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Murphy v. United States

February 17, 2009


The opinion of the court was delivered by: James F. Holderman Chief Judge, United States District Court



Petitioner Michael J. Murphy ("Murphy") was sentenced on December 3, 2003, to 365 months of imprisonment and 3 years of supervised release, with a $1,400.00 assessment and $15,334,242.46 in restitution. In his pending "Motion Under 28 U.S.C. § 2255 to Vacate, Set Aside, or Correct Sentence by a Person in Federal Custody," (Dkt. No. 1), Murphy asks this court to vacate his sentence with prejudice and order his immediate release from custody. For the reasons set forth below, Murphy's motion is denied.


On February 5, 2003, Murphy and his lawyer met with an Assistant U.S. Attorney, an agent from the Federal Bureau of Investigation, and two attorneys from the Securities and Exchange Commission to discuss a fraudulent investment scheme that Murphy had been running since the mid-1980s. Murphy confessed to the scheme that same day, and a criminal complaint was filed against Murphy on February 6, 2003. See United States v. Murphy, 03 CR 138 (N.D. Ill.). As part of his confession, Murphy also acknowledged that he had no legitimate source of income during the time he was conducting his fraudulent investment scheme.

On March 13, 2003, then Chief Judge Charles P. Kocoras held a hearing on the government's motion for an order restraining Murphy's assets and allowing the government to preserve the value of these assets by selling them and depositing the proceeds of the sale into an escrow account. Murphy's lawyer, Barry Spevack ("Spevack"), attended the hearing and did not object to the restraint of Murphy's assets. Spevack did indicate, however, that he was withdrawing from the case, and he sought to preserve the right of new counsel to object to the sale of the assets. Chief Judge Kocoras entered the Order in its entirety, but directed the government not to begin selling the property until the Federal Defender came into the case and had the opportunity to raise any objections to the selling of Murphy's assets. Appointed attorney Luis Galvan ("Galvan") began representing Murphy after Spevack withdrew from the case.

On April 15, 2003, a superceding indictment was returned against Murphy, charging him with fourteen counts of mail fraud in violation of 18 U.S.C. § 1341. United States v. Murphy, 03 CR 138 (N.D. Ill.) (Dkt. No. 8) (the initial indictment was returned against Murphy on April 1, 2003). Specifically, the superceding indictment alleged that Murphy falsely represented to over 200 victims that he had invested their money in income-generating investments when, in fact, he did not invest the victims' money but used it to pay returns to previous investors and to support a lavish lifestyle for himself and his friends. Both the initial indictment and the superceding indictment included a separate provision alleging "that certain property is subject to forfeiture to the United States pursuant to Title 18, United States Code, Section 981(a)(1)(C), and Title 28, United States Code, Section 2461(c)." (Dkt. No. 3 at 13; Dkt. No. 8 at 17.)

On June 24, 2003, Murphy entered a blind plea of guilty to all mail fraud counts in the superceding indictment; however, Murphy did not agree to the forfeiture allegations at that time. Nevertheless, the government sold certain of Murphy's assets according to the terms of the March 13, 2003 Order on June 28, 2003, and August 6-9, 2003, having ascertained that Galvan had no objection to the sale of these assets.

In September 2003, Murphy filed a number of pro se motions, including a "Motion to Substitute Counsel and Return Illegally Seized Attorneys Fees," "Motion for Withdrawal of Plea," "Motion for Emergency Hearing," "Motion for Return of Seized Property," and "Motion for Hearing on Pre-Trial Restraint of Assets Needed to Pay Legal Fees and Defense Cost." In response to the motion to substitute counsel, the court granted Galvan leave to withdraw as counsel of record on September 30, 2003, and granted Michael J. Petro ("Petro") leave to file his appearance on behalf of Murphy. The court also held a two-day hearing regarding the restraint and sale of Murphy's assets on October 2, 2003 and October 24, 2003. Murphy's motions for return of illegally seized property were denied by the court on October 24, 2003, when the court concluded that "the government has overwhelmingly established probable cause in this case for the restraint of these assets both under the facts and under the law" and "the value of those items were preserved as much as they could be preserved as a result of that sale." (10/24/2003 Hr'g Tr. at 173:19-174:6.) On November 6, 2003, the court denied Murphy's motion for withdrawal of plea based on ineffective assistance of counsel.

On November 17-19, 2003, a jury trial was held on the forfeiture allegations brought against Murphy. The jury returned a verdict against Murphy on November 19, 2003, finding that the property in the forfeiture allegations "constitutes and is derived from proceeds traceable to the mail fraud scheme devised by Michael Murphy." (Dkt. No. 68 at 1.) Murphy was sentenced on December 3, 2003, to 365 months of imprisonment and 3 years of supervised release, with a $1,400.00 assessment and $15,334,242.46 in restitution. (This judgment was amended on March 4, 2004 to reflect a restitution amount of $15,217,130.76.) All proceeds from the sale of Murphy's forfeited assets, minus administrative expenses incurred by the U.S. Marshal's Office, were applied toward the payment of Murphy's restitution obligation. (See 12/3/2003 Preliminary Order of Forfeiture; 4/26/2005 Final Order of Forfeiture; 9/19/2006 Final Order of Forfeiture as to Certain Substitute Assets.)

After filing Murphy's notice of appeal on December 19, 2003, Petro withdrew from the case and the Federal Public Defender's Office was appointed by the Seventh Circuit to represent Murphy on appeal. Before the Seventh Circuit Murphy was represented by Kent V. Anderson ("Anderson"), Senior Staff Attorney for the Office of the Federal Public Defender. Murphy attempted to file a pro se brief in the appellate court, but the Seventh Circuit rejected his filing after determining that Murphy was represented by counsel. Through Anderson, Murphy argued before the Seventh Circuit that his sentence was unconstitutional pursuant to Blakely v. Washington, 542 U.S. 296 (2004) and United States v. Booker, 375 F.3d 508 (7th Cir. 2004), and that his sentence violated the ex post facto clause because the court relied upon the Sentencing Guidelines as amended on January 25, 2003, at which point the majority of the scheme had already been consummated. On August 25, 2005 the Seventh Circuit affirmed the district court's calculation of Murphy's sentence, but ordered a limited remand in light of United States v. Paladino, 401 F.3d 471 (7th Cir. 2005). See United States v. Murphy, No. 03-4291 (7th Cir. Aug. 25, 2005).

This court confirmed that it would have imposed the same sentence had the court known the Guidelines were merely advisory, and the Seventh Circuit affirmed Murphy's sentence on May 30, 2006. United States v. Murphy, No. 03-4291 (7th Cir. May 30, 2006). Murphy's petition for certiorari was denied by the Supreme Court on October 2, 2006. This motion timely followed.


Under § 2255, "[a] prisoner in custody under sentence of a court established by Act of Congress claiming the right to be released upon the ground that the sentence was imposed in violation of the Constitution or laws of the United States, or that the court was without jurisdiction to impose such sentence . . . may move the court which imposed the sentence to vacate, set aside or correct the sentence." 28 U.S.C. § 2255(a). If the court finds that the sentence was imposed in violation of the petitioner's constitutional rights, the court must vacate and set ...

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