Appeals from judgments entered after a jury trial in the United States District Court for the Southern District of New York, Robert L. Carter, Judge, convicting appellants of conspiracy, mail fraud, wire fraud, obstruction of justice and false declaration. Affirmed.
Before Oakes and Meskill, Circuit Judges, and Blumenfeld, District Judge.*fn*
James F. O'Connor and Bernard J. Coven appeal from judgments of the United States District Court for the Southern District of New York, Carter, J., entered after a trial by jury convicting each of one count of conspiracy, 18 U.S.C. § 371 (1976); eight counts of mail fraud, 18 U.S.C. §§ 1341-42 (1976); one count of wire fraud, 18 U.S.C. §§ 1342-43 (1976); and one count of obstruction of justice, 18 U.S.C. § 1503 (Supp. III 1979). In addition, Coven was convicted of one count, and O'Connor of two counts of false declaration, 18 U.S.C. § 1623 (1976 & Supp. III 1979). The district court sentenced both appellants to ten years imprisonment*fn1 and imposed the maximum committed fine as to each count, totalling $34,000 as to Coven and $44,000 as to O'Connor. We affirm.
Coven and O'Connor owned beneficial interests in Euro-Swiss International Corporation ("Euro-Swiss"), a company which sold commodities contracts to retail operations which in turn sold similar contracts to the public. Coven, an attorney, was counsel to Euro-Swiss. The company operated out of Coven's New York law offices.
Euro-Swiss sold "deferred delivery" contracts for various commodities such as gold, silver and currencies. While these contracts gave the purchaser the right to obtain delivery of a particular commodity at a set price on a specified date, delivery was rarely, if ever, demanded. Instead, Euro-Swiss would liquidate the contracts by paying to the purchaser the equity value the excess of the market price of the commodity over the contract price on the date set for delivery. Thus, if the market price of the commodity exceeded the contract price on the delivery date, the contract would yield a profit to the purchaser. If the market price on the delivery date was lower than the contract price, the purchaser simply would forgo his option to exercise his rights under the contract and the value paid for the contract would be profit to the seller.
Morgan Harris & Scott, Ltd. ("MHS"), and later, Harrison Prescott, Inc. ("HP") were major customers of Euro-Swiss. These companies, both owned and operated by one Earl Wilt, were so-called "boiler room" operations which used high pressure telephone sales and other tactics to induce the public to purchase contracts for the deferred delivery of commodities.*fn2 MHS and HP "covered" these "retail" contracts by purchasing similar "wholesale" contracts from Euro-Swiss.
In early August 1979, the United States Postal Inspectors executed a warrant to search the premises of MHS and HP, seizing the companies' books and records and effectively shutting them down. Later that month, the Commodity Futures Trading Commission ("CFTC") filed a complaint seeking to enjoin MHS and HP from conducting further business and to have a receiver appointed. District Judge Constance B. Motley appointed Steven J. Glusband as receiver on September 28, 1979.
During the period between the execution of the search warrant by the Postal Inspectors and the commencement of suit by the CFTC, Earl Wilt agreed to plead guilty to one count of mail fraud and to various violations of state law, and to cooperate with the government in its investigation of Euro-Swiss.
When MHS and HP were shut down, they had several outstanding contracts with Euro-Swiss. As these contracts matured, Euro-Swiss became obligated to pay substantial sums of money to MHS and HP and, therefore, to the receiver. In an attempt to avoid paying these sums, Coven and O'Connor embarked on a course of action designed to defraud the district court and the receiver by transferring Euro-Swiss funds to out-of-state and personal accounts, executing and backdating a fraudulent customer agreement between Euro-Swiss and the receiver's companies, altering the books and records of Euro-Swiss to reflect fabricated transactions and giving false testimony at an attachment proceeding instituted by the receiver against Euro-Swiss.
The government's evidence included the testimony of several witnesses, tape recordings made by Earl Wilt during visits to Euro-Swiss' offices and during telephone conversations after he had agreed to cooperate with the government, books and records of Euro-Swiss and portions of the transcript of the attachment proceeding before Judge Motley. On these appeals Coven and O'Connor challenge not only the rulings of District Judge Carter at the criminal trial but also the prior conduct of District Judge Motley and the government preceding and during a civil attachment hearing.
Before we address the allegations relating to the criminal trial we first examine the earlier proceedings before Judge Motley which appellants claim taint the subsequent criminal trial, thereby requiring reversal.
Appellants strenuously argue that the civil attachment proceeding, out of which some of the criminal charges and some of the evidence presented in the criminal trial grew, was invalid due to Judge Motley's failure to recuse herself under 28 U.S.C. § 455.*fn3 This invalidity, they contend, tainted the subsequent criminal proceedings before Judge Carter. Appellants claim that Judge Motley obtained "personal knowledge of disputed evidentiary facts" and was therefore required to recuse herself from the attachment proceeding. According to appellants, Judge Motley's "pre-knowledge" of evidence relating to facts disputed in the proceeding created a situation in which her "impartiality might reasonably be questioned." This allegedly disqualifying "pre-knowledge" was obtained when Assistant United States Attorney Audrey Strauss, who subsequently prosecuted the criminal case, approached Judge Motley asking that Glusband, the receiver, be permitted to cooperate in a criminal investigation of Coven and O'Connor. Strauss told Judge Motley that Earl Wilt, while cooperating with the government, had obtained evidence that Coven and O'Connor had attempted to defraud the receiver by showing him records of fictitious orders from MHS to Euro-Swiss for which MHS had not paid, and by producing a fraudulent, backdated customer agreement between MHS and Euro-Swiss. These documents, if genuine, would have demonstrated that Euro-Swiss did not owe money to MHS under the maturing contracts. Judge Motley permitted Glusband to report to the government on any meetings with Coven and O'Connor in the course of his duties as receiver, but warned that Glusband should inform the court of any conflict that might develop between his duties as receiver and his cooperation with the criminal investigation.
A few weeks later, Glusband filed a complaint against Euro-Swiss and obtained an ex parte order attaching Euro-Swiss' assets. Glusband moved to confirm the order, and Euro-Swiss cross-moved for an order vacating the attachment. Judge Motley scheduled the matter for an immediate hearing after which she denied the motion to vacate the attachment. Appellants argue here as they did before Judge Carter that Judge Motley's prior knowledge of evidence received from Strauss relating to attempts to defraud Glusband required the Judge to recuse herself from presiding over this hearing.
Section 455(b)(1) requires recusal when a judge has "personal knowledge of disputed evidentiary facts concerning the proceeding ...." The term "personal" was carried over from 28 U.S.C. § 144 when section 455 was amended in 1974. Pub.L.No.93-512, 88 Stat. 1609. This amendment to section 455 was intended to make the statutory standards for judicial disqualification consistent with those set forth in Canon 3C of the ABA Code of Judicial Conduct. See H.R.Rep.No.93-1453, 93d Cong., 2d Sess. (1974), reprinted in (1974) U.S.Code Cong. & Ad.News 6351. The ABA Code was adopted in 1972 in the light of a long line of cases holding that "personal" as used in section 144 means "extrajudicial." Knowledge acquired by the judge while he performs judicial duties does not constitute grounds for disqualification. United States v. Grinnell Corp., 384 U.S. 563, 583, 86 S. Ct. 1698, 1710, 16 L. Ed. 2d 778 (1966); United States v. Bernstein, 533 F.2d 775, 785 (2d Cir.), cert. denied, 429 U.S. 998, 97 S. Ct. 523, 50 L. Ed. 2d 608 (1976). There is no indication in the ABA Code, the accompanying commentary, or the legislative history of section 455 that this earlier judicial interpretation of "personal" was disapproved. Against this background it is clear that by amending section 455 Congress intended to transfer the extrajudicial bias limitation contained in section 144 to section 455(b)(1). Information or knowledge possessed by a judge must stem from an extrajudicial source to warrant disqualification. In re International Business Machines Corp., 618 F.2d 923, 927-28 (2d Cir. 1980); United States v. Wolfson, 558 F.2d 59, 62-63 (2d Cir. 1977).
In this case, the information in question was obtained by Judge Motley when the government sought her approval of an agreement by a receiver she had appointed to cooperate in a criminal investigation. It was clearly within her judicial responsibilities to be informed of proposed activities that might impair the receiver's ability to perform his duties properly. Therefore, Judge Motley was not required to recuse herself under 28 U.S.C. § 455(b)(1).
Appellants also claim that recusal was required under 28 U.S.C. § 455(a), asserting that Judge Motley's impartiality in the attachment proceeding "might reasonably be questioned" because of her familiarity with matters in dispute. Section 455(a) does not contain the term "personal" found in section 455(b) (1). Thus, it has been asserted that this section does not contain the requirement that to be disqualifying bias must spring from an extrajudicial source. See Note, Disqualification of Federal Judges for Bias or Prejudice, 45 U.Chi.L.Rev. 236, 254-57 (1978). As this Court has said in the past,
We recognize that § 455(a) is designed to negate the "duty to sit" notion and to allow "a greater flexibility in determining whether disqualification is warranted in particular situations." United States v. Ritter, 540 F.2d 459, 462 (10th Cir. 1976), cert. denied, 429 U.S. 951, 97 S. Ct. 370, 50 L. Ed. 2d 319 (1976). Also, we do not read the authorities (interpreting "personal" as "extrajudicial") as holding that a judge's conduct of proceedings before him can never form a basis for finding bias.
United States v. Wolfson, 558 F.2d at 63 (footnote omitted).
However, under section 455(a) considerations, the fact that Judge Motley came upon the allegedly prejudicial information in her judicial rather than personal capacity, even if not dispositive, is relevant to an analysis of the appearance of impartiality. See In re International Business Machines Corp., 618 F.2d at 929; United States v. Daley, 564 F.2d 645, 651-52 (2d Cir. 1977), cert. denied, 435 U.S. 933, 98 S. Ct. 1508, 55 L. Ed. 2d 530 (1978). In Wolfson, this Court held that section 455(a) did not require a judge to recuse himself from coram nobis proceedings which touched on activities at two trials over which he presided. The Court said:
We understand that regardless of a court's fairness, a defendant who has undergone two lengthy trials before the same judge, both of which ended in guilty convictions, may come to consider that judge as biased against him. These suspicions are understandable, but, without more, they do not provide a reasonable basis for questioning a judge's impartiality.
558 F.2d at 64. See also, In re Corrugated Container Antitrust Litigation, 614 F.2d 958, 964-65 (5th Cir.), cert. denied, 449 U.S. 888, 101 S. Ct. 244, 66 L. Ed. 2d 114 (1980); United States v. Schreiber, 599 F.2d 534, 535-37 (3d Cir.), cert. denied, 444 U.S. 843, 100 S. Ct. 86, 62 L. Ed. 2d 56 (1979); United States v. Cowden, 545 F.2d 257, ...