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UNITED STATES v. DEMPSEY

October 13, 1989

UNITED STATES OF AMERICA, Plaintiff,
v.
MARTIN J. DEMPSEY, et al., Defendants


William T. Hart, United States District Judge.


The opinion of the court was delivered by: HART

WILLIAM T. HART, UNITED STATES DISTRICT JUDGE

 On August 2, 1989, a Grand Jury returned a 534-count indictment against nineteen defendants, eighteen of whom were traders in the soybean futures pit of the Chicago Board of Trade ("CBOT"). The indictment charges that between December, 1986 and August, 1989, certain defendants participated in a pattern of racketeering aimed at defrauding their customers through illegal trading practices. Four of the nineteen defendants have engaged four of the members of a single law firm to represent them. The Government has moved for an inquiry into the firm's multiple representation pursuant to Fed. R. Crim. P. 44(c). The matter is before the court on the Government's motion, each defendant's declaration and the briefs of the parties. The issue presented is whether the law firm of Cotsirilos, Crowley, Stephenson, Tighe & Streicker, Ltd. ("the Firm") should be disqualified from representing any of the defendants in this case.

 The indictment in this case follows an undercover investigation of alleged illegal trading activity at the CBOT. For a period of approximately two years, a special agent for the Federal Bureau of Investigation posed as a trader in the soybean futures pit. He tape-recorded his transactions with other traders and allegedly documented the illegal activity of defendants. In January of 1989, the undercover FBI agent, an assistant U.S. Attorney, and other FBI agents confronted a number of the traders with evidence gathered from the investigation. On January 20, 1989, Government agents interviewed Martin Dempsey at his home regarding his allegedly illegal trading activity. According to the agents' written report of the interview, which has been furnished to the parties and the court, Dempsey explained how certain illegal trades were conducted and admitted to his participation in some of those practices. The report also states that Dempsey made statements involving and inculpating others, including James Nowak and Scott Anixter. On the same day, the assistant U.S. Attorney and FBI agents also interviewed James Nowak at his home. According to the agents' written report of that interview, Nowak admitted to his participation in certain illegal trading activity and made statements involving and inculpating others, including Dempsey and Ryan.

 At the time of the interviews or soon thereafter, defendants engaged counsel. Dempsey was the first of the four defendants to retain the Firm to represent him. *fn1" The next day, Nowak also hired the Firm, as did Ryan and Anixter three days later. *fn2" Thereafter, the Grand Jury returned the indictment charging the traders, including Dempsey, Nowak, Ryan and Anixter. Each of the four defendants has entered a plea of not guilty to the charges against him.

 The Government has responded to defendants' choice of counsel by filing a Motion for Inquiry pursuant to Fed. R. Crim. P. 44(c). *fn3" The Government contends that the Firm's decision to represent each of the four defendants has created an actual conflict of interest that will deny defendants their Sixth Amendment right to effective assistance of counsel. In support of this contention, the Government notes that each of the four defendants has been made an offer of more lenient treatment in exchange for his cooperation in the trials of the other defendants. According to the Government, "each defendant is presented with a unique, and finite, opportunity to reduce his own exposure to criminal and monetary sanctions arising from his trading activity; no defendant can avail himself of that opportunity without acting in a manner directly contrary to the interests of the other three men also represented by the firm." Government's Brief in Support of It's Motion for an Inquiry Pursuant to Rule 44(c) at 5. The Government contends that the Firm's conflict of interest will not diminish as the case proceeds to trial.

 Each of the defendants has responded by submitting a comprehensive affidavit outlining his understanding of the "potential conflicts" that have arisen and that which might arise at each stage of the case because of the Firm's representation of the other defendants. Each defendant also seeks to completely waive "any possible conflicts of interest that the firm might have." Defendants' claim that in light of their knowing and intelligent waiver of any such conflicts, their Sixth Amendment right to retain counsel of their choice should be respected by the court.

 When codefendants' choice of counsel in a criminal prosecution results in a case of multiple representation, the court must promptly address the propriety of the representation. Fed. R. Crim. P. 44(c). The trial court must fulfill this obligation notwithstanding the fact that it faces, as the Supreme Court aptly observed, "the prospects of being 'whip-sawed' by assertions of error no matter which way [it] rule[s]." United States v. Wheat, 486 U.S. 153, 108 S. Ct. 1692, 1698, 100 L. Ed. 2d 140 (1988) (quoting United States v. Wheat, 813 F.2d 1399 (9th Cir. 1987)). "[A] possible conflict of interest inheres in almost every instance of [such] multiple representation." Cuyler v. Sullivan, 446 U.S. 335, 348, 64 L. Ed. 2d 333, 100 S. Ct. 1708 (1980). When potential conflicts threaten each defendant's right to the undivided loyalty and independent judgment of counsel, it precipitates an unavoidable tension between the Sixth Amendment guarantee of effective assistance of counsel, see Cuyler, 446 U.S. at 344, and defendants' qualified right to be represented by counsel of their choice. Wheat, 108 S. Ct. at 1697. In United States v. Wheat, the Supreme Court recently sought to chart the proper course between the Scylla and Charydbis of these conflicting rights.

 Although the Sixth Amendment comprehends the qualified right to counsel of one's choice, the Court in Wheat emphasized that "the essential aim of the Amendment is to guarantee an effective advocate for each criminal defendant rather than to ensure that a defendant will inexorably be represented by the lawyer he prefers." Id. at 1697. Accordingly, a trial court must recognize a presumption in favor of defendants' choice of counsel; however, that presumption may be overcome upon a showing that defendants' choice has created an "actual conflict" or "serious potential" for a conflict of interest on the part of defense counsel. Id. at 1700. See also United States v. Colonia, 870 F.2d 1319, 1327 (7th Cir. 1989).

 Codefendants, after being fully apprised of the actual or potential conflicts, may still want to be represented by their chosen counsel. In appropriate cases, a waiver by each of the defendants as to his or her right to conflict-free representation will generally effectuate this desire. Holloway v. Arkansas, 435 U.S. 475, 483, 55 L. Ed. 2d 426, 98 S. Ct. 1173 (1978). However, in Wheat the Supreme Court recognized that a defendant's waiver, even if made knowingly and intelligently, will not necessarily cure the conflicts presented in every multiple representation case. *fn4" Waivers must be reviewed in light of the particular facts before the court. "Where a [trial] court justifiably finds an actual conflict of interest, there can be no doubt that it may decline a proffer of waiver, and insist that defendants be separately represented." Wheat, 108 S. Ct. at 1698. See, e.g., Glasser v. United States, 315 U.S. 60, 70, 86 L. Ed. 680, 62 S. Ct. 457 (1942) (a trial court should not readily accept a hard-pressed defendant's waiver of fundamental constitutional rights). Thus, in the context of a multiple representation case, a trial court should limit the exercise of its supervisory authority to override defendants' proffered waivers to those instances in which defense counsels' simultaneous conflicts are actual, or there is a serious potential for such conflicts and they threaten to undermine the essential guarantee of the Sixth Amendment because of the nature of the conflicts involved. Under those circumstances, the trial court's authority to deny defendants' waivers is augmented by its independent or institutional obligation to conduct a criminal trial that will lead to a "just result," that appears "fair to all who observe [it]," and that conforms to the ethical standards of the legal profession. Wheat, 108 S. Ct. at 1697-98. See also Colonia, 870 F.2d at 1326-27.

 Although it is difficult for a trial court to accurately predict the course of a complex criminal case such as the present one, Wheat, 108 S. Ct. at 1699, the extant record here reveals that the Firm is presently laboring under actual and serious potential conflicts of interest that are likely to become more complicated as the case proceeds to trial. The conflicts arise from the nature of the charges against the four defendants and the evidence which is likely to be central to the Government's case.

 There is a significant difference in the charges against each of the defendants. Defendants Nowak and Dempsey are charged with participation in a conspiracy to commit a pattern of racketeering, as well as substantive violations of RICO, 18 U.S.C. § 1962. Both defendants are also charged with numerous counts of mail and wire fraud in violation of 18 U.S.C. §§ 1341 and 1343, and violations of the Commodities Exchange Act, 7 U.S.C. § 6, et seq. Nowak is charged in a total of 237 counts in violation of eleven different statutes, and Dempsey is charged in a total of 121 counts in violation of nine different statutes. In contrast to the more extensive charges against Nowak and Dempsey, Ryan is charged in only 13 counts, eleven of which relate to four specific transactions. He is not charged with violating RICO or with participation in the conspiracy to commit a pattern of racketeering. Likewise, Anixter is charged in only 13 counts, eight of which relate to three specific transactions. At present, Anixter is named as an unindicted coconspirator in the overarching racketeering count.

 Additionally, numerous counts allege that some of the defendants worked together with others in conducting some of the fraudulent practices at issue. In separate counts, Nowak is alleged to have committed a number of fraudulent trades and one prearranged accommodation trade, all of which Dempsey is alleged to have aided and abetted. In turn, Dempsey is charged in two counts with conducting unauthorized trades in which Nowak is alleged to have aided and abetted. Nowak and Dempsey are also charged with participating in four separate counts of mail fraud, either as a pair or with a third trader. Furthermore, Nowak is charged with conducting a fraudulent trade in which Ryan is alleged to have aided and abetted, and both are charged with participating in one count of wire fraud. Nowak is also charged with participating with Anixter in conducting a prearranged accommodation trade. Finally, Dempsey is charged in two counts with conducting a fraudulent trade in which Anixter aided and abetted, and both are charged with participation in one count of mail fraud.

 The differing extent of the charges against the four defendants and their alleged participation and cooperation in certain practices reveals that their objective, individual interests are potentially at odds and will remain so throughout the trial and at sentencing, if convictions result. These differences, in conjunction with the allegations of participation and cooperation, could force defense counsel to forego certain strategic options that might otherwise be pursued if defendants were ...


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