleece the investors out of their money).

Case 2:14-cv-03574-WJM Document 19 Filed 03/11/15 Page 1 of 9 PageID: 140

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order to get the business through the economic crisis. Inevitably, foreclosures on the

properties and financial disaster followed.

It is incorrect for the government to suggest that Connolly solicited investors in

any formal or public way. Rather, friends and family sought out Davids properties as

investments. Even the PCR, prepared by the government, admits as much: PSR, p. 8, no.

24 (David Connolly solicited capital contributions from friends and family, and later

from an expanding pool of investors and used the money to buy rental apartment

buildings in New Jersey and Pennsylvania. He paid distributions to the investors,

purportedly from the cash returns the buildings generated.)

Connolly did prepare a prospectus for each property so that the potential investors

could learn the details of the investments. The United States offers no citation for its

assertion that investor victims were told each entity would have separate accounts and

be financially independent. Instead, the operating agreements and trust agreements under

which Connollys business operated specifically allowed him use the funds from the

different properties for the benefit of other properties. The government misstates the

facts when it claims each property did not have its own bank account. There was,

however a master account, set up on the advice of the bankers at Fleet Bank, which was

perhaps not legally compliant. Petitioner, however did not know this.

Argument

Petititoners Lawyer, Gerald Saluti Has Overcharged and Underserved This Client and

Other Clients

The Supreme Court of this state had already concluded that Saluti overcharged his

clients when suspending him from the practice of law in 2011. (Saluti has numerous


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ethics charges against him and is not eligible to resume the practice of law and likely

never will be. (He apparently has now decided to give up law and pursue the life of a

yogi. See http://www.rebellesociety.com/2013/04/12/how-can-you-defend-those-people-

a-criminal-defense-attorney-turned-yogi/) Saluti continued to overcharge by doing

almost no work on this matter. Saluti ignored David Connollys case, appropriated the

money that Connolly had given him for the defense, stole more money that Connolly has

never recovered2, and lied to Connolly, telling him that he could take the plea but never

go to jail. http://law.justia.com/cases/new-jersey/supreme-court/2011/d-70-10-opn.html

Connolly believed these lies to his detriment and now faces 9 years in federal prison.

The Sixth Amendment right to counsel includes the "correlative right to

representation that is free from conflicts of interest." Wood v. Georgia, 450 U.S. 261,

271, 101 S.Ct. 1097, 67 L.Ed.2d 220 (1981). Upon notification that an actual or potential

conflict of interest exists, a trial court has the obligation "either to appoint separate

counsel or to take adequate steps to ascertain whether the risk was too remote to warrant

separate counsel." Holloway v. Arkansas, 435 U.S. 475, 484, 98 S.Ct. 1173, 55 L.Ed.2d

426 (1978); see also Wood, 450 U.S. at 272 & n. 18, 101 S.Ct. 1097. If the trial court

fails to undertake either of these duties, the defendant's Sixth Amendment rights are

violated. See Holloway, 435 U.S. at 484, 98 S.Ct. 1173. Even if a defendant's Sixth

Amendment rights have been violated in this manner, though, the defendant cannot

obtain relief unless he can demonstrate that his attorney's performance was "adversely

2 Saluti demanded $50,000 to represent Connolly. He arranged to collect a tax refund that belonged to Mr. and Mrs. Connolly of approximately $161,000, which money was being held by the Office of New Jersey Treasury. Saluti paid himself the $50, 000 retainer out of this money but only refunded $36,000 of the difference, retaining the rest of the money. Thus, Saluti swindled the Connollys out of $75,000.


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affected" by the conflict of interest. Mickens v. Taylor, 535 U.S. 162, 174, 122 S.Ct.

1237, 152 L.Ed.2d 291 (2002). Here, Saluti directly benefited from Connollys

incarceration because while Connolly is in federal prison, it is difficult if not impossible

for him to pursue criminal or civil charges against Saluti for stealing from him.

Connollys lack of financial resources, stolen by Saluti, further curtails his ability to

either help himself with his legal problems or bring legal malpractice charges against

Saluti. Who better to steal from than someone who cannot protect himself since he is in

jail?

Ineffective Assistance of Counsel

In its brief, the government proves the point that Saluti was ineffective since he

failed to raise the issues of defects in the superseding indictment. Govt brief at 8. Saluti

did not bother reading the plea agreement much less the superseding indictment. Saluti

did no more than phone it in with respect to Connollys case. 3 He was never at the

office, ignored Connollys phone calls and emails and even sent Richie Roberts, who was

totally unfamiliar with the case, to the plea hearing. All the while Saluti was telling

Connolly and Connollys wife that Connolly would not spend even a day in jail on the

charges he faced and that everything would be fine. He relayed this message himself and

also sent it through his paralegal, Gabriel Iannacone. The two told Connolly that they

were going to make a proffer that would prevent Davids imprisonment. It was all lies.

This behavior was hardly new for Saluti. Instead it was part of his pattern of

misleading and cheating his clients. Salutis overcharging of clients even garnered the

3 See declaration of Donna Connolly, submitted herewith.


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notice of the Supreme Court which in 2011, unbeknownst to Connolly, ordered him to

pay money back to clients based on fee arbitration awards.

The government seeks to foreclose Connollys claim for collateral relief with

respect to his argument that Counts I X of the superseding indictment failed to state a

cause of action. The government claims Connolly was required to make these arguments

before now. This argument ignores that Connolly was disserved by Salutis

inattentiveness to his case. In order to make a claim for ineffective assistance of counsel

on a habeas petition, Connolly must show that Salutis performance as his attorney

caused him harm and made a difference. As petitioner explained in his opening brief, he

would not have accepted the plea deal had Saluti told him the truth about the prison time

he would be ordered to serve. Instead, petitioner believed Salutis lies that he would not

serve a day in jail, and only have to be on probation. 4 A defendant considering a plea has

a right to be adequately informed of the risks and advantages of accepting a plea.

United States v. Mohammed, 9959 F. Supp. 1198m 1200 (N.D. Ill. 1998). 4 Salutis paralegal, Gabriel Iannacone, confirmed as much in a suit brought in Bergen County Superior Court, Docket No. L-2802-14 in which he alleged (Par. 61): DC was a white collar crime case. DC was only able to retain the firm after the firm retrieved money held by the New Jersey Department of the Treasury. The money was being held as part of a bulk transfer tax. The firm asserted that it would hold the money in escrow for the benefit of the client but did not disburse it to him. . . . Saluti and Roberts promised the client that he would get a lesser sentence, specifically getting him probation, by proffering information about other criminals but never showed up at the US Attorneys office to make the proffers. The firm failed to submit: a sentencing memo or a motion to offset the loss calculation. The client accepted a plea deal based on Salutis and Roberts offer to do things which they failed to do. Subsequently the Court ordered a probation report which basically recite[d] the indictment verbatim and to which Saluti made no objections. See http://www.law360.com/articles/523109/newark-firm-hit-with-whistleblower-suit-by-fired-employee (Petitioner notes, in the interest of full disclosure, that his undersigned attorney was the attorney of record on this employee whistleblower complaint.)


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Of course, Saluti had no choice but to try to force petitioner to accept the plea

since he was completely unprepared for trial. Defense counsels failure to prepare equals

ineffective assistance. United States ex rel. Washington v. Maroney, 428 F. 2d 10 (3d

Cir. 1970). Saluti failed to do any work on the file, including reading the materials his

own client gave him. Superficial investigation by counsel means that counsels

performance was inadequate. White v. Roper, 416 F.3d 728, 732 (8th Cir. 2005). See

also United States v. Gray, 878 F.2d 702, 711 (3rd Cir. 1989) (the "failure to conduct any

pretrial investigation generally constitutes a clear instance of ineffectiveness," because,

"in the context of complete failure to investigate . . . [,] counsel can hardly be said to have

made a strategic choice against pursuing a certain line of investigation when s/he has not

yet obtained the facts on which such a decision could be made." (citation omitted)). This

pretrial investigation is mandatory, not optional, for an attorney to undertake: An

attorney must engage in a reasonable amount of pretrial investigation andat a

minimuminterview potential witnesses and make an independent investigation of

the facts and circumstances in the case. Bryant v Scott, 28 F.3d 1411 (5th Cir. 1994).

Saluti further advised petitioner not to say anything at the meeting with the

probation officer. Of course, petitioner discovered later that it was important for him to

speak since the purpose of that meeting was for him to tell his side of the story. Instead,

it went untold. Because Saluti failed to object to the PSR, it essentially became fact

despite that it is not, by any stretch of the imagination, at all accurate.

The government suggests that since Connolly got a good deal (Govt br., p. 18) that

Saluti could not have been ineffective as counsel. This argument is specious and circular.

Connolly denies dealing in securities. He did not market these real estate investments out


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of state. The properties were by and large in New Jersey. He considered the business to

be exempt from the federal securities laws. If Connolly did not knowingly violate the

securities laws, how can he have the sufficient mens rea to commit the crime? Liability

for securities fraud requires proof that the defendant acted with scienter, which is

defined as a mental state embracing intent to deceive, manipulate or defraud. Ernst &

Ernst v. Hochfelder, 425 U.S. 185, 193 n.12. In order to establish a criminal violation of

the securities laws, the Government must show that the defendant acted willfully. 15

U.S.C. 78ff(a). Courts have defined willfulness in this context as a realization on the

defendants part that he was doing a wrongful act under the securities laws. United

States v. Cassese, 428 F.3d 92, 98 (2d Cir. 2005) (internal quotation marks and citations

omitted); see also United States v. Dixon, 536 F.2d 1388, 1395 (2d Cir. 1976) (holding

that to establish willfulness, the Government must establish a realization on the

defendants part that he was doing a wrongful act . . . under the securities laws and that

such an act involve[d] a significant risk of effecting the violation that occurred.)

(quotation omitted). The government could not possibly make such a showing here.5

There Can be No Securities Law Violation Absent a Scheme to Defraud

Connolly further denies he was engaged in a scheme to defraud. The

governments evidence against him does not meet the definition of fraud because

Connolly did not solicit anyones funds for a fraudulent purpose. Instead, he solicited 5 Under 15 U.S.C. 78ff, the petitioner was subject to fines and a felony conviction but should not have been imprisoned: but no person shall be subject to imprisonment under this section for the violation of any rule or regulation if he proves that he had no knowledge of such rule or regulation. As previously mentioned, petitioner did not believe he was dealing in securities so he could not have believed he was guilty of securities fraud and was not aware of the securities laws at all, either in the abstract or as they might apply to him.


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money to buy apartment buildings, and that was his intent at the time of any solicitation.

A scheme to defraud can only exist in the context of raising money in order to steal it.

This means any representation that Connolly made had to be knowingly false when he

made it. Connolly denies the governments allegations that he committed fraud. His

apartment rental business suffered the same fate as the entire real estate market in late

2008 early 2009it went down the drain. The government should be put to its proofs

that Connolly made knowingly false statements in order to get money from investors.

Saluti should have carefully scrutinized the charges the government made on the

jurisdiction issue and had he done so, he would have realized that no interstate crime

existed, and therefore jurisdiction was lacking. This issue may be raised at any time

under United States v. Spinner, 180 F.3d 514 (3d Cir. 1999). 6

There Can Be No Money Laundering Conviction Absent a Scheme to Defraud

The money laundering charge can only succeed in the presence of a scheme to

defraud. Otherwise there is no underlying crime. The purpose of the money laundering

statute is to criminalize the channeling of illicit funds (such as those obtained by dealing

in illegal drugs, illegal gambling, illegal prostitution and the like) into legitimate

businesses. This is referred to as washing the money. Here, Connolly contends that

there was no scheme to defraud. Therefore, there can be no underlying crime from

which illicit funds emanate. The money laundering charge is a perverse charge that

cannot be maintained.

6 Further, the governments indictment fails to mirror the code under which the petititoner was indicted. Such mirroring is essential to make certain that the petititoner was charged with an offense that is actually forbidden under the code, and is not optional.


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The government completely overlooked that Connolly, as an investor, suffered the

same fate as the other investors and lost a ton of money. This is inconsistent with a

scheme to defraud. Surely a thief is smart enough to keep the ill-gotten gains for

himself rather than lose his shirt along with the dopes he supposedly deceived. The

government charges that Connolly lived a swanky lifestyle. This hardly makes him a

swindler. David Connolly earned good money when the economy permitted it. That is

not a crime. When the economy tanked, Connolly suffered the same as all his investors

did. This was the result of the downturn of the economy, not a planned fleecing.

Conclusion

For all of the above stated reasons, Petitioners request for Habeas Corpus relief

must be granted.

Dated: March 6, 2015 s/Elizabeth T. Foster Attorney for Petititoner


habeas 3-11-2015 petitioner reply corrected

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